Incorporating in Belize seems great, but what if European customers don't like it?

[DaveFischer]

Is it possible to have a European company to use for sending invoices while keeping the Belize tax advantages?

Some clients aren't going to be happy doing business with companies incorporated in Belize.

I liked the solution presented on nomadlist.com, but I'm not from the United States and most of my clients are European:

Here’s the structure I use for my US citizen digital nomad clients, from the top down:

You’re the sole shareholder and sole director of a Belize IBC;
The Belize IBC is the sole member of a Wyoming LLC;
You’re the sole manager of the Wyoming LLC; and
The Wyoming LLC has a US bank account.

What would be the logical solution if most of your customers are based in Europe?

 

[James Turner]

Hi, Depending on your residential status and the legalities in your country of residence there is generally not an issue creating two companies. One in a more respectable location and one in Belize, with the respectable company working direct with clients and then diverting some of its income over to the Belize Company where you get some advantages. Whether this is legal or not will depend where you live and local laws and I would suggest that this is discussed in much more detail before progressing.

 

[DaveFischer]

Would it be a problem if I use the Belize company to send invoices and get paid on a EU bank account?
I can just use a European postal address for a Belize company and they won't see where the company is registered.

Although I wouldn't have a EU VAT number. I don't know if that's important when doing business with European companies, as European companies wouldn't charge each-other VAT.

 

[James Turner]

EU Companies often need a VAT number in order to ’zero rate’ the VAT to other EU companies. Also I’m not sure what you plan to do on the banking, but the bank will need to see company documents to support its existence so will know where the company is from. Other than the impossible task of obtaining EU banking for a Belize Company there is nothing to stop a Belize Co banking in Europe.

 

[voipservice]

@DaveFischer -
- if your company is outside Europe:
--- if you are buying from a company inside of Europe, then a European business would not charge your company VAT (although local VAT may be due in your company's place of residence depending on whatever the VAT law is there)
--- if you are selling to a company inside Europe then you do not charge VAT. The European company either pays VAT to their collection agency if they import physical goods or, if they are buying services from you (including digital goods) then they allocate VAT under the reverse rule law for the place of supply of the service - however you don't get involved in any of this, you simply supply the service.
There's a good tool which shows how this works from the EU business perspective: Cross-border VAT

If you cannot trade with a European company from your Belize registered company, I wouldn't try to hide the company registration location because ultimately the European company will ask what the registered company address is and then it will look like you were trying to hide something. Better to go the route as James Turner mentioned and incorporate another company in a European friendly jurisdiction (but not inside Europe) and then trade from there.

 

[hernanday]

EU Companies often need a VAT number in order to ’zero rate’ the VAT to other EU companies. Also I’m not sure what you plan to do on the banking, but the bank will need to see company documents to support its existence so will know where the company is from. Other than the impossible task of obtaining EU banking for a Belize Company there is nothing to stop a Belize Co banking in Europe.

The problem is the OP is trying to do things backwards and in what is likely a disallowed structure, he is trying to shift income, when he should be trying to shift expenses.
Why try to bill customers from Belize when it creates 1001 problems?
He should bill from his local euro company all the products like normal. Then he bills out all the underlying activities to the company in Belize. The effect is the same.

 

[JohnLocke]

What would be the logical solution if most of your customers are based in Europe?

You could possibly look into Cyprus as an alternative or some may even say Georgia or Bulgaria.

 

[CaLViN]

%90 of the companies / customers will be reluctant to make business with a banana island company including Belize.

 

[James Turner]

The problem is the OP is trying to do things backwards and in what is likely a disallowed structure, he is trying to shift income, when he should be trying to shift expenses.
Why try to bill customers from Belize when it creates 1001 problems?
He should bill from his local euro company all the products like normal. Then he bills out all the underlying activities to the company in Belize. The effect is the same.

The only problem with bringing costs into the business is that if they none genuine, which in this case they would be artificially created, this could be considered tax evasion. Depending how this was done it could also be transfer pricing (or mis-pricing). If a company is created correctly to enable someone to trade legitimately in the offshore environment and structured to specifically benefit them then they can operate legally.

 

[James Turner]

%90 of the companies / customers will be reluctant to make business with a banana island company including Belize.

Sometimes using a double structure to enable the client facing business to be in an acceptable country, but the owner company to be offshore can work. Sometimes it works if you create a payment processor to handle transactions so that the client is only ever dealing with a company in a respectable location.

 

[hernanday]

The only problem with bringing costs into the business is that if they none genuine, which in this case they would be artificially created, this could be considered tax evasion. Depending how this was done it could also be transfer pricing (or mis-pricing). If a company is created correctly to enable someone to trade legitimately in the offshore environment and structured to specifically benefit them then they can operate legally.

Oh, I don't disagree. But I don't believe he stated his home nation or his European state where his customers are, so we are all just speaking hypothetically and generally of course.

I would recommend if he has ample business/ncome from the business to make the expenses genuine. If his belize business is just a front, won't matter what he is shifting, his local tax authority will see it as BS either way. Like if he has no real economic activity in Belize, not even 1 employee, but just a shell with a pobox address, they aren't going to accept it no matter what.

I don't know what his product is, but lets say he is selling ketchup in Europe. He lives somewhere over there. Lets say he sells a case of bottles right now for $100. What he is trying to do is sit in Europe, on his 1000 cases, made in Spain or Italy and sell them to UK or france or something but claim it is all a Belize company or bill the Euro clients for a Belize company. Of course the clients are smart to suspect it, because its not from Belize, he is not from there, the product is not made or packaged there, etc. Tax authorities will see it the same way and call bulls**t. How can this be a Belize sale when he doesn't even have a single import from Belize.

But what if he has legit cost on that $100 case like this:
$10-Marketing + Advertising
$20-Licensing fees of the logo
$20-Royalties of the bottle shape (get a patent for it)
$5-Accounting fees
$3-Web support/development
$5-HR
$15-Research

Total cost $78.

Net Income $22 a case. Now maybe he tacks on a little extra wink wink, to get the Net Income down to $10 a case or $5 case (5 is pretty aggressive but $10 likely will withstand tax scrutiny because 10% net margin is normal).

If he is normally netting $2.2 mil on $10 mil and can get that number down to only $500k in EU and the rest $1.7 mil in Belize its not too bad. He will only pay eu tax on the $500k and $1.7 mil with very little to no taxes.

EU cannot force him to incur all of his cost in the EU. But if EU sees all his customers in Europe,nothing in Belize no employees, no address, etc. How is he going to transfer his income to Belize, not even his customers is dumb enough to fall for it.

 

[James Turner]

As you say @hernanday to give a full idea of the situation we will all need a lot more information, which is likely to change the clients situation.

 

[clemens]

Maybe OP want to get back in here and answer some of the questions if these were of real interest for him