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Where to form an International Trading Company?

J

JimmyWho

Active Member
Apr 4, 2019
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#1
I have immigrated to Israel, and as part of the incentives of immigrating to Israel, any foreign company I own will not be classified as an Israeli resident company for the first 10 years. See here: https://taxes.gov.il/english/income...kagefornewimmigrantsandreturningresidents.pdf

I will still need to pay personal income taxes in Israel. (47% on everything above ~140,000USD :oops:). My Israeli corporate lawyer has advised me that my company will need to pay me the median CEO salary if I do not want this setup to be contested. This means anything beyond my salary can be paid to me as a dividend with no further taxation. He also advised me to select a jurisdiction with audited books, to have perfect book keeping, and keep all documents.

My business entails buying exclusive rights from suppliers in the United States (#maga) and licencing those rights to retailers in European/Asian countries. I do not actually move any products and my business can be seen as shuffling papers around, assessing the credit worthiness of the European/Asian buyers, collecting payments, and paying the suppliers. I pick suppliers that see this as a win-win, as they are not familiar with the Asian markets, and my expertise brings them profits. I guess my business can be seen as wholesale drop shipping?

I am looking for a jurisdiction that has the following:
audited books
0% dividend tax
0% corporate tax
be on TransferWise's list of countries that can accept USD: TransferWise Help | Why can't I get USD account details?
legally consider my company locally domiciled
preferably be in EEA (if this isn't against my interest?)
be a respectable country

What issues should I be aware of? Would the US or any other country consider the profits to be made in their territory for my kind of business? Is there any kind of way I can better structure myself? With these new OECD rules will I need to hire in-jurisdiction staff or maintain a in-jurisdiction domiciled?

Thank you everyone in advance!
 
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#2
JimmyWho said:
OECD rules will I need to hire in-jurisdiction staff or maintain a in-jurisdiction domiciled?
Click to expand...
To be considered trustworthy with such a structure you didn't need the new OECD rules. This has been known to be the most valid way to convience any authority that your operation is legit and real.

I would look into a Cyprus non resident company for your setup, it full fill 99% of your requirements and is easy to setup. No issues with payment processors, banks, EMI's and other facilities you may require.
 
#3
Any reason for Cyprus over Gibraltar, Isle of Man, Jersey? I know there is a tax treaty in between Cyprus, US, and Israel. Israelis seem to love to use Cyprus I am just wondering why.
 
#4
What is the 1% that won't be fulfilled by Cyprus?

Will such a structure be considered trustworthy if I am the sole employee and based in Israel? If not, what positions need to maintained in Cyprus?
 
#6
#8
JimmyWho said:
I am not US. No worldwide taxation from origin country and I am not a tax resident of origin country for years.
Click to expand...

Cool then the world is your oyster.

You really need to make sure the foreign company is really resident in the foreign country and not considered by the foreign country and Israel to be operating in the home country of the director (Israel). The majority of offshore companies setups i.e Seychelles companies etc place of operation is often where the director is resident and not the Seychelles. Israel has CFC laws and taxes undistributed foreign income as if it was distributed to an Israel resident :(. I would 100% make sure with your lawyer that the document you showed in the link overrides this rule completely and is current firstly thu&¤#.
 
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#9
How do I make sure? Pay a management company $10k/yr to maintain an office with staff? Honestly I don't mind if I hire all my help out of whatever country the company is in. I can hire a PA, book keeper, etc to work from home in whatever country it is.
 
#10
If I read @Martin Everson right then the only thing this would require is that you find a agent that is able to setup a offshore company i.e. Seychelles with a real office, real director and real shareholder, all locals.

For such setups you can pick most offshore jurisdictions where it is possible to get office and director etc in real. I understand that this is actually what most countries will require and have required for years to accept the company not to be a resident company of where the owner live.
 
#11
JimmyWho said:
How do I make sure? Pay a management company $10k/yr to maintain an office with staff? Honestly I don't mind if I hire all my help out of whatever country the company is in. I can hire a PA, book keeper, etc to work from home in whatever country it is.
Click to expand...

Find a lawyer who is firsthand familiar with this type of relocation and the rules before spending any money. The best solution is to seek an advance ruling from the Israel tax authority for your proposed setup if in doubt. I don't think this will cost you more than a couple of 100's via your lawyer. However knowing someone who has done this before will go a long way. You are definitely not the first person to have this issue.
 
#12
Martin Everson said:
I would 100% make sure with your lawyer that the document you showed in the link overrides this rule completely and is current firstly thu&¤#.
Click to expand...

I have asked my Israeli corporate lawyer for clarification.

In the Israeli Income Tax Ordinance the exemption is worded as follows:
"First time Israel residents and returning residents 14. (a) An individual who became an Israel resident for the first time and a veteran returning resident shall – during ten years after the date on which they became residents as aforesaid – be exempt of tax on their income from all the sources enumerated in sections 2, 2A and 3 that were produced or accrued abroad or that are derived from assets abroad, unless they made a different request in respect of all or part of the income;"

sections 2, 2A, and 3 basically define all forms of income.
 
#14
#15
Revolut is actually one great alternative to Transferwise depending on what other requirements you may have.
 
#16
JimmyWho said:
Any reason for Cyprus over Gibraltar, Isle of Man, Jersey? I know there is a tax treaty in between Cyprus, US, and Israel. Israelis seem to love to use Cyprus I am just wondering why.
Click to expand...
Israel is close to Cyprus and only pay 2% for royalties
 
#18
JimmyWho said:
I have immigrated to Israel, and as part of the incentives of immigrating to Israel, any foreign company I own will not be classified as an Israeli resident company for the first 10 years. See here: https://taxes.gov.il/english/income...kagefornewimmigrantsandreturningresidents.pdf

I will still need to pay personal income taxes in Israel. (47% on everything above ~140,000USD :oops:). My Israeli corporate lawyer has advised me that my company will need to pay me the median CEO salary if I do not want this setup to be contested. This means anything beyond my salary can be paid to me as a dividend with no further taxation. He also advised me to select a jurisdiction with audited books, to have perfect book keeping, and keep all documents.

My business entails buying exclusive rights from suppliers in the United States (#maga) and licencing those rights to retailers in European/Asian countries. I do not actually move any products and my business can be seen as shuffling papers around, assessing the credit worthiness of the European/Asian buyers, collecting payments, and paying the suppliers. I pick suppliers that see this as a win-win, as they are not familiar with the Asian markets, and my expertise brings them profits. I guess my business can be seen as wholesale drop shipping?

I am looking for a jurisdiction that has the following:
audited books
0% dividend tax
0% corporate tax
be on TransferWise's list of countries that can accept USD: TransferWise Help | Why can't I get USD account details?
legally consider my company locally domiciled
preferably be in EEA (if this isn't against my interest?)
be a respectable country

What issues should I be aware of? Would the US or any other country consider the profits to be made in their territory for my kind of business? Is there any kind of way I can better structure myself? With these new OECD rules will I need to hire in-jurisdiction staff or maintain a in-jurisdiction domiciled?

Thank you everyone in advance!
Click to expand...

Really critical thing missing from the assessments people are giving you here.

You said "licensing those rights to retailers..."

This is a huge problem because that's royalties income. Royalties income is usually subject to withholding tax at the source country. So the first thing you'd want to do is either:

A) Treaties that allow you to not have this
B) Recharacterizing the income to not be royalties income

It gets somewhat worse if you're earning royalties income because for example HK would consider this to be locally taxable income.

Bottom line, you don't want royalties income if you can avoid it, you want sale of goods and/or services if possible.

Why do you want to be in the EEA?
 
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