Question Is it worth setting up off-shore company as French tax resident?

[GenevaDude]

Hello all,

I am new here and have already learnt a lot from many smart people. Thank you all.

I need to understand if it is worth setting up off-shore busines for tax optimization and security.

I am currently French tax resident with family private visa (Eastern Eurointending to set up and operate a marketplace. All activities will be done from France and I will be UBO.

At first, I intended to incorporate in Belize or Delaware. However, a French tax lawyer I've consulted has somehow tried to discourage me. The main reasons were:
1. French tax authorities dislike of off-shore companies (particularly, Belize).
2. Consequently, having me flagged snd investigated more than normal.
3. No benefit, since as French tax resident, I will have to do all tax reporting anyway.

Honestly, taxation is not what I am worried about at the moment. I am just starting a marketplace and all totally for legal and legit business. My main concern is that given the stories I've heard of French Tax administration, assets and bank accounts being frozen for alleged fraud and investigation (can take 5 years) sometimes upon a suspicion (my nationality, for example). Having both an off-shore company and a bank account will provide me with a piece of mind until I have more revenue and, therefore, other problems. It is not THAT easy I guess to freeze those in another country and not worth since I am not yet making big profits.

Finally, I don't trust easily a lawyer (if at all), and perhaps he said that knowing problems will happen and I will come back to him and hire for a litigation and he gets more money.

He kept saying taxation is very easy in France which I know is not and pressured him to finally agree. At the same time, he admitted, his office's 90% of activities is tax litigations. So, not so simple then.

I would very much appreciate your advice and direction to the right place.

 

[GenevaDude]

@centme308win - Thank you for advice. Does it mean I will have double taxation? France insists on declaring everything and it os difficult to get off the hook.

 

[CyprusLaw]

Hi, is there any chance you would consider relocating to Cyprus, for at least 60 days? Or is the plan 100% set on living in France?

 

[GenevaDude]

Hi, is there any chance you would consider relocating to Cyprus, for at least 60 days? Or is the plan 100% set on living in France?

I am married in France now. There is no way we ever are going to Cyprus.

 

[GenevaDude]

No,you won't have double taxation but you will have to declare the company and build substance in Cyprus

Thank you. Does it change a taxation requirements in France? Does company in Cyprus provide a protection given profits are declared anyway. Do I require incorporate a company in France too? I am a bit puzzled on why should I have to incorporate anything in France by law if all profits are to be declared anyway.

 

[CyprusLaw]

Thank you. Does it change a taxation requirements in France? Does company in Cyprus provide a protection given profits are declared anyway. Do I require incorporate a company in France too? I am a bit puzzled on why should I have to incorporate anything in France by law if all profits are to be declared anyway.

It will be working this way - Cyprus company profits taxed at 12.5% - any dividend paid to yourself will be SDC/tax exempt, you will only be paying 2.65% on dividend for the GHS. The catch here is that as you will not be in Cyprus you will have to declare dividend income in France and pay any applicable tax there.

With respect to the Company being a Cyprus tax resident, you will need nominee services in order to establish substance and control in Cyprus, and therefore minimise the risk of the structure being challenged by the tax authorities.

 

[GenevaDude]

It will be working this way - Cyprus company profits taxed at 12.5% - any dividend paid to yourself will be SDC/tax exempt, you will only be paying 2.65% on dividend for the GHS. The catch here is that as you will not be in Cyprus you will have to declare dividend income in France and pay any applicable tax there.

With respect to the Company being a Cyprus tax resident, you will need nominee services in order to establish substance and control in Cyprus, and therefore minimise the risk of the structure being challenged by the tax authorities.

Thank you for clarifying. If I understood you correctly, company profits taxed at 12.5% and dividends are to be disclosed to French tax authorities (of course) and applicable tax paid. As I will be reinvesting any profits back into the company for the first year, dividends will not be an issue.

Is it legal, though, to have an off-shore company ONLY in France without local i corporation?

 

[GenevaDude]

Hi, is there any chance you would consider relocating to Cyprus, for at least 60 days? Or is the plan 100% set on living in France?

