Best offshore jurisdiction for collecting AdSense income?

[diginomad]

I get consistent and solid revenue from AdSense (Technically AdMob), and I need to register an offshore company to collect this revenue (Yes, I have no other choice. I need to go offhsore).

What is a good jurisdiction considering the nature of income?

I hope I can find a jurisdiction with low fixed expenses, not many tax authorities rules / audit report, and without complex accounting/bookkeeping requirements.

I was thinking:

1) HK => Ltd
2) US => SMLLC
3) Dubai offshore (still need to explore the entity types)

Any other option? What you suggest?

I will receive just 1 transaction per month. No need of complex accounting/bookkeeping.

 

[Fred]

Well if you don't fall in the category named in this article

YouTube Will Begin Withholding U.S. Income Tax From Revenue Earned By International Creators - Tubefilter

In the coming months, YouTube will begin deducting United States federal income tax from all creator revenue generated by U.S.-based viewers. New changes New changes to Chapter 3 of the U.S. Internal Revenue Code--the chapter that governs “withholding of tax on nonresident aliens and foreign...

www.tubefilter.com

- Dubai is your best choice in case you are looking for a tax free structure without any audit reporting requirements.

HK for example is not tax free and banking is limited to EMI's - I don't see any problems here as the source of funds is Google. However HK comes for sure with bureaucracy, headache and depending on your country of residence you need to consider CRS reporting as well.

If I'm not mistaken Google force you to have the Bank Account in the same country of your incorporation country.

Dubai -> Check if withholding tax applies - in case not - most reliable choice with real bank accounts and privacy
HK -> Banking limited to EMI and bureaucracy
US -> Banking limited to EMI and needs to be checked if any taxes apply in case of US sourced income

 

[Tramirez]

Yes google needs a bank account located in the same country of the company (but also a TransferWise account can work).

Yes google will start collecting whitholding taxes but that applies on the US portion of audience.

I had a lot of research so far about Dubai HK and US.
Dubai seems very good but compared to the other 2 is the most expensive when it comes to incorporation and annual expenses.

HK is not very expensive, but has a lot of audit reports and accounting rules to follow.

US is cheap but the jurisdiction is completely a mess when it comes to identify US source income. They don't provide a definitive guide and its all about interpretation (in other wors you have to hope that your tax advisor will give you the right advice when it comes to tax return).

 

[JustAnotherNomad]

I've been wondering if a UK Ltd. might be the best option since it seems like there's no withholding tax on royalties paid to a UK Ltd.
You could then pay out a salary or service invoices from the UK Ltd. to get the money out.
Can anyone confirm?

 

[Fred]

I've been wondering if a UK Ltd. might be the best option since it seems like there's no withholding tax on royalties paid to a UK Ltd.
You could then pay out a salary or service invoices from the UK Ltd. to get the money out.
Can anyone confirm?

Yes but this comes with bureaucracy and taxes - I think the goal of the thread starter is 0 tax and low bureaucracy.

 

[JustAnotherNomad]

Sure, but UK Ltd. companies should be cheap to incorporate and there's a lot of competition between accountants, so it should probably still come out cheaper than a UAE company.

 

[Fred]

Sure, but UK Ltd. companies should be cheap to incorporate and there's a lot of competition between accountants, so it should probably still come out cheaper than a UAE company.

You get a UK Ltd. for 20$ with www.rapidformations.co.uk but starting from 80-100k a year you pay a lot more in taxes then just incorporate one time a Dubai Company with Residence Visa and UAE Bank Accounts.

 

[JustAnotherNomad]

Why would you pay taxes if you just reduce the corporate profits by paying out a salary or service invoices?

 

[Fred]

Why would you pay taxes if you just reduce the corporate profits by paying out a salary or service invoices?

Then again you pay taxes in the country you receive the salary.

And with which company you will want to conduct the service invoices? Needs again to be an Offshore company.

Your thoughts are not wrong but it's simply not what the thread starter looking for.

 

[JustAnotherNomad]

I was assuming that OP already has some sort of tax-free setup. Otherwise a Dubai company would also be subject to tax wherever he is located.

