Remote software developer generating mid 6 figures, where to incorporate?

[drysponge]

Then my Samoa company hires myself as an employee for $50K/yr to do monkey coding from Malaysia for example. My monkey coding would be considered locally sourced income and would pay tax on that $50K salary.

When I need to sign contracts, update trade secrets, plan projects, make strategic decisions, etc for the Samoa company, I would travel as a digital nomad to another country for a few days (say to Singapore), have the Samoa company rent a workspace there for a day, and do some control and management of the company, update the meeting minutes book, etc then fly back home to my 9-5 employee monkey coding work.

why are you going to singapore to do that? Malaysia has no cfc rules?

what do you mean "I would travel as a digital nomad"? when you go through customs are you going to declare yourself a digital nomad? do you wear a hat of some kind? a badge?

the idea that if malaysia did care and were to have & enforce cfc rules, that you would have tax residency there but they would respect the fact that you went on vacation for 2 days to sign a document and then came back to do the material operations of the company that ostensibly is just you, for the next 363 days is insane.

why samoa of all places?

 

[daniels27]

why are you going to singapore to do that? Malaysia has no cfc rules?

I think the PE rules are more the problem.

CFC in most cases are about as relevant as a tax residency certificate: irrelevant!

what do you mean "I would travel as a digital nomad"? when you go through customs are you going to declare yourself a digital nomad? do you wear a hat of some kind? a badge?

Yes. Must be bought here before boarding.
https://patchion.com/en/experts-and...267-digital-nomad-adventure-is-my-office.html

 

[pieceofmind]

Ya traveling as a “Digital Nomad” was a little loose terminology. There is an APEC business travel visa where many Asian countries are a part of where you can do short term business activities there: https://www.apec.org/groups/committee-on-trade-and-investment/business-mobility-group/abtc

And @daniels27 is totally right, the PE is the biggest challenge to overcome, which I attempt to offset with with having as much operations in Samoa.

Reason for Samoa is because one of the last few places that isn’t pressured by OCED to comply with economic substance (which does indeed contradict PE attempts), and requires no accounting or reporting so easy to maintain. That was just my thought and research thusfar. Very tricky for consulting services overall and wondering if anyone has cracked the code.

 

[drysponge]

And @daniels27 is totally right, the PE is the biggest challenge to overcome, which I attempt to offset with with having as much operations in Samoa.

what you said about going to singapore to sign contracts (exercise control) & returning to then work in Malaysia wouldn't effect your pe status, I could only imagine that strategy being used to avoid Australian style cfc rules where its ambiguous if companies become Australian resident from so much as a zoom call

have you tried getting banking in Samoa? I haven't, is it a pain? my understanding is that its a blacklisted region that will give you headaches whenever possible.

 

[pieceofmind]

yes traveling to Singapore would resolve management and control issues. For PE, the approach would be “I would put software IP on the balance sheet which is code, libraries, and trade secrets that I've come up with over the past few years. I would have a mailbox, phone number, and even a Samoa ".ws" domain and a physical server that hold sensitive company documents and trade secrets there.” Is it sufficient is pretty gray.

Caye Bank in Belize will open an account for Samoa corporation and confirmed with first hand recent experiences. Also Currenxie works. But ya, because Samoa is gray/black listed, options are limited so a US LLC / UK Ltd might help take it further for Stripe, etc.

 

[JackAlabama]

Ya traveling as a “Digital Nomad” was a little loose terminology. There is an APEC business travel visa where many Asian countries are a part of where you can do short term business activities there: https://www.apec.org/groups/committee-on-trade-and-investment/business-mobility-group/abtc

And @daniels27 is totally right, the PE is the biggest challenge to overcome, which I attempt to offset with with having as much operations in Samoa.

Reason for Samoa is because one of the last few places that isn’t pressured by OCED to comply with economic substance (which does indeed contradict PE attempts), and requires no accounting or reporting so easy to maintain. That was just my thought and research thusfar. Very tricky for consulting services overall and wondering if anyone has cracked the code.

are there any recommended agents in Samoa?

 

[JustAnotherNomad]

This is bad advice. Play the game instead of cheating, otherwise you can go a downward spiral a decade later if any govt ever wants to call your hand. If there’s a smarter, simpler way, im all ears.

