Offshore Company + Bank + Paypal for Hosting Business

[BlaZe]

Hi,

First of all, I am new here, but been lurking around as a guest from few months. I would really like to thank the admin & the community as I gained a lot of knowledge from this forum. Thank you guys!

Now coming to the main part, I have been running a web hosting business from 2014 and its earning me decent amount of money. I will be finishing my Masters in Business Administration this April & would run the business to the full core as it will be my bread & butter.

I reside in India. Paypal is very pathetic because of RBI (Reserve Bank of India) rules & regulations. Indian PayPal account cannot hold any funds, it comes as directly to our bank account. Also to make any payment, it requires Debit Card/Credit Card.
This is not an issue, the real issue is the currency conversion charges & the 1 week delay of payments coming to my bank.
Paypal charges 4.4%+$0.30 per transaction & on top of that they charge additional 2.9% currency conversion charge with the lowest currency rate (USD -> INR). Let me make it more clear with an example:
Client sends $100 to my Paypal. I receive $95.30 & additional 2.9% is charged which makes it $92.54.
This $92.54 is then converted with the lowest rate (of that week perhaps).
So it cuts a major portion of my profit.
Also, to make payments to datacenters, I send them money via Paypal in USD but Paypal cuts in INR (considering the highest currency exchange rate this time).

So I am left out with less profit.

I am looking out to get my business incorporated even in an offshore country. I do not mind paying taxes or privacy. Also, I can withdraw the Paypal funds via Bitcoins to my country using an online exchanger. So withdrawing via Paypal -> Offshore Bank -> My Indian Bank is not a necessary trait for me.

My basic pain area is to hold funds in Paypal which my clients send & use it to pay it to my vendors. That's it.

Please help me with this.

 

[negon]

Welcome aboard

It's going to be difficult to find any solution for you as you already may have found out! I think the biggest hurtle is that PayPal wont accept to transfer any payments to an EMI account that would maybe help you to get a "bank account" for instant with LeuPay or WorldCore!

Only alternative may be 2checkout but they charge a higher fee to.. so I don't really know how to get around your PP issue!

 

[BlaZe]

@auric,
Yes it is difficult. My last resort is to get the company registered in India itself & use it.

 

[BlaZe]

One of my friend who has a company in HK (same business) said that he pays around $2k-$3k per year for accounting expenses.

So would it be good to go with a HK Offshore company ? to use PayPal ?

 

[Nomad]

Don't forget that your country (India) follow a tax system which taxes worldwide income. If you register company in HK, you need to make sure to have enough substance to prove that the company is tax resident in HK. (i.e, office in HK, local staff, director meetings there etc). Otherwise it will be treated as tax resident in your country of residence (in your case India), especially if the company you setup is a one man operation.
Also, now days its very hard to open a bank account in HK for HK company.

 

[BlaZe]

@Nomad, I do not want to run away from taxes. As per the law, we are required to pay taxes only one time. If I pay it in HK then I can produce the receipt in India & get the exemption. The corporate taxes will not be applicable here in India if the country operations & incorporation is not in India.
Although I will be an "employee" of the company so the amount which I transfer in my personal bank account will surely be taxed & I don't mind paying it.

 

[Nomad]

@BlaZe, Its not like the way you think. HK will definitely ask you to pay tax. But you may provide proofs that you don't have HK sourced income ( like HK clients) and you will be exempt from HK corporate tax.
It doesn't matter you pay corporate tax in HK or not, your company will be treated as tax resident in India, if you manage and control it from India. (like your home or office in India).
Say you paid corporate tax in HK, then you can ask Indian tax department to give you a tax credit ( this also will be a big challenge as HK don't have DTT with India and HK tax department won't give out tax residency certificate that easy now).

If paypal fees are problem, why don't you use 2checkout

 

[bountymounty]

You seem to know a lot about the tax system in India and also to have a bright knowledge about all of this generally speaking @Nomad Do you think it is possible to setup something with a foundation / trust or both in combination to be able to proof to operate abroad and not in my home country?

 

[BlaZe]

@Nomad,
2Checkout is the worst payment provider I have dealt with.
Their fees is high. They send you payments to your bank after every two weeks. When the transaction amount goes is +$10k per month then they suspend your account & hold the money for 180 days. When you start to talk & explain your business. They say web hosting is not allowed.
So they fuk you after a while when your business is running smooth.

 

[Nomad]

@BlaZe, talk to a CPA in your place about operating foreign company from India.

1) Determine if its worth to open a foreign company considering your turn over levels.
2) If you are the sole owner/ director of company make sure the company you setup is tax resident in country of incorporation and have DTI with India. Just forget traditional IBCs (Seychlles, Belize etc) if you plan to operate legally from India.
3) Make sure you are able to open bank account in the same country where you incorporate.
4) Ask your CPA how to report corporate tax in India, when the company abroad is completely managed from India.

Few places where you can setup abroad company and have Paypal too.

Cyprus - Expect a high account, audit fees, Have DTI with India
UAE FZE or FZCO - High setup costs, Have DTI with India
Estonia - Seems to be ok operating costs, to get bank account you need to fly there
Hungary - Seems to be ok
Bulgaria - Not bad, but less reputation
USA LLC - Consider Stripe Atlas program. They offer Delaware LLC + USA bank account.
UK LTD - Not able to open local bank account ( unless you have big initial deposit and have contact with good local lawyer).
Hong Kong - Almost impossible to get local bank account now. Without that you won't be able to verify the Paypal fully or withdraw money. Then, expect a good audit, account fees depending on the service provider.

 

[Nomad]

You seem to know a lot about the tax system in India and also to have a bright knowledge about all of this generally speaking @Nomad Do you think it is possible to setup something with a foundation / trust or both in combination to be able to proof to operate abroad and not in my home country?

The issue will be bank account. Who will be the signatory ? If you plan to be the sole signatory will be issue due to AEOI

 

[blizz]

You could use Stripe with a UK company or not?

 

[BlaZe]

I am still founding solutions. I talked to a well known guy who deals in Offshore business corporation (fiveconsult) and they have offered me to go for Scotland / UK company for this purpose.

 

[clemens]

I am still founding solutions. I talked to a well known guy who deals in Offshore business corporation (fiveconsult) and they have offered me to go for Scotland / UK company for this purpose.

What are the costs to setup a Scottish LP? is that the setup you are going with?

 

[BlaZe]

finding*

@clemens, not yet. Looking around more for the same. Scottish LP is cheap I guess.

 

[crownblown]

As far as I remember it's very complicated to run a company offshore from India at least if it has to be legal right? It requires so much documentation of every step this company and you as the owner will do that it almost will kill your business in workload!

A Scottish LP will not help you to open a PayPal account in Scotland unless you find someone to help you provide documents and banking as far as I understand the whole thing. Please correct me if I'm wrong.

 

[BlaZe]

@crownblown, but what is I do not require any type of privacy ? I am ok with paying the taxes & all.

 

[clemens]

@crownblown, but what is I do not require any type of privacy ? I am ok with paying the taxes & all.

You will have to travel to Scotland if you want to open a bank account there! As mentioned here already, it's not the company that you need to worry about, it's the banking.

 

[suzy]

OP what setup did you made? I'm interested to learn what you did in order to copy it

 

[DeMajor]

And why don't you simply use services like 2checkout to get this setup with a simple offshore company for instant in Belize or so?