 

[diginomad]

Actually, my goal is not to avoid withholding taxes. You only need to pay withholding taxes for the US audience, if you don't have a US account, so it basically means that all the non-US users will pay US withholding taxes starting from July, It's just a new breaking rule of Google AdSense for the US.

The point is simply to find a jurisdiction where:
1) There are not too many requirements in terms of accounting (as it will be just a couple of transactions per month)
2) Easy to open a bank account
3) Low corporate tax
4) Hopefully a reputable country

WIth regards to the personal income taxes, that's a problem that I can fix by taking advantage of a local tax rule.
I reside in Thailand, and here if you get "foreign source" income but that income is not remitted to Thailand on the same year it was earned, it will be considered tax-free. You just need to be patient to remit the money.

 

[Fred]

Actually, my goal is not to avoid withholding taxes. You only need to pay withholding taxes for the US audience, if you don't have a US account, so it basically means that all the non-US users will pay US withholding taxes starting from July, It's just a new breaking rule of Google AdSense for the US.

The point is simply to find a jurisdiction where:
1) There are not too many requirements in terms of accounting (as it will be just a couple of transactions per month)
2) Easy to open a bank account
3) Low corporate tax
4) Hopefully a reputable country

WIth regards to the personal income taxes, that's a problem that I can fix by taking advantage of a local tax rule.
I reside in Thailand, and here if you get "foreign source" income but that income is not remitted to Thailand on the same year it was earned, it will be considered tax-free. You just need to be patient to remit the money.

Then it's like mentioned already before.

All your requirements you mentioned will lead to Dubai (reputable country, no corporate tax, no audit)

Otherwise you can look in classic Jurisdictions like BVI and maybe you can find an EMI that onboards you with this company as the source of income is Google but getting banking with a real Physical Bank - no chance.

I don't see any point for you to pay taxes if it's not necessary as you are staying in Thailand.

So you simply need to to decide for the "easy come - easy go" or "setup once and forget about it" way.

 

[JustAnotherNomad]

Actually, my goal is not to avoid withholding taxes. You only need to pay withholding taxes for the US audience, if you don't have a US account, so it basically means that all the non-US users will pay US withholding taxes starting from July, It's just a new breaking rule of Google AdSense for the US.

I didn't get this part. Non-US accounts have to pay withholding tax for the US audience? Or no withholding tax at all?

The cheapest UAE option would be at least $1500 or so per year. There's no US tax treaty, so I would expect that you'd have to pay 30% withholding tax at least on your US AdSense income?
So we're talking $1500 + 30% withholding tax, but a simple setup. Getting a UAE bank account can be a challenge and it can be a bit annoying to deal with freezones, banks and other companies in the UAE as customer service is usually not great and the rules can change frequently.

A UK company is very cheap and accounting should be quite cheap, too, if you only have few transactions. I would expect it to be even cheaper than the UAE setup. And no US withholding tax.
You could pay out a salary from the UK company, which would not be taxed in the UK, and it should qualify as foreign income in Thailand. Opening a bank account should be simple.
The only risk would be that you can't take a 100% salary due to transfer pricing restrictions. If you take a 90% salary (for example), then (if I'm not mistaken) you would have to pay 19% corporate income tax on the remaining profits, so 1.9% tax in total.
You would be able to reduce the corporate profits even more by claiming business expenses, such as flight tickets etc.
So, yes, there would be some accounting, but you wouldn't have to do that yourself and you might still come out ahead. And I would prefer dealing with UK accountants than customer service agents in the UAE.

If you use a US LLC (that would probably be the cheapest option) as a tax resident of Thailand, there might only be 15% US withholding taxes since there is tax treaty. But you should check with a Thai accountant if income from such a US LLC would count as foreign income since the LLC would be considered a disregarded entity by the IRS.

