New offshore company formation

[SomeoneNice]

Hey there, how are you all?
Just found this forum and it seems to be what I need

I am owning a network of minecraft servers, and I am a registered business in Israel, my country of residency. I would however like to register my business in another country as well, either somewhere in the EU or US, and wanted to ask what is the best country/state to register my business in, specially in terms of tax/VAT rates, ease of managing my business (government/irs/other forms filling, reports, stuff like that)

I need it to be in a country that supports Stripe as well, as it is not supported in my country and I really wanna start using it in my store.

I already got a Wise Business account, and a PayPal business account fyi.

Thanks in advance for any help!

 

[Sols]

First question: why? Unless you plan to also leave Israel, there is no getting around Israeli tax. A company controlled from Israel is Israeli for tax purposes.

US LLC (Wyoming, Delaware) could work. Some but fairly light reporting requirements. Banking can be challenging but something like Mercury might work. PayPal doesn't like non-resident business accounts, though. If your business grows quickly or if you get disputes, they have a tendency to make it difficult to keep accounts active without having a proper place of business in the country.

For EU, Cyprus and Malta are popular not because it's easy but because it's streamlined and there are plenty of service providers that do most of the paperwork for you. Running a company is technically easier in many other EU countries, but doing it as a non-resident foreigner is a different story.

 

[SomeoneNice]

First question: why? Unless you plan to also leave Israel, there is no getting around Israeli tax. A company controlled from Israel is Israeli for tax purposes.

US LLC (Wyoming, Delaware) could work. Some but fairly light reporting requirements. Banking can be challenging but something like Mercury might work. PayPal doesn't like non-resident business accounts, though. If your business grows quickly or if you get disputes, they have a tendency to make it difficult to keep accounts active without having a proper place of business in the country.

For EU, Cyprus and Malta are popular not because it's easy but because it's streamlined and there are plenty of service providers that do most of the paperwork for you. Running a company is technically easier in many other EU countries, but doing it as a non-resident foreigner is a different story.

First, thank you very much for your reply, I appreciate it!
Second, I do not plan to leave Israel, and I do not intend to try and get around Israeli tax - What I meant was to form a company overseas in a country that has as low as possible tax/vat in it.

As for EU, I understand it's easier to run a company in other countries there other than Cyprus or Malta, and I believe there are service providers that can do the paperwork and stuff for me there, so is there a real reason to open a company in Cyprus or Malta other than the fact it has service providers that can do the work for me? Also, which other countries would be good in the EU to open a business in? I know Ireland is very good (as most offshore companies register there due to low taxes and stuff) but since I'm a foreigner, I will need to pay 2,000 euros for a bond to open a company, which isn't something I'd be keen to do.

Thanks again!

 

[Sols]

Second, I do not plan to leave Israel, and I do not intend to try and get around Israeli tax - What I meant was to form a company overseas in a country that has as low as possible tax/vat in it.

Then what is the motivation for forming a foreign company? Just trying to understand, since it might affect suitable jurisdictions.

EU VAT is complicated but in this case, it is not based on where the seller is incorporated. It's based on where the buyer is. If you sell to someone in Hungary, the VAT is 27%. If you sell to someone in Luxembourg, it's 17%. It doesn't matter where your company is incorporated. Although if you are a non-EU company and a relatively small company, chances are that no one will come after you.

If you form a foreign company, that company becomes tax resident in Israel. It might also be tax resident somewhere else. Israeli corporate tax is 23%. Let's say you pay 15% corporate tax where the company is incorporated. You still have to pay 23% in Israel. Unless there is tax treaty between Israel and that other country, in which case you would maybe only have to pay the difference of 8% in Israel. So your tax burden is the same as if you hadn't formed a foreign company.

So it's a lot of extra paperwork with no savings in tax. All in all, your costs have gone up because of all the extra work with having a foreign company and making tax credit adjustments here and there.

As for EU, I understand it's easier to run a company in other countries there other than Cyprus or Malta, and I believe there are service providers that can do the paperwork and stuff for me there, so is there a real reason to open a company in Cyprus or Malta other than the fact it has service providers that can do the work for me?

In terms of paperwork, it's easier to run a business in Denmark, Sweden, and Norway. As a local resident with a local personal ID number and tax ID, you can very easily form a company there and annual filings are extremely straight forward. Bureaucracy runs like a well-oiled machine. It's also quite cheap. But if you're a non-resident foreigner, it's not so easy. Things quickly become more time consuming and expensive than going for Malta or Cyprus, which are set up to work very well with non-resident foreigners.