As time to edit post expired, writing a new one. What happens if I stay 60 days in Cyprus?

 

[CyprusLaw]

As time to edit post expired, writing a new one. What happens if I stay 60 days in Cyprus?

Ok so the 60-day rule relates to your personal income - if you stay 60 days in Cyprus per year, and not more than 183 days in any other jurisdiction, you become a tax resident in Cyprus. This will also give you the status of a non-dom for 17 years, which means that any dividend will be tax exempt, and as you will be a Cyprus tax resident you won't have an obligation to pay taxes in another jurisdiction. But as you have mentioned that it is not possible to relocate to Cyprus this will not be an option.

 

[GenevaDude]

Ok so the 60-day rule relates to your personal income - if you stay 60 days in Cyprus per year, and not more than 183 days in any other jurisdiction, you become a tax resident in Cyprus. This will also give you the status of a non-dom for 17 years, which means that any dividend will be tax exempt, and as you will be a Cyprus tax resident you won't have an obligation to pay taxes in another jurisdiction. But as you have mentioned that it is not possible to relocate to Cyprus this will not be an option.

Ok clear. Sounds as a very interesting option. Sadly, yes, maybe 60 days in Cyprus could be negotiated, but France is permanent, so I will be staying here the whole year. Thank you for the explanation, though. I will keep it in mind.

 

[neweraoffshore]

Honestly, taxation is not what I am worried about at the moment. I am just starting a marketplace and all totally for legal and legit business.

Offshore companies are not illegal if you pay your taxes and declare everything correctly. You can then choose the jurisdiction which gives you the best protection. But this doesn't mean that you can't be made liable for illegal activities in your home country. Courts will overrule you in this case easily.
So if you really want to pay tax, then get a jurisdiction with favorable protection laws and also stable banking which allows you to use the main payment processors like Paypal and Stripe. For example Belize would have good protection, but bad banking. Delaware has good protection and good banking options, however good banking would require a personal visit.

 

[kranj99]

To the OP: do you speak/understand French? If so, there are a fair number of good YouTube videos who address specifically French residents opening up LLCs in the US etc. In a nutshell, it's totally allowable, you just need to declare the profits in France on a special tax form. But if your expected revenues are say less than 250K, I'd suggest you may be better off incorporating an SAS in France. I used to be a part owner of one and the tax/reporting obligations aren't that bad. One advantage in France is that there are lots of loopholes and even opportunities for state subsidies. They're not widely published and so a local accountant can advise better. But once you get the hang of the French system, you will see there are actually some good opportunities, despite the perception of it being a tax hell.

 

[GenevaDude]

To the OP: do you speak/understand French? If so, there are a fair number of good YouTube videos who address specifically French residents opening up LLCs in the US etc. In a nutshell, it's totally allowable, you just need to declare the profits in France on a special tax form. But if your expected revenues are say less than 250K, I'd suggest you may be better off incorporating an SAS in France. I used to be a part owner of one and the tax/reporting obligations aren't that bad. One advantage in France is that there are lots of loopholes and even opportunities for state subsidies. They're not widely published and so a local accountant can advise better. But once you get the hang of the French system, you will see there are actually some good opportunities, despite the perception of it being a tax hell.

Thank you for your honest and sensible response. This is what I have found recently too. Although, there are many horror tax stories, it seems better to be on a good stance with tax authorities when starting in France. Although, paperwork is extensive.
Once I go above 250K, situation may change altogether as tax laws and incorporation structures do in different countries. So, I will handle it then and there. Thank you again.

 

[GenevaDude]

To the OP: do you speak/understand French? If so, there are a fair number of good YouTube videos who address specifically French residents opening up LLCs in the US etc. In a nutshell, it's totally allowable, you just need to declare the profits in France on a special tax form. But if your expected revenues are say less than 250K, I'd suggest you may be better off incorporating an SAS in France. I used to be a part owner of one and the tax/reporting obligations aren't that bad. One advantage in France is that there are lots of loopholes and even opportunities for state subsidies. They're not widely published and so a local accountant can advise better. But once you get the hang of the French system, you will see there are actually some good opportunities, despite the perception of it being a tax hell.