Actually, you should check the Thai rules for foreign income in any case. In theory, the Thai authorities could decide that even your UAE company should pay tax in Thailand. But that's probably rather unlikely, given that Thailand doesn't seem to care a lot about companies that are run by foreigners and have no local customers.
Finally, you could also consider a UK LLP, which - in terms of taxes - would be the UK equivalent of a (disregarded) US LLC. Some people in this forum have reported that they use a UK LLP to live tax free in Thailand. It would probably not be a correct setup, but you might get away with Google (incorrectly) recognizing it as a UK entity (=no withholding tax) as well as Thailand (incorrectly) recognizing it as foreign income (hybrid mismatch). The accounting requirements for a UK LLP should be even simpler than for a UK Ltd.

Oh, and if you're considering a UAE company, you should really also check traditional offshore jurisdictions like the BVI, Belize, Seychelles etc. They should be even cheaper, but I don't know about bank accounts and if Google would pay out to an EMI account.
Please let us know what you find out, as I'm essentially looking for the same thing: Cheap (relatively) anonymous company with limited liability for website
I'm expecting very low income for that project, so I'm looking for a really cheap option...

All in all, I don't think a UAE company is a bad choice, I would simply also consider other options.

 

[JustAnotherNomad]

@James Turner maybe you have some experience with Google AdSense?

 

[diginomad]

@JustAnotherNomad Thanks for your interest in this.
With regards to the withholding tax issue, here is the google official statement: U.S. tax requirements for YouTube earnings - YouTube Help

Basically I will need to pay withholding taxes only for the US audience and I don't actually care... because it's small audience (no need treaties... I will just pay, no problem).

US ENTITY => I have now a SMLLC and it's great in terms of tax efficiency, as you suggested I potentially don't need to pay taxes unless I am "ETBUS" (engaged in a trade or business with the united states).
But I think I will dissolve this entity at the end of this year and switch to another jurisdiction... Why?
Bacause beside Adsense income (I also offer "In-App-Purchases on my apps) and sometimes US users make these purchases.
This can potentially lead the IRS to argue that I am ETBUS (even if its not physical product). I don't think that is likely to happen, but I don't want to worry anymore about this interpretation.. I prefer to find a jurisdiction with CLEAR rules, even if it involves a little more taxes/expenses that US entity.

UK ENTITY => Thanks for the suggestion, but for some reason I prefer to choose a jurisdiction outside Europe.

UAE => This is the most interesting option.... I still need understand if it's fully achievable, including BankAccount. I don't want to register a company and surprisingly seeing my bank account application rejected.
Also I will need to understand the difference between "free zone" entities (with tax residence certificate) and "offshore" entity. It seems "free zone" is much better option for all the aspects, which is why I don't understand why people should choose "offshore" over it.

HK ENTITY => This was interesting... corporate tax really low (I don't care to pay low taxes...really). But I don't like so much all the "audit report" involved... too many!

THAI RULES => I will have a chat with a local accountant, but I don't think that Thailand would tax offshore companies managed by foreigners only because they exist. They will simply tax it if you remit money into Thailand... and that would be simply subject to "personal income tax".
Now you have 2 ways to avoid this personal income tax.
1 => You remit the earnings to a non-THAI bank account
2 => Your remit the earning to a THAI bank account but not on the same calendar year the earnings was received


So to recap, I'm looking to a jurisdiction that offer these benefits:
1- Easy to incorporate
2- No big yearly expenses (hopefully not over 1500 USD)
3- Not too strict rules in terms of accounting and no complex "audit report" involved (I don't like HK for this reason).
4- No corporate tax or low corporate tax (not more that 5-8 percent)

 

[GiGoGo]

HK is not very expensive, but has a lot of audit reports and accounting rules to follow.

If you are not HK resident, HK taxes are 0%

You can get good auditors for 3000 USD that speak good english.

The only problem with HK is banking, they are quite selective and require personal visit. If the income come from a big company, you can work with an EMI remotely without problems and even get a cheaper deal for the audits.

 

[JustAnotherNomad]

"Nobody" uses UAE offshore companies anymore. They have a very bad reputation. They're the same as a Belize/Seychelles/BVI IBC. They're typical shell companies and getting a bank account will be close to impossible.
I think it might have made sense earlier when freezone companies were $10k and more per year. But nowadays, there are so many affordable freezone options that it doesn't matter.
In that case, I would just go with BVI/Seychelles directly since it's cheaper.

