Choosing the right structure (digital products with mainly EU customers)

[Offct]

A US LLC is not ideal for EU customers, as cross-border payments tend to have higher decline rates.

Singapore, or a similar jurisdiction, can be a good option if you want to manage 5-10 EU-based PSP subsidiaries and send all funds to a parent company, from which you can later take dividends.

I was not thinking about directly doing business in Europe as an LLC, more of substituting the Singapore Pte Ltd with a US LLC and using a European subsidiary as PSP.

 

[daniels27]

Wait. Are we talking about a setup with an Estonian PSP or without? With a PSP, the location of the parent does not matter much. Without, it does not make sense to process more than 1M as the savings on interchange rates are substantial beyond that.

 

[daniels27]

I was not thinking about directly doing business in Europe as an LLC, more of substituting the Singapore Pte Ltd with a US LLC and using a European subsidiary as PSP.

You already have Singapore? Are you paying tax? Which agent did you use for the nominee director?

 

[Offct]

Wait. Are we talking about a setup with an Estonian PSP or without? With a PSP, the location of the parent does not matter much. Without, it does not make sense to process more than 1M as the savings on interchange rates are substantial beyond that.

Yes, if you are doing e-commerce (e.g. amazon) in Europe, you will need an EU entity for compliance reasons and also to save on the payment processing fees (I know you can solve it all differently, but I don't think it is worth it).

You already have Singapore? Are you paying tax? Which agent did you use for the nominee director?

I was planning to use Singapore for a business idea. However, the plan is currently on hold, so I do not have any practical experience yet.

Many nominee directors don't like non-resident companies, especially if you do not use their accounting services (their liability includes the nominee directors personal funds).

Accounting will be time-consuming or expensive -- if you have tax-free foreign-sourced income you can not use form C-S and have to use form C (e.g. financial statements and tax computations have to be submitted). Usually if your revenue is below 5M SGD form C-S (the shorter form) is sufficient.

Operating without access to local banking is also harder than you might imagine, many Fintechs use local licenses for their Singaporean customer (e.g. Airwallex, Wise). Getting liable information on operating as a non-resident company is quite challenging, even from local tax professionals and lawyers you will get contradictory opinions.

You can find solutions for everything, but it is not as easy as some people suggest, especially if you try to be a non-resident without taxes. The alternative could be to accept the taxes and minimize the profit by paying yourself an employee salary that is not taxed in Singapore (only director fees are subject to taxation in Singapore). Besides that there are quite a few more ways to minimize the taxation in Singapore, you won't end up with 0%, but significantly less than 17%.

 

[SoNewToAllShit]

Yes, i guess the best solution is EU PSP Subsidiary + Singapore parent company, not remit Anything to Singapore. 0% tax.

So you pay the tax in the UK is that better ? I don't get your plan. Best would be to have the parent company to be in a country with the lowest tax possible.

 

[Offct]

So you pay the tax in the UK is that better ? I don't get your plan. Best would be to have the parent company to be in a country with the lowest tax possible.

You would use the local subsidiary only as PSP and potentially as MoR. As you said, it would be best to have the parent in a country with the lowest tax (& best reputation) possible, for example, Singapore, which can be 0% tax under certain circumstances (e.g. not remitted to Singapore & not sourced in Singapore).

Nobody is thinking about paying taxes in the UK, the UK is/was a popular country for the location of the PSP.

 

[Marzio]

If you operate a physical trial l retail shop, you can take 5% in Germany. For payments, I think 1% might be a bit too much.

5% sounds about right, 1% definitely too much

 

[DeepDrilling]

You need to move the money from the UK LTD to the parent company for this plan to work! So if you don't take the money into the Singapore company the chain breaks and you get taxed in the UK.

 

[Offct]

You need to move the money from the UK LTD to the parent company for this plan to work! So if you don't take the money into the Singapore company the chain breaks and you get taxed in the UK.

You are right, just to clarify, in order to be exempt from tax for the Singapore company, you can not remit the money into Singapore. However, your entity in Singapore can hold bank accounts outside of Singapore to which you can remit the money (after leaving a small percentage in the UK or EU entity for their provided services).

 

[Propeller]

However, your entity in Singapore can hold bank accounts outside of Singapore to which you can remit the money (after leaving a small percentage in the UK or EU entity for their provided services).

is that allowed and compliant with the tax laws in Singapore?

 

[Offct]

is that allowed and compliant with the tax laws in Singapore?

Yes, it is nothing new and is discussed in many posts. However, as mentioned in an earlier answer, the setup is not easy.

"Foreign sourced dividends, branch profits, and services income is exempt from Singaporean tax if not remitted into Singapore."
Source: https://csttax.com/en-sg/blog/remitting-revenue-in-and-out-of-singapore-corporate-tax-obligations
(you will easily find a lot about it)

 

[moonrail555]

Yes, it is nothing new and is discussed in many posts. However, as mentioned in an earlier answer, the setup is not easy.

"Foreign sourced dividends, branch profits, and services income is exempt from Singaporean tax if not remitted into Singapore."
Source: https://csttax.com/en-sg/blog/remitting-revenue-in-and-out-of-singapore-corporate-tax-obligations
(you will easily find a lot about it)

So you're saying using AirWallex with a Singapore company will count as remitted to Singapore? AirWallex offers local accounts for many countries, you can just use their local USD account with US details and not touch their SG local account.

 

[Offct]

So you're saying using AirWallex with a Singapore company will count as remitted to Singapore? AirWallex offers local accounts for many countries, you can just use their local USD account with US details and not touch their SG local account.

This would be subject to discussion, but that was the opinion of a local accountant. Airwallex Singapore is your contract partner when opening an account with your Singaporean entity. As I remember, it was not about using the SGD or USD accounts, since you are opening the account with Airwallex Singapore (which is licensed and regulated in Singapore) the IRAS might consider the funds as remitted to Singapore. Your whole funds independent of your account currency are also subject to safeguarding mechanisms as defined by the MAS (Monetary Authority of Singapore).

If you can find a Fintech without a Singaporean subsidiary under local regulation, you can even have an SGD account.

While the opinion might not be correct, it is a risk to consider.

 

[Dandyline]

Yes, it is nothing new and is discussed in many posts. However, as mentioned in an earlier answer, the setup is not easy.

"Foreign sourced dividends, branch profits, and services income is exempt from Singaporean tax if not remitted into Singapore."
Source: Remitting Revenue In and Out Of Singapore: Corporate Tax Obligations
(you will easily find a lot about it)

Yes, there seem to be many obstacles with Singapore, and Hong Kong as well.