Employed and self employed looking for options

[nicopollo]

Hello all,

I am currently working salaried at a company in Paris (France) and my side online business is growing in size (event ticket brokering).

I’d like to open a company in order to start paying tax on my earnings and scaling the business even more, but I don’t want to open it in France, where I:
- don’t plan to spend more than 1 year from now
- don’t want to pay huge amounts of tax
- don’t want to report my business to my current employer

What are my (legal) options here? Can I open a business offshore and pay myself dividends from it?

It is not of great importance to me to pay myself dividends/salary every month as I do have enough to live comfortably.

Thanks to everyone who will answer!

 

[Sols]

Hello all,

I am currently working salaried at a company in Paris (France) and my side online business is growing in size (event ticket brokering).

I’d like to open a company in order to start paying tax on my earnings and scaling the business even more, but I don’t want to open it in France, where I:
- don’t plan to spend more than 1 year from now
- don’t want to pay huge amounts of tax
- don’t want to report my business to my current employer

What are my (legal) options here? Can I open a business offshore and pay myself dividends from it?

Yes, but the company also has to pay French taxes since it'll be French for tax purposes until you after you have left and established yourself and your company tax resident there.

However, you can probably form a company in for example Cyprus or Malta now and not face any troubles so long as you relocate there quickly, before the company makes a profit or pays you anything. As long as you're not of any importance and don't draw attention to yourself, doing that usually works fine. Assuming you're an EU citizen, that's the easiest option you have if you don't plan to stay in France. To avoid having your name and French address appear in any of the company documents, rent an apartment right before incorporating or use a nominee service initially.

If you want to have company and place of residence in different jurisdiction, things get more complicated.

As for reporting to your employer, see what your employment contract says and then think about whether you want to violate that agreement. If your contract forbids you from starting a new business, assess whether you're comfortable with taking that risk or check if such a clause is actually legal and to what extent. Many employment agreements have clauses that aren't actually legally enforceable.

 

[Au999]

Some countries like the UK allow up to a year to set up and grow an offshore company before it becomes a CFC liable to tax. I believe UK also has a small profits exemption that doesn't tax offshore company under CFC rules if profit is less than 500k from active trade, or 50k passive income. Perhaps France has similar exception?

 

[nicopollo]

Yes, but the company also has to pay French taxes since it'll be French for tax purposes until you after you have left and established yourself and your company tax resident there.

However, you can probably form a company in for example Cyprus or Malta now and not face any troubles so long as you relocate there quickly, before the company makes a profit or pays you anything. As long as you're not of any importance and don't draw attention to yourself, doing that usually works fine. Assuming you're an EU citizen, that's the easiest option you have if you don't plan to stay in France. To avoid having your name and French address appear in any of the company documents, rent an apartment right before incorporating or use a nominee service initially.

If you want to have company and place of residence in different jurisdiction, things get more complicated.

As for reporting to your employer, see what your employment contract says and then think about whether you want to violate that agreement. If your contract forbids you from starting a new business, assess whether you're comfortable with taking that risk or check if such a clause is actually legal and to what extent. Many employment agreements have clauses that aren't actually legally enforceable.

Thanks for the reply.

So as I understand it, it would not be possible for me to own a business offshore if I don't plan to relocate there in a short amount of time? Because then I would have to pay french tax on the entire profits of the company?

Does that happen also if I never take out any profits from the company and e.g. reinvest all the profit, or wait to relocate to a more tax lenient country and cash out there?

 

[Sols]

So as I understand it, it would not be possible for me to own a business offshore if I don't plan to relocate there in a short amount of time? Because then I would have to pay french tax on the entire profits of the company?

When you get down to the fine details, France is unnecessarily complicated. Just France being France.

Companies are tax resident in France by being incorporated there. That might sound like you could incorporate outside of France and avoid paying French tax. However, what will actually happen is that the foreign company will have a Permanent Establishment (PE) in France. PE is not defined in law, but the tax authority and the courts have been quite aggressive.

One way or another, if you stay in France and run a foreign company, the tax man can come after you personally or your company. It's a mess you could easily avoid.

Does that happen also if I never take out any profits from the company and e.g. reinvest all the profit, or wait to relocate to a more tax lenient country and cash out there?

The same tax obligations would apply as if to an equivalent French company.

Your foreign company establishes a PE in France simply by you running the business from France. All income attributable to the French PE of your company is taxable in France the same way a French company is.