Advice for a newbie - SaaS business looking to incorporate. What's a good combination for banks, payment processors and jurisdiction?

[MrDotty]

First of all, I have learnt a lot from these forums. So I would like to thank you all.

I have a SaaS business which I have been running as a proprietor (no incorporation, it' just me). I am Australian, so that's where I am registered and have an Australian business bank account. I only had a few customers when I started, so I didn't bother incorporating and focused on the business. However, I feel I will need to incorporate very soon as I am hitting significant revenue (still <25k annually but I am growing fast). Everything about the business is legit (no sex or drugs, plain software and cloud storage)

I want to relocate to Europe (not necessarily EU), because I want to be closer to my customers' time zones (80% customer base in USA, 20% EU/UK - but this can change). Australia is bloody far from everywhere, and too many draconian laws in general, and particularly in my sector (cloud computing). And I will also be doing a disservice to my business, from a competitiveness pov, by not being incorporated in a jurisdiction with lower taxes. And I like Europe. But I have considered places like Uruguay (no, I don't speak the language - but I can learn). Also lastly, I don't like draconian KYC/AML (I have those magical internet coins, and want to relocate to low KYC, low CGT places).

My long term goal is to live in Europe and ideally have citizenship somewhere in Europe or EU, so I have more mobility options within Europe.

Right now, I am looking at Cyprus, based on threads in this forum.

My first question is around the payment processor. I use Stripe for payments. And stripe requires your residency to be the same as your bank account and your company has to be in the same place. If they could, they would want a CCTV camera in my house as well. Is there a decent payment processor, that allows me some flexibility here? Any payment processor that takes credit/debit cards is fine. I don't want Stripe since they are simply not available or have limited services in many countries I like - including Cyprus. I am looking for a payment processor that is more location agnostic.

Second question - is Cyprus the right choice? Or are there comparable options? The reason I want Cyprus is that it is easy to get tax residency, and I think I will like the place. My company is not going to be profitable for a while, since I have to pay myself and my future team members salaries too. But I don't want to be in a super high tax jurisdiction. Ideally less than 15%, but anything below 20% is fine. I have considered the Balkan countries, but getting residency & banking there seems to be hard. For instance in Bulgaria, I have to hire 10 Bulgarian nationals (which is way too much for a company my size). Montenegro seems to be easier for residency, but seems to be a bad place to bank in.

Third question - should I bank in the country I incorporate in? Is it better to bank in a country like Germany? I am unsure if this kind of a structure works though (that is company and the bank in different jurisdictions) .

Sorry if it was a long post without much substance - but I will appreciate any and all advice.

Regards,
MrDotty

 

[Onassis]

And stripe requires your residency to be the same as your bank account and your company has to be in the same place.

Not true - you can have a Stripe account as an EU resident UBO for a UK company with a bank account again in Europe, no issues there. At least that is the case with most countries they support.

My company is not going to be profitable for a while, since I have to pay myself and my future team members salaries too.

So you have capital to invest? That opens up quite a few residency opportunities depending on the amount involved.

For example you could set up a company in Vukovar, Croatia and have 0% CIT forever just by hiring a few locals. There is also a town called Osijek nearby (20kms away) with a thriving tech/startup scene along with an international airport that has regular and cheap Ryanair flights to London Stansted. Everyone speaks decent English as well. Plenty of such options in the EU, just gotta do the research.

 

[Marzio]

For example you could set up a company in Vukovar, Croatia and have 0% CIT forever just by hiring a few locals.

I presume you are Croatian because this is like "insiders info" that only a local could know. Can you point us to some written law that explains this exemption in detail? For example how many locals you should hire and other requisites.

I have a SaaS business

If i would have to setup a SaaS business in EU i would go where there's plenty of developers at the best cost and Romania is one of the countries with the best developers.

Depending on the level of expenses of your business you could go for a romanian micro company setup which will tax you 1% up to 500K in revenue. You need to hire at least one employee.

 

[Onassis]

I presume you are Croatian because this is like "insiders info" that only a local could know. Can you point us to some written law that explains this exemption in detail? For example how many locals you should hire and other requisites.

Croatia: Tax relief: city of Vukovar and assisted areas

Tax incentives and tax relief for special geographical areas in Croatia are regulated by myriad acts and ordinances that are constantly changing and adjusting to the demands of the acquis communautaire. Whereas previously such relief was structured and destined for free trade areas, highlands and…

www.internationaltaxreview.com

"Corporate income taxpayers must have employed more than five employees, and personal income taxpayers more than two employees under a permanent employment contract, of which more than 50% have to be resident or domiciled in the city of Vukovar or a Group 1 assisted area. The continuous employment and the residence/domiciliation in exempted areas must last at least nine months during a tax period (financial year)."