@vbam99 a question, why have you specifically mentioned SAS and not SARL, for instance? SARL has more protection implying limited responsibility, doesn't it?

 

[kranj99]

@vbam99 a question, why have you specifically mentioned SAS and not SARL, for instance? SARL has more protection implying limited responsibility, doesn't it?

There was no real rationale behind it - I was just a former (minority) shareholder in an SAS that I exited a while back, hence the reference. That aside, I'd say the SAS is perhaps the closest the French have to the US LLC, where the SARL may be closer to say a UK Ltd. or something. I'm not an expert on this, but I'm of the belief that the SAS has less administrative overhead - and if you're essentially going to be a one-man shop when starting out, this may be of interest. It would also seem that the SAS seems to be more flexible with the ownership structure, shareholder agreements etc. You can also look at something called a 'SAS a capital variable" rather than fixed share capital. This allows for some anonymity for shareholders as well. Like I said, France is not the tax hell it's often made out to be - but there are some interesting tools available that make France an interesting place to set up - especially given that you are tax resident there.

 

[GenevaDude]

There was no real rationale behind it - I was just a former (minority) shareholder in an SAS that I exited a while back, hence the reference. That aside, I'd say the SAS is perhaps the closest the French have to the US LLC, where the SARL may be closer to say a UK Ltd. or something. I'm not an expert on this, but I'm of the belief that the SAS has less administrative overhead - and if you're essentially going to be a one-man shop when starting out, this may be of interest. It would also seem that the SAS seems to be more flexible with the ownership structure, shareholder agreements etc. You can also look at something called a 'SAS a capital variable" rather than fixed share capital. This allows for some anonymity for shareholders as well. Like I said, France is not the tax hell it's often made out to be - but there are some interesting tools available that make France an interesting place to set up - especially given that you are tax resident there.

Alright. Clear now. Thank you for the explanation and valuable nuances. I have just checked SAS and it looks like its primary value is in creating foreign partnerships amongst other benefits.

I will explore available tools and structures in detail. Some have been changed by recent French administration. Thank you again for this valuable information and explanation.

 

[Cetme308win]

Thank you for clarifying. If I understood you correctly, company profits taxed at 12.5% and dividends are to be disclosed to French tax authorities (of course) and applicable tax paid. As I will be reinvesting any profits back into the company for the first year, dividends will not be an issue.

Is it legal, though, to have an off-shore company ONLY in France without local i corporation?

yes it's fully legal as long as you disclose it to the French tax authority

 

[kranj99]

Alright. Clear now. Thank you for the explanation and valuable nuances. I have just checked SAS and it looks like its primary value is in creating foreign partnerships amongst other benefits.

I will explore available tools and structures in detail. Some have been changed by recent French administration. Thank you again for this valuable information and explanation.

I think the original intent of the SAS was to facilitate JV partnerships with foreign partners. But it's really evolved over the years where it's a very common company structure on its own. Again I don't have the expertise to advise on SAS vs SARL and the nuances but if you're comfortable with the French language, you will find some excellent resources here: Le coin des entrepreneurs : création, reprise et gestion d'entreprise

 

[GenevaDude]

I think the original intent of the SAS was to facilitate JV partnerships with foreign partners. But it's really evolved over the years where it's a very common company structure on its own. Again I don't have the expertise to advise on SAS vs SARL and the nuances but if you're comfortable with the French language, you will find some excellent resources here: Le coin des entrepreneurs : création, reprise et gestion d'entreprise

You are right. Indeed, it should have been developed into a more comprehensive structure over time.
I will consult accountant(s) and lawyer(s) to choose the best solution for now. SAS, SARL or EURL. A very important (decisive, in fact) factor responsibility must be limited to the investment into the company. I don't want them to have an access to personal assets as this increases appetite for investigations, I assume.

Hiring an accountant and auditor (in some cases) is required by law for some structures. Some companies help with incorporation too as local French administration is not very efficient to say the least.

Thank you for the link. I will have a look. My French is not yet perfect, but Google translation does the job. There are many resources online too. Thanks again for all the help.