Tax is of course another factor. Cyprus' 12.50% and Malta's effective 5% beat the 20%+ rates seen across much of EU.

Also, which other countries would be good in the EU to open a business in?

After Brexit and the loss of Gibraltar, there is nothing else left in the EU that compares to Cyprus or Malta. Maybe Estonia.

Romania, Hungary, Bulgaria, Lithuania, and Latvia look good on paper (low tax, low costs) but are nowhere near as popular as Cyprus and Malta.

 

[SomeoneNice]

Then what is the motivation for forming a foreign company? Just trying to understand, since it might affect suitable jurisdictions.

EU VAT is complicated but in this case, it is not based on where the seller is incorporated. It's based on where the buyer is. If you sell to someone in Hungary, the VAT is 27%. If you sell to someone in Luxembourg, it's 17%. It doesn't matter where your company is incorporated. Although if you are a non-EU company and a relatively small company, chances are that no one will come after you.

If you form a foreign company, that company becomes tax resident in Israel. It might also be tax resident somewhere else. Israeli corporate tax is 23%. Let's say you pay 15% corporate tax where the company is incorporated. You still have to pay 23% in Israel. Unless there is tax treaty between Israel and that other country, in which case you would maybe only have to pay the difference of 8% in Israel. So your tax burden is the same as if you hadn't formed a foreign company.

So it's a lot of extra paperwork with no savings in tax. All in all, your costs have gone up because of all the extra work with having a foreign company and making tax credit adjustments here and there.


In terms of paperwork, it's easier to run a business in Denmark, Sweden, and Norway. As a local resident with a local personal ID number and tax ID, you can very easily form a company there and annual filings are extremely straight forward. Bureaucracy runs like a well-oiled machine. It's also quite cheap. But if you're a non-resident foreigner, it's not so easy. Things quickly become more time consuming and expensive than going for Malta or Cyprus, which are set up to work very well with non-resident foreigners.

Tax is of course another factor. Cyprus' 12.50% and Malta's effective 5% beat the 20%+ rates seen across much of EU.


After Brexit and the loss of Gibraltar, there is nothing else left in the EU that compares to Cyprus or Malta. Maybe Estonia.

Romania, Hungary, Bulgaria, Lithuania, and Latvia look good on paper (low tax, low costs) but are nowhere near as popular as Cyprus and Malta.

My motivation to form a foreign company is the services I can use with it - powerful banking like Revolut, which is practically fees free and super convenient to use. Stripe, as a payment gateway in my online store (a US stripe account also has faster payouts, and even instant payouts), there are a lot of rewards I can get if I form a company through a service provider (like AWS credit which can be super useful for me), and more.

So in all in, would you recommend a US company or Cyprus/Malta company?

 

[johndunham]

Are any of the users that you will receive funds from US citizens / based in the US?

 

[SomeoneNice]

Are any of the users that you will receive funds from US citizens / based in the US?

Hey, some users are indeed from the US yes

 

[Sols]

My motivation to form a foreign company is the services I can use with it - powerful banking like Revolut, which is practically fees free and super convenient to use. Stripe, as a payment gateway in my online store (a US stripe account also has faster payouts, and even instant payouts), there are a lot of rewards I can get if I form a company through a service provider (like AWS credit which can be super useful for me), and more.

In that case, an EU company is likely the best option. You're stuck with VAT on sales to EU resident customers, so make sure you include that in your business plan projections and budgeting. But you have a greater chance of being onboarded with EU payment processors and banks. However, you may need to appoint a local director to satisfy requirements that the company is EU-based and not just a shell corporation controlled from outside EU.

US LLCs controlled by non-resident foreigners struggle to find sustainable banking and payment processing, more so than EU.

So in all in, would you recommend a US company or Cyprus/Malta company?

I would recommend that you continue researching those three and research other businesses like yours to see what they have done.

 

[SomeoneNice]

In that case, an EU company is likely the best option. You're stuck with VAT on sales to EU resident customers, so make sure you include that in your business plan projections and budgeting. But you have a greater chance of being onboarded with EU payment processors and banks. However, you may need to appoint a local director to satisfy requirements that the company is EU-based and not just a shell corporation controlled from outside EU.

US LLCs controlled by non-resident foreigners struggle to find sustainable banking and payment processing, more so than EU.


I would recommend that you continue researching those three and research other businesses like yours to see what they have done.

How come LLCs struggle? I dont really need too much, Revolute, Wise, Stripe - these are more than enough for me, and I understand that with an LLC it shouldn't be a problem to open accounts on any of these..

