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alibran

Offshore Agent
Feb 2, 2011
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Hi, apologies for the many questions, but I'm trying to get my head around this offshore stuff, and it's proving pretty complicated at the moment.


I have been running a small online business (below UK VAT threshold) as a sole trader for a while in the UK. I am now planning to relocate to Spain, and was shocked to find Spain doesn't have a VAT threshold, so I would be required to charge spanish VAT on all my sales. (Although the vast majority of my customers are outside Spain and the EU, I don't ask for addresses, which is normal in my industry, so I can't prove it.)


To avoid charging VAT, I am looking at setting up an offshore company.


My current situation is that my customers pay their subscription fees for my membership based website by PayPal. This money is then withdrawn from PayPal into my personal UK bank account.


Once I have set up the company, I will transfer my domain names and hosting from my name into the company name. (The website is located on a server in the US.)


Do I need to use an offshore bank account, or is the fact that the website belongs to an offshore company enough to show that my business is outside of Spain? If I do need an offshore account, does my UK bank account qualify as it's outside Spain? Does any bank account I use have to be in the company's name or can it be in my own name? (I'm not worried about banking privacy, as I'm not trying to avoid paying tax.)


Once again, sorry to ask so many questions. Hopefully, someone will be able to point me in the right direction.
 
Well, the major problem here is paypal since you will need to incorporate a offshore company in a jurisdiction supported by them, this is at the time we speak not possible. The solution may be a Offshore company for instant in the Seychelles with a bank account in Cyprus, this will qualify the company to apply for a 2co.com account! 2co.com can process paypal as well but the fee on each transaction will increase because they charge on top of the ppl fee.


Other scenario would be a Cyprus company with a bank account in Cyprus, but then you will have to charge VAT (15%) towards your customers!


You will need to have any bank account regardless if it is the UK, Cyprus, Germany or wherever, to be hold by the Company, otherwise you will not be able to proof that the operation is orginated from outside of Spain! This is not to be considered as a free pass sometimes the country where the beneficial owner of the company is resident will still ask for additional proof of operation and take no notice if your set up!
 
What are the most favorable jurisdictions PayPal does support?


PayPal jurisdiction support is by location of bank account, not necessarily location of incorporation, no?


Would setting up a fiscally transparent entity (LLC/LLP) in a PayPal-supported banking jurisdiction + bank account facilitate PayPal processing without triggering taxation of that revenue?
 
The problem for me is not tax. I'm OK with making a reasonable contribution towards funding the services of the country I've chosen to live in.


My issue is VAT. In the UK, I don't have to charge it because I'm below the VAT threshold. Spain doesn't have a threshold (or effectively has a zero threshold), so I wll have to charge VAT to all my customers since I can't prove that the majority are from outside the EU. Adding VAT to my prices will price me out of the market, and reducing my prices so that my customers don't see an increase when the VAT is added will mean my business is no longer commercially viable.


From what I can see, looking at PayPal, it isn't an issue of finding a PayPal supported banking jurisdiction. PayPal provides services to most countries, including Cyprus, Dominica, Seychelles, etc. The first problem I see if you go to the account creation form with one of those countries selected, is that they ask for an address within that country for the primary contact for the account. I can see a number of ways around this, but I'm not sure if it's the only problem.


Also, from my experience of PayPal, you can only add a bank account from the country the PayPal account is registered in, ie if your campany was in Seychelles, your bank account would also have to be in Seychelles.


Thanks for the mention of 2co.com, Admin. I've made payments through them myself before, so I'll go and take a look.


What did you mean by banking outside of Spain not being considered a free pass? I assumed the location of the company, if it's registered in a particular country, would be pretty clear cut. What additional proof might they ask for?
 
What are the most favorable jurisdictions PayPal does support?
More...


You decide!

Would setting up a fiscally transparent entity (LLC/LLP) in a PayPal-supported banking jurisdiction + bank account facilitate PayPal processing without triggering taxation of that revenue?
Depends where the LLC/LLP is resident.
 
From what I can see, looking at PayPal, it isn't an issue of finding a PayPal supported banking jurisdiction. PayPal provides services to most countries, including Cyprus, Dominica, Seychelles, etc. The first problem I see if you go to the account creation form with one of those countries selected, is that they ask for an address within that country for the primary contact for the account. I can see a number of ways around this, but I'm not sure if it's the only problem.
Regardless of which country you look at then PayPal is country specific!