What? You must have quoted the wrong post.

 

[daniels27]

What? You must have quoted the wrong post.

He wants peace of mind at any cost. Check his name.

 

[JustAnotherNomad]

Malaysia doesn't have a PE concept. Andrew Handerson used to live there.
You can ask @MiddleEuroAsia .
I know other people who live there and use transparent US LLCs - they even talked to their accountant and/or the tax office to ask if they should pay tax: "You have an offshore business, I wouldn't even know how to report this. It's not possible to pay tax for this in Malaysia."

That's not to say they don't have a PE concept on paper, in theory. But in practice, this is not being applied.
That could change in the future, and I believe Malaysia has been mulling taxing foreign income as well.
But if you want to live in Malaysia, you really don't have to make things more complicated than necessary.

 

[drysponge]

yes traveling to Singapore would resolve management and control issues

management and control issues that do not exist because cfc rules arent a thing there

For PE, the approach would be “I would put software IP on the balance sheet which is code, libraries, and trade secrets that I've come up with over the past few years. I would have a mailbox, phone number, and even a Samoa ".ws" domain and a physical server that hold sensitive company documents and trade secrets there

PE rules just require you to be doing business in the jurisdiction of the country it doesnt matter if you have substance somewhere else, what're these servers meant to do for you?
as posted above, these rules aren't enforced so it doesnt matter, but your structure doesnt provide any special protections to them afaik (other than what being in an non cooperative jurisdiction provides, negatives included)

 

[pieceofmind]

https://phl.hasil.gov.my/pdf/pdfam/GP_21052020_2.pdf

“Where business operations are carried on in Malaysia, the business income derived is subject to the ITA. Despite the absence of a place of business in Malaysia, business income may be deemed to be derived from Malaysia and is subject to tax due to business operations carried on in Malaysia.”

On paper, PE is there. Not following it because “they don’t enforce it” in practice is not good advice I meant. How would we even know if they enforce it or not really. Also Andrew Henderson has a whole team working for him offshore, but if he were to do consulting for a US client from within Malaysia, that particular income from that project would be deemed Malaysian sourced I believe.

There’s a thin line between PE and management and control, still hazy on it but if you are controlling and managing the corp that could be considered PE even if no CFC rules.

Servers have corporate docs, implementation details for past, present, and future projects, contracts, business software, etc. just an idea so far but I’m sure needs more thought.

@JackAlabama ive used offshoreformation247.com before.

 

[daniels27]

Andrew Henderson. He had a company in Labuan for the 3% tax. Malaysia has a lot of incentives to incorporate there.

 

[JackAlabama]

@JackAlabama ive used offshoreformation247.com before.

thanks

 

[JustAnotherNomad]

management and control issues that do not exist because cfc rules arent a thing there

PE rules just require you to be doing business in the jurisdiction of the country it doesnt matter if you have substance somewhere else, what're these servers meant to do for you?
as posted above, these rules aren't enforced so it doesnt matter, but your structure doesnt provide any special protections to them afaik (other than what being in an non cooperative jurisdiction provides, negatives included)

What is this nonsense? None of it makes any sense at all.

 

[JustAnotherNomad]

Andrew Henderson. He had a company in Labuan for the 3% tax. Malaysia has a lot of incentives to incorporate there.

From what I've read, he uses a nonresident HK company and he currently lives in Georgia? Unless something has changed.
I would expect that he also used the HK company when I was living in Malaysia to avoid the tax.

 

[JustAnotherNomad]

On paper, PE is there.

Yes, like in Thailand for example. Or Panama. Or Paraguay.

"A company incorporated abroad is subject to CIT in Thailand if it is considered to be carrying on business in Thailand. The term ‘carrying on business in Thailand’ is broad and, subject to the provisions of a DTT, includes the presence of an employee, representative, or go-between that results in the foreign company deriving income or gains in Thailand."
https://taxsummaries.pwc.com/thailand/corporate/corporate-residence

"A company is considered as a tax resident [in Panama] [...] if Panama is regarded as the place where the central management is located. [...] Panama follows the Organisation for Economic Co-operation and Development (OECD) PE rules."
https://taxsummaries.pwc.com/panama/corporate/corporate-residence

"If a person provides instructions related to the agreement of certain operations on behalf of a foreign entity, this operation may be considered as a PE in [Paraguay], except in cases where the mentioned instructions are related to the purchase of goods."
https://taxsummaries.pwc.com/paraguay/corporate/corporate-residence


Maybe you should go and explain to the THOUSANDS of remote workers in Thailand that their offshore companies have to pay tax in Thailand.
And that what they're doing is extremely risky, but now you've come to save them!

