My tax attorney is advising
Singapore. But I am not sure how well he understands taxation in Singapore. I am sceptical because it isn't a popular choice here.
Well I wouldn't call people making comments on any public forum a reliable source of information.
That being said if your tax attorney is advising Singapore I'd be really curious to know why?
Let's start with the basics:
1. It's expensive and hard to deal with - especially due to the local director requirement, not unsurmountable but definitely more complicated
2. The likelihood of getting zero tax is quite low, the alternative is tax is fairly high (17%) and what you'd need to do to get zero tax creates a whole host of other issues starting with not banking in Singapore, which defeats one of the main reasons for being connected to Singapore at all
As I said I love Singapore I think it's a great place to live and visit and bank, it's got some talented people (though the labor market is super tight so attracting and retaining those people is another matter), and a pretty robust VC scene, which is good for if you're looking for funding.
However, if you're not going to benefit from those things and if you're looking for super low taxes it's just not a great idea in most cases...I actually can't think of a case where it would be excepting the above.
What should you do?
I don't know you or your situation but let's look high level at what concerns you might have:
1. Tax - tax has relatively litle to do with where you form a company in most cases. In other words if you're thinking you'll sit in a high tax country, form a company in a low tax country and pay low taxes you're probably deluding yourself. If it was so easy then no one would form in high tax countries and all the tax departments would go out of business. It turns out they are really smart and they've created rules to make it tough for you to benefit from international tax advantages...not impossible but tough. What do you need to look at? First you need to look at corporate residency rules. Will the foreign company be considered a local company for tax purposes? If so you're already screwed. Assuming you can actually make the company foreign next, you need to consider the source income rules, will the income be taxable even if the company is foreign? If so this doesn't get policed much so you might get away with it but you're definitely at risk. If you're a one man show you'll almost certainly be taxable on this basis. Finally, you've got to look at how your residency or the residency of the shareholders in general affects
CFC rules. If these are triggered you could end up being taxable locally regardless of those other points and potentially gain nothing.
Have you thought through all those elements?
2. Banking - You've expressed concerns here, let's start at the beginning. In the land of offshore today the first priority is simply to get an account open and keep it open. The starting rule of thumb is as a foreign owner it's tougher for you to open an account than a local. It's harder still to open an account for a company in another country. Keeping it open if you don't have local presence is also getting harder. If someone is sending or receiving money you'll have to consider both the country of incorporation and the country of banking, which is why I say Singapore offshore is sort of self defeating because you don't get the benefit of
Singapore banking, which is very reputable.
Final suggestion. Form a company somewhere where you can have real activity. Hire some staff, have a small office if it makes sense. Make sure this country has low taxes, good infrastructure you can get good people and have decent banking.
If you do this it will be much easier for tax, much easier to get accounts, much more likely to keep them open.
Where should that be?
Depends on you, where you're from the nature of your business, etc.
For example, if I wanted to
process credit cards or receive money from Paypal especially if I wanted USD or EUR I wouldn't use a company in HK or Singapore, etc. because fees will be quite high. I'd aim for the US or Europe. But if I was in a situation where I didn't have those worries maybe I'd look to places in Asia.
If you were going to be in Asia you're usually looking at:
- HK
- Singapore
-
Malaysia
- Thai free zone company or similar
You might also consider Dubai in there as somewhat comparable depending.
If you're looking at the US you're looking at US or Puerto Rico.
If you're looking at Europe you're probably looking at:
- Gibraltar
- Jersey/Guernsey/Alderney/Sark
- Isle of Man
- UK
- Malta
- Cyprus
-
Estonia
- Bulgaria
- Romania
- Hungary
You could throw Georgia in there (debatable where to call that Europe or not)
If you were to narrow this down most of the time out of the first 5 I'd favor Malaysia (Labuan) or Dubai. Not always again it's case by case but those are most likely to be the best options.
If Europe then usually Hungary and Romania aren't quite a good options as Bulgaria. Estonia requires some work arounds to get around the 20% distribution tax. Malta you can't really bank locally. Cyprus and Bulgaria you can have a debate about. Gibraltar, Jersey, Isle of Man are usually quite expensive for staff but it's easy to get good quality fiduciaries there.
Georgia is a decent option if you don't need
payment processing since wages are low, there's some good tax options, and it's easy to deal with. You won't get a very deep or skilled talent pool though so you need surface level people.
If you want to look at the US then usually Puerto Rico is only a big advantage for Americans but sometimes it's a good option for foreigners too.
Hope that helps.