 

[Sols]

How come LLCs struggle? I dont really need too much, Revolute, Wise, Stripe - these are more than enough for me, and I understand that with an LLC it shouldn't be a problem to open accounts on any of these..

It's easy if you're a US resident. If you're not a US resident, you will struggle if your business gets to a point where the bank or payment processors starts asking for proof that your business is physically based in the US.

 

[SomeoneNice]

It's easy if you're a US resident. If you're not a US resident, you will struggle if your business gets to a point where the bank or payment processors starts asking for proof that your business is physically based in the US.

Stripe for example has that Atlas service, and they specifically say that after using it, you can open a stripe account with it (other service providers say the same too), and actually, most service providers that open companies for you can also provide you with a physical address and postbox and stuff..

 

[Sols]

I'm not getting through, so I'll refrain from posting further. I hope you continue doing research and don't take anything here as conclusive.

Stripe Atlas might work in your case. Worth looking into as part of further research.

 

[Jerry1911]

How did y'all come to the conclusion that Stripe Atlas is the best solution here. It doesn't support LLCs, only C-corps, which are taxed at 21% fucking percent. And don't forget about the massive bureaucracy that comes with it along with IRS reporting requirements, filings and whatnot.

If you don't plan on leaving Israel then forget about forming a company abroad unless you have at least a few k/month to spend on substance. Which I assume you don't as you mentioned free AWS credits and so on.

If you would like to access more payment processors then simply form a UK LLP with you and your company as members and call it a day.

You should have 0 or 1% profit share or maybe a bit more in case Israeli personal income tax has some thresholds you could use in your favor. The rest will flow to your company.

 

[SomeoneNice]

How did y'all come to the conclusion that Stripe Atlas is the best solution here. It doesn't support LLCs, only C-corps, which are taxed at 21% fucking percent. And don't forget about the massive bureaucracy that comes with it along with IRS reporting requirements, filings and whatnot.

If you don't plan on leaving Israel then forget about forming a company abroad unless you have at least a few k/month to spend on substance. Which I assume you don't as you mentioned free AWS credits and so on.

If you would like to access more payment processors then simply form a UK LLP with you and your company as members and call it a day.

You should have 0 or 1% profit share or maybe a bit more in case Israeli personal income tax has some thresholds you could use in your favor. The rest will flow to your company.

Could you elaborate some more on what a LLP is exactly? Will it be enough to open a stripe account and possibly revolut?

 

[Jerry1911]

UK limited liability partnership is a tax transparent entity akin to a US LLC except it requires a minimum of 2 members. Profits flow freely to the members and there's no requirement to pay corporate tax in the UK.

It's very easy to open a Stripe/Revolut account with it. You can also take a plane to the UK and open an account at a brick and mortar bank such as HSBC for example.

You will have to charge VAT to UK customers only and only after passing the threshold for VAT registration.

 

[SomeoneNice]

UK limited liability partnership is a tax transparent entity akin to a US LLC except it requires a minimum of 2 members. Profits flow freely to the members and there's no requirement to pay corporate tax in the UK.

It's very easy to open a Stripe/Revolut account with it. You can also take a plane to the UK and open an account at a brick and mortar bank such as HSBC for example.

You will have to charge VAT to UK customers only and only after passing the threshold for VAT registration.

Ah sounds nice, except it's only me in the business, no one else, so I can't really open an LLP sadly

 

[Jerry1911]

Like I said, one of the partners is going to be you and the other one will be your Israeli Ltd company.

 

[Sols]

How did y'all come to the conclusion that Stripe Atlas is the best solution here. It doesn't support LLCs, only C-corps, which are taxed at 21% fucking percent. And don't forget about the massive bureaucracy that comes with it along with IRS reporting requirements, filings and whatnot.

I don't think anyone concluded that it was the best solution. But Stripe Atlas has supported LLC for quite some time now. Stripe Atlas for LLCs

If you would like to access more payment processors then simply form a UK LLP with you and your company as members and call it a day.

Since Brexit, you're limited to what's licensed for the UK market. Options have dwindled, quickly and drastically.

 

[SomeoneNice]

Like I said, one of the partners is going to be you and the other one will be your Israeli Ltd company.

Will it work if I'm not an LTD but a Sole Proprietorship?

 

[Jerry1911]

I don't think anyone concluded that it was the best solution. But Stripe Atlas has supported LLC for quite some time now. Stripe Atlas for LLCs

Ok but last time I checked it wasn't supported for US non-residents

Will it work if I'm not an LTD but a Sole Proprietorship?

I don't think so as you need 2 different partners