Not following it because “they don’t enforce it” in practice is not good advice I meant.

Ok, if you say so.

How would we even know if they enforce it or not really.

Yes, I really wonder. Certainly nobody has any experience with this, nobody has ever done this before, and there certainly aren't even people on this forum who have done it.
But it's good that we can at least ask you, who has no experience with this.

Also Andrew Henderson has a whole team working for him offshore, but if he were to do consulting for a US client from within Malaysia, that particular income from that project would be deemed Malaysian sourced I believe.

Of course. Since all he does is consult US clients and he used to live in Malaysia, obviously he paid tons of taxes in Malaysia.
That was his secret trick.

There’s a thin line between PE and management and control, still hazy on it but if you are controlling and managing the corp that could be considered PE even if no CFC rules.

Effective place of management, PE and CFC rules are three distinct concepts.
Your comment reads like "There is a thin line between apples and oranges. If you have an apple, that could be considered a banana, even if there is no strawberry."
My brain is hurting from having to read nonsense like this.

Look, I'm not selling anything. All I'm saying that if someone wants to live in Malaysia, just GO TALK TO SOME PEOPLE ON THE GROUND and then figure it out for yourself.
Don't listen to people on the internet who probably wouldn't even be able to find Malaysia on a map.

 

[pieceofmind]

Wow @JustAnotherNomad you are not fun to work with. We’re all trying to be collaborative and no one is claiming they know everything, just sharing thoughts and research. Go air out your arrogance and go troll off on Reddit, this forums is for adults. You really spoiled this thread, I hope I never run into you again on this forum or anywhere for that matter.

 

[drysponge]

What is this nonsense? None of it makes any sense at all.

my understanding of piece of minds set-up is that
is a tax resident of Malaysia
owns company "SAM" that does software contracting
is paid by SAM to create software in Malaysia - this could reasonably be considered a Malaysian PE of SAM
flies to Singapore to sign a contract to make software, then returns to Malaysia to fulfil that contract

my opinions are that
piece of minds actual operations of making software is Malaysia are still a reasonable Malaysian PE of SAM no matter if he has his .ws domain and samoan servers or not
piece of minds actual operations of making software is Malaysia are still a reasonable Malaysian PE of his company if his company is Samoan or a us llc or a uk ltd or any other entity that may be easier to do business with (and possibly has a treaty with clearer PE rules defined).
piece of minds actual operations of making software is Malaysia are still a reasonable Malaysian PE of his company if he flies out of country to sign agreements to do work or if he does those in Malaysia

i am saying "reasonably" because i don't believe they would or would likely be considered that, but if a Malaysian judge was to rule that way it wouldn't surprise me other than the Malaysia is generally lenient in these matters (from what i've heard).

if im missing anything here please let me know.

"A company incorporated abroad is subject to CIT in Thailand if it is considered to be carrying on business in Thailand. The term ‘carrying on business in Thailand’ is broad and, subject to the provisions of a DTT, includes the presence of an employee, representative, or go-between that results in the foreign company deriving income or gains in Thailand."
https://taxsummaries.pwc.com/thailand/corporate/corporate-residence

Maybe you should go and explain to the THOUSANDS of remote workers in Thailand that their offshore companies have to pay tax in Thailand.
And that what they're doing is extremely risky, but now you've come to save them!

Maybe you should go and explain the HUNDREDS OF THOUSANDS (more likely millions) of us individuals that fail to file their personal tax returns with the IRS they have to pay taxes in the US and that what they're doing is extremely risky, but now you've come to save them!

of course, these are different things, but you hopefully you can understand why someone would care about the law as it is written over how it is currently being enforced & peoples personal experience with it.