Getting a UAE bank account for a "cheap" UAE freezone company without a proper office and without a local director will still be a challenge. You could get a residency visa for yourself to improve your chances, but then you'd have to enter the UAE at least once every 6 months - and even then there wouldn't be any guarantees. You could try UAE EMIs like Mashreq Neobiz - they would probably be more willing to open a bank account for you than traditional UAE banks. Or simply use an international EMI like Transferwise or Payoneer or Bankera if that's an option.
Otherwise you should work with someone like Fred who can guarantee that you'll be able to open a bank account.

 

[diginomad]

@JustAnotherNomad Thanks. I will discard the UAE offshores and consider just the "free zone" ones.

I can't consider to stay in the UAE for "6 months", but I can definitely consider EMI banks... unless:
1. The EMI banks that offer UAE account are getting a bad reputation.
2. They don't offer a "debit card" or at least "virtual card". For instance... I like transferwise, but they don't usually offer a debit card for business account.

You mention that "free zones" companies now are much cheaper to incorporate and maintain.
Do you think we are under 2000 USD per year?

Can you suggest a great and affordable agency that can help set up a "Free zone" company?

 

[JustAnotherNomad]

You don't have to spend 6 months in the UAE. But you would have to enter at least once every 6 months (you cannot be outside the UAE for more than 180 days or so), otherwise your visa would be canceled.
The EMI banks like Mashreq NeoBiz would offer you a debit card and I don't think they have a bad reputation. But customer service can be quite bad, like everywhere in the UAE.
But once it's set up, it should probably work fine.

Yes, you can get free zone companies for $1500-$2000 or so per year. Check Ajman Media City for example, I'm sure @Fred has other suggestions.
You can also compare different options on Home: Discover FreeZoneMarket.ae and its platform

Freelance licenses could be another alternative, they might be even cheaper. But with a freelance license, I'm not sure if Thailand would accept that as foreign income since it's not necessarily a "proper" company.
Generally speaking, the more expensive your company setup is, the easier it is to get a regular UAE bank account.

I still wouldn't dismiss BVI, Belize, Seychelles and other traditional tax havens - if you can find a way to make it work with an EMI and Google.

 

[Fred]

To clarify some things here.

Dubai Company Formation with Residence Visa and local UAE Business / Personal Account won't come at 2000$.

You need to consider everything and like mentioned many times as more you stick to a cheap license the bank will ask for more min. balance.

We can help and consult in the right way regarding the whole setup as we are a Dubai based Corporate Service Provider.

However you need to ask yourself which route you want to go like I mentioned before:

"easy come - easy go" or "setup once and forget about it"

So the "easy come - easy go" route is to stick to either HK or US with some EMI like Neat or Mercury. Something like RAK ICC Offshore or BVI with EMI won't work due to the Google policy to have the bank account in the same jurisdiction like the incorporation. Both jurisdictions HK and US you can't really get any real physical bank account and the EMI's are very limited and work with some shared/pooled accounts most likely Google can't even pay to.

The "setup once and forget about it" route is to stick to a Dubai Freezone Company with Residence Visa and local UAE Business Bank Account.

It's at the end of the game an easy number game and most likely like mentioned before the Dubai Freezone route will be the best choice even in the long run as the real physical bank space isn't changing that fast and is much more long lasting and reliable. I know Neat back from the E-Commerce days and they changed the service with correspondence banks already many times.

Clarification regarding Masshreq NeoBiz:

They are no EMI and just the 0 Balance Online Bank from Mashreq so the initial application is done online and the KYC/Compliance questions will happen by mail as well. However to finally activate the Online Banking you have to meet a Banker in Dubai after 3-4 weeks. So Mashreq NeoBiz makes only sense in some case but most of the time the schedule of the people in Dubai is to short so that you have to stick to the classic solutions. Furthermore the NeoBiz substance requirements are not negotiable - with calssic banker and applications you can still manage the substance - at least with a good service provider on your side.