Please see paypals statement here:

Thank you for contacting PayPal regarding your query relating to registering foreign financials to your PayPal account.
In regards to your query, PayPal is a country specific system and the registration of foreign banking information to your account. As you indicate you are attempting to register a Cypriot bank account, I regretfully inform you that this is not possible at this time.
What did you mean by banking outside of Spain not being considered a free pass? I assumed the location of the company, if it's registered in a particular country, would be pretty clear cut. What additional proof might they ask for?
It's just that some think that setting up a offshore company with bank account will offer a free pass to never get any troubles with the tax authorities, this is a wrong picture, regardless how you structure your offshore company and where you bank you will need to be prepared to maybe, maybe not, answer some questions proving that your are not the operator,management,employee, of the company.
 
Six things need all be in the same country:


a) Natural Person (with local citizenship, residential mailing address)


b) Corporation


c) Bank Account


d) Payment method (credit card)


e) Telephone/Fax number


f) Network access (IP trace)


Anytime those start to vary you will encounter problems. (a) means you will probably need to use a fiduciary individual or employee.


I'm curious myself, where variation here causes problems. CCLogic itself seems to recommend (b) SY + © CY.


Obviously (a/f) US + © CY isn't going to work.


Personally I want to do (a/e/f) CR + (b) SY + (c/d) CY; we'll see how well or not that works.
 
Admin said:
You decide!


paypal/worldwide
Based on that page, I can see now why it's very common for people to ask how to setup a U.S. bank account with a foreign corporation. Paypal seems to encourage, or even only allow, use of US bank accounts regardless of what country you sign up from. Weird.


Appears signing up from Cyprus and withdrawing to a Cypriot debit card is the trick. I presume your corporation would need to hire a Cypriot employee to accomplish that. And looks like a Seychelles PP account isn't allowed to withdraw at all.
 
This can be accomplished with a VPN - read this thread as well /forum/f2/solution-paypal-13380/


Many have solved all of your 6 points simply with the right company and banking set up and by using VPN for this purpose.. We are not saying that Cyprus is the only solution but it is one of them, there are plenty of other countries to accomplish the same, you just need to have experience in this area also without to use any employee, nominees or whatever you can think of coursing additional costs.
 
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A VPS (Virtual Private Server) works also, for purpose of showing a local IP address, and has some substantial security advantages. (Although costs more than a VPN typically).


The hardest item there seems to me to be utility bill matching name and residential mailing address in the local country. How do people generally meet that requirement where applicable without using employees/fiduciaries? (BTW, I don't believe that is required for PayPal, although if they ever freeze your account it's probably the first thing they'll ask for)
 
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Well some incorporation services offer actually this as an special service (we don't do that) - we have seen this several times and don't intervene at all since it is up to each person to what they do.
 
In certain cases we can help with this, please submit a ticket to get in touch with one of our consultants.
 
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Admin said:
It's just that some think that setting up a offshore company with bank account will offer a free pass to never get any troubles with the tax authorities, this is a wrong picture, regardless how you structure your offshore company and where you bank you will need to be prepared to maybe, maybe not, answer some questions proving that your are not the operator,management,employee, of the company.
I've been going over this in my head, and it's raised a question for me.


Since I'm not trying to avoid paying tax in Spain (only trying to avoid charging VAT to my customers), is this an issue for me? I mean, would it be possible to incorporate an offshore company in a country that has no VAT or corporation tax, then have the company use me (living and paying tax in Spain) as a sales agent, remote administrator or something along those lines?
 
alibran said:
I've been going over this in my head, and it's raised a question for me.
Since I'm not trying to avoid paying tax in Spain (only trying to avoid charging VAT to my customers), is this an issue for me? I mean, would it be possible to incorporate an offshore company in a country that has no VAT or corporation tax, then have the company use me (living and paying tax in Spain) as a sales agent, remote administrator or something along those lines?
It interest me as also because it is what Im doing with a Seychelles corp. to avoid charging VAT!
 
alibran said:
I've been going over this in my head, and it's raised a question for me.
Since I'm not trying to avoid paying tax in Spain (only trying to avoid charging VAT to my customers), is this an issue for me? I mean, would it be possible to incorporate an offshore company in a country that has no VAT or corporation tax, then have the company use me (living and paying tax in Spain) as a sales agent, remote administrator or something along those lines?
Yes thats possible, actually a company which is incorporated in a non EU country don't have to charge VAT! This I learned because I actually have been invoiced by such a company and wasn't invoiced any VAT.
 
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