 

[Don]

In terms of tax residence Cyprus is far from ideal as you need to spend at least 60 days a year there.
Cyprus can be a great choice if your business model qualifies for IP box.

 

[MrDotty]

In terms of tax residence Cyprus is far from ideal as you need to spend at least 60 days a year there.
Cyprus can be a great choice if your business model qualifies for IP box.

The reason I am looking at Cyprus is the ease of getting tax residency (only 2 months/year). It's hard for me to get tax residency in another place - as a 6 month visa is not always easy to get. Also, Cyprus seems to be a stripe country.

Not true - you can have a Stripe account as an EU resident UBO for a UK company with a bank account again in Europe, no issues there. At least that is the case with most countries they support.


So you have capital to invest? That opens up quite a few residency opportunities depending on the amount involved.

For example you could set up a company in Vukovar, Croatia and have 0% CIT forever just by hiring a few locals. There is also a town called Osijek nearby (20kms away) with a thriving tech/startup scene along with an international airport that has regular and cheap Ryanair flights to London Stansted. Everyone speaks decent English as well. Plenty of such options in the EU, just gotta do the research.

Thanks for the tip on Croatia. I have been to Croatia, and love the country and the people. I don't have a lot of capital to invest, but that can change.
As for Stripe - does that setup work only for a UK company? For instance, can I have a Germany bank account and have the business incorporated elsewhere in Europe? Will Stripe support that?

 

[Don]

The reason I am looking at Cyprus is the ease of getting tax residency (only 2 months/year). It's hard for me to get tax residency in another place - as a 6 month visa is not always easy to get. Also, Cyprus seems to be a stripe country.



Thanks for the tip on Croatia. I have been to Croatia, and love the country and the people. I don't have a lot of capital to invest, but that can change.
As for Stripe - does that setup work only for a UK company? For instance, can I have a Germany bank account and have the business incorporated elsewhere in Europe? Will Stripe support that?

The problem with Cyprus, in your case, is that it does not have a double tax treaty with Australia, so I wouldn't recommend "paper residency". It might also not be the most optimal option if you combine costs and taxes. Go there if you really like the country.

A lot of jurisdictions want to attract IT professionals and offer interesting benefits that are worth looking into.

You might want to look even into Poland:
"Sole traders performing services as sole traders in Poland can benefit from a newly introduced law, 'IP Box'. The concept of IP Box is a preferential taxation of income achieved from the creation or improvement of qualified intellectual property right (eg web based apps, new functionality to existing programs, developing software). The preferential tax rate in case of sale of such qualified intellectual property right is only 5% instead of 19% or 18/32% where progressive rates apply. In order to benefit from this incentives taxpayers must fulfill certain conditions including retaining documentation of the projects."

 

[5K1PP3R]

Why not setup another company in Dubai and channel profits there?

 

[JimBeam]

If you want to run a serious business I would stay away from sole trader companies (like the one advised in Poland or in micro-company in Romania). Also someone proposed Vukovar in Croatia, but as far as I able to google out the 0% tax rate is capped (Croatia: Tax relief: city of Vukovar and assisted areas) so that might work in the start but if you cross the limit you would get taxed. Plus you need to apply each year for it. Again I would stay away from this.

The best bang for the buck you can get in Bulgaria: 10% CIT + 5% dividends. It will be much cheaper to run than Cyprus company and getting a residency permit should not be an issue once you setup a company there. So, if you could live in Bulgaria that's not a bad advice.

If you think your company will not be profitable for longer period of time - than you can look into other countries as well as the (CIT) tax rate in that case doesn't matter that much. But, you don't know what's going to happen with your project. What if it picks up and you're profitable in the near future or you sell it and you get hit by a large amount of tax to pay etc.

So you might want to check Romania with 16 CIT an 8% dividends. Not bad and I guess you'll be able to find talent more easily. You might want to look at smaller cities with universities like Timisoarra or Cluj-Napoca.

Dubai is also a good option but it will be quite expensive and also living costs there have been rising recently. Also you need to figure out if that's the place you want to live.

 

[Marzio]

stay away from sole trader companies (like the micro-company in Romania).

FYI romanian micro-company it's s LLC, not a sole trader.