EMI for Marshall Islands company (legitimate business)

[Jerry1911]

It's an interesting and clever idea.

I know But I've never actually needed it so as you may have figured out, I'm not exactly sure if it works in practice.

By the way, what if someone decides to sue a business with this kind of structure?

The first thing someone would see on the website would be the details of the UK company, so who would be liable, the principal or the agent? I assume the principal, but only after the agreement is disclosed to the court? Would then Marshall Islands laws apply? i.e. would it then be the same as if someone were suing a Marshall Islands company?

 

[sergeylim88]

what about taxes for uk entity?
you will have to pay taxes on their profits

 

[Jerry1911]

what about taxes for uk entity?
you will have to pay taxes on their profits

Only on UK sourced income and the agency comission (1-5%)

 

[clemens]

Could he leverage crypto for this? Here's my suggestion:

1) Set up a UK LTD
2) Sign an agency agreement between the Marshall Islands co and the UK LTD
3) Get a cryptocurrency exchange account for the UK LTD
4) After deducting comission charges, deposit the income at an exchange and buy a cryptocurrency of choice
5) Remit the income offshore by sending the crypto to the wallet of the Marshall Islands company

Crypto can now theoretically be "withdrawn" as dividends from the Marshall Islands company and exchanged for fiat anywhere in the world.

Would this be possible? Not sure what kind of documents would be required besides the agreement itself.

That could work

what about taxes for uk entity?
you will have to pay taxes on their profits

you have almost nothing to pay if you don't leave much in the UK LTD.

It's a very good setup that similar setup I have been using many times before.

 

[sergeylim88]

explain the part if you don't leave much
in this setup
UK business is the one that conducts business transactions
MI business is the holding company that owns UK business
all money got to UK is subjected to UK profit tax, unless you spend it (and justify it in front of tax authority). for instance if UK company pays out dividends to MI holding company (the owner), all that money is considered profit (origin of dividends is profit)

did i get anything wrong?

 

[Jerry1911]

MI business is the holding company that owns UK business

It's not necessary for the MI company to own the UK Ltd, in fact I think it's better that it doesn't

did i get anything wrong?

Yes, pretty much everything

Look at the video below for example.

 

[sergeylim88]

ok, now i understand what you are talking about
i even found something similar few moments before i saw your post

so in this case we are not talking about holding structure, we are talking about promotion/payment processing or similar service that UK company does for MI company

but isn't all this affected by transfer pricing?

lets imagine a scenario where tax authorities of UK know that you own both UK and MI company
wouldn't this be under transfer pricing, or even maybe profit erosion(BEPS)?

 

[Sols]

By the way, what if someone decides to sue a business with this kind of structure?
The first thing someone would see on the website would be the details of the UK company, so who would be liable, the principal or the agent? I assume the principal, but only after the agreement is disclosed to the court? Would then Marshall Islands laws apply? i.e. would it then be the same as if someone were suing a Marshall Islands company?

It depends on which company is sued. Either entity could sue. It also depends on nature of the lawsuit and the craftiness of the lawyers.

There is a risk the UK company could probably be sued as a proxy for the Marshall Islands company if a court determines that it is the effective business not only taking payments but also offering the goods/services.

Applicable court would depend on the exact circumstances. It would usually by MH but if it's a consumers' right issue and the consumer is in UK, that law might apply and the suing party could try to go after the UK company instead.

Lots and lots of details affect the outcome of such a scenario.

lets imagine a scenario where tax authorities of UK know that you own both UK and MI company
wouldn't this be under transfer pricing, or even maybe profit erosion(BEPS)?

Both Transfer Pricing and BEPS could become a concern, which is why it's very important that the agreement between the MH and UK companies is vetted by an expert lawyer.

 

[sergeylim88]

does it appear possible to have a solution or situation where BEPS and Transfer pricing are not an issues?
as i said, if it is fully disclosed that UBO of both companies is the same, what kind of agreement could you make to avoid BEPS and Transfer pricing?

 

[Sols]

It's possible and from what I've seen, will hold up to scrutiny — provided that the right arrangements are in place. It doesn't work for every business all the time, which is why it's important to have a lawyer look at it and draft the agreement to fit your specific situation.

 

[Honest Junior]

In general, as a result - I could not find a single place or organization that will open an account for a company from the Marshall Islands, even with a real director.
All of them refused. Or demand to provide data that somewhere is already open an account.