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eCommerce, where are you incorporated and why? (12)

10-25-2017 10:08 AM #1 pavel_apostolov87 (Member)
eCommerce, where are you incorporated and why?

Hi,

I would love to hear where other people have incorporated their ecommerce operation and why. Europe is a nightmare for taxes, Hong Kong is nearly impossible to get a bank account and therefore Paypal account (not to mention a card to pay for products)...

How's everyone doing it?

10-25-2017 10:56 AM #2 manu_adefy (Veteran Member)

I wouldn't say Europe is a nightmare for taxes - they are higher on average and you often have less headache with all the other things you mentioned there. In fact, corporate tax in many EU countries is lower than in the US. What is high in Europe is private income tax and social insurance.

I think if you are not too big and can reinvest your profit into scaling, many EU countries are a more than decent option. You can then move a real business into a more favourable jurisdiction, more likely to be accepted in Hong Kong as well, for example.

Tax is certainly not the only consideration - will wait for @pekadis to chime in on this topic.

10-25-2017 11:53 AM #3 chaabanov (Member)

I'm also interested in this, I've heard from many people that UK/Ireland are good options. What do you guys think about them?

10-25-2017 12:37 PM #4 donmathboss (Member)

Malta has 5% tax, from what I "heard".
I could be wrong, so check please

10-25-2017 01:19 PM #5 chaabanov (Member)

By the way, it's important to note that a lot of countries are low-tax but that doesn't always mean they're a good fit for e-commerce. You have to also consider payment gateways. Not all countries have access to good payment gateways. Countries like US and the UK aren't considered "low tax countries", but they have access to Shopify Payments which can save you a lot of headaches and loss of sales. That can make it worthwhile.

10-25-2017 01:55 PM #6 manu_adefy (Veteran Member)

Quote Originally Posted by donmathboss View Post
Malta has 5% tax, from what I "heard".
I could be wrong, so check please
It can - a few footnotes on it and extra work but yes, Malta can have very low corporate tax and is in the EU.

I think something to keep in mind on the topic is also tax on dividends if it exists, how you can employ people if you need to, payment gateways which has been mentioned before. You can probably solve many of those issues but not all, because if you are in BVI for example, you could struggle to find companies who want to do business with you.

I'd suggest also looking into Estonian e-residency.

10-25-2017 02:32 PM #7 style13 (Member)

What do you guys think about Singapore? Especially with the "tax exemption for foreign income" option.

I've heard about Malta being a legit option too and of course HK.

10-25-2017 02:49 PM #8 pekadis (Moderator)

I was writing a long reply here, until I realised I don;t know whether you want to incorporate in the country where your business actually will be or whether you want to set up a tax structure, like a holding in order to minimise tax levels.

I assume it's the scond, but some clarification would help

10-25-2017 03:58 PM #9 nickpeplow (AMC Alumnus)
eCommerce, where are you incorporated and why?

Two businesses paired together for ultimate tax efficiency and asset protection.

Netherlands business for payment processing (PayPal, stripe etc)

Nevis business for Shopify account, fb advertising and product sourcing/fulfillment, payroll

Transfer pricing agreement that sucks all the profit out of be NL business into the offshore, so tax is only paid on the remaining 5% (effectively 0)

10-25-2017 05:30 PM #10 manu_adefy (Veteran Member)

Quote Originally Posted by nickpeplow View Post
Two businesses paired together for ultimate tax efficiency and asset protection.

Netherlands business for payment processing (PayPal, stripe etc)

Nevis business for Shopify account, fb advertising and product sourcing/fulfillment, payroll

Transfer pricing agreement that sucks all the profit out of be NL business into the offshore, so tax is only paid on the remaining 5% (effectively 0)
How often does this setup run into issues? Or how much is it under pressure from EU?

I remember the Irish + Dutch setup some big boys use was also under heavy fire recently.

10-25-2017 07:57 PM #11 pavel_apostolov87 (Member)

Quote Originally Posted by pekadis View Post
I was writing a long reply here, until I realised I don;t know whether you want to incorporate in the country where your business actually will be or whether you want to set up a tax structure, like a holding in order to minimise tax levels.

I assume it's the scond, but some clarification would help
More like the second. I'm open to incorporate anywhere, not necessarily to minimize taxes. It's also important to keep in mind things other people mentioned like access to payment gateways, easiness to set things up (f*** HK).

When I mentioned that EU is a taxes nightmare, it wasn't so much about corporate tax %, more like associated things like requirements to charge different VAT per country (then also pay in every country where goods are sold?), etc. Perhaps I'm wrong about it.

Thanks to everyone who chimed in.

10-25-2017 08:08 PM #12 manu_adefy (Veteran Member)

Quote Originally Posted by pavel_apostolov87 View Post
More like the second. I'm open to incorporate anywhere, not necessarily to minimize taxes. It's also important to keep in mind things other people mentioned like access to payment gateways, easiness to set things up (f*** HK).

When I mentioned that EU is a taxes nightmare, it wasn't so much about corporate tax %, more like associated things like requirements to charge different VAT per country (then also pay in every country where goods are sold?), etc. Perhaps I'm wrong about it.

Thanks to everyone who chimed in.
If you deliver from within the EU for quick delivery - you pay VAT like everyone else, pretty sure.

If you deliver from outside, you may not need to pay VAT but you will have delayed shipping time and probably extra costs. Definitely plenty of factors to consider but I like Nick's suggestion - definitely something to look into.

Last I checked, this probably applies regardless of where you are incorporated - at least dropshipping from China means you don't have to charge VAT.

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