Offshore company own onshore company where to start, online business?

[blossum]

Hello,


Im all new to this and thankfully found this forum and hope to get some help.


At the time I write this Im developping my new e-commerce website selling electronic devices and office supply articles. I hope to finish the website development within the next 2 - 3 weeks. Im ready to register my company now which I feel is the missing brick in the puzzle at the moment. Since I believe in my business and have some money put aside to invest then I want to start it all right! Now, what is the proper way to start?


My plan is to register a offshore holding company (I read here a Seychelles holding company may be good) and have them to register my onshore company in the UK and for tax reasons as well in Spain and Cyprus. I have 15+K available to establish everything which I hope is sufficient.


Can somoene please shed some light on what will be best for me to do and where to start?


As I say, Im ready to proceed a urgent reply would be great.

 

[blossum]

I need offshore banking as well! I read Cyprus banking is good, can you tell me which bank is best in Cyprus for day to day banking needs?

 

[JohnLocke]

What I would do is to incorporate the UK, Spain or Cyprus company first, get the merchant account for it (if that is a requirement) and then incorporate the Seychelles Holding company and sell the shares from the onshore company to the offshore company.. if you do that before the UK company had any activity then no tax complications should rise.


The reason doing it this way is you avoid a lot of questions and documentation from the Acquiring bank, also the risk to be declined increase dramatically if the onshore company is owned by an offshore company.


In regards to banking, I would recommend you to look into a Cyprus bank account. Cyprus is part of the EU and will not look suspicious towards the acquiring bank if you decide to get your funds transferred directly to this account for tax reasons.

 

[blossum]

aha, what is an Acquiring Bank and why does it rise questions if the onshore company is owned by an offshore holding? Most of the fortune 500 corporations are either owned or connected by/with offshore holding companies to avoid or reduce tax.

 

[JohnLocke]

You can find detailed information about what a Acquiring bank is here Acquiring bank - Wikipedia, the free encyclopedia - You can build a Holding / Trading offshore company structure which is what most are doing...

 

[sebastian]

My advise would be to incorporate a Cyprus company! Register a Seychelles company first that will own the shares in the Cyprus company and act director as well, so you can make use of the DTA between Cyprus and the Seychelles to move money between the to companies bank account without to pay tax

 

[TwoFaces]

Hello Admin. I know this post is 3 months old but I hope you can clarify what you meant by the following as our situation is not much dis-similar to OP.

What I would do is to incorporate the UK, Spain or Cyprus company first, get the merchant account for it (if that is a requirement) and then incorporate the Seychelles Holding company and sell the shares from the onshore company to the offshore company..

Are you suggesting they obtain merchant account in the UK, Spain and Cyprus with the local (onshore) companies? and once the merchant accounts have been approved, they will then sell the shares of local (onshore) companies to the Seychelles Holding company but KEEP the merchant accounts?

...if you do that before the UK company had any activity then no tax complications should rise

What did you mean by this? The UK company will start having activities after they sell the shares to the Seychelles Holding company. The fact that money (from purchases) goes into their UK merchant account, is that not considered taxable income? Did you mean they will transfer the money from UK bank account out of the country into an offshore bank account immediately?

In regards to banking, I would recommend you to look into a Cyprus bank account. Cyprus is part of the EU and will not look suspicious towards the acquiring bank if you decide to get your funds transferred directly to this account for tax reasons.

What did you mean by 'transferred directly to this (cyprus) account'? My interpretation of the above is that money comes into their UK bank account and this gets transferred out to their Cyprus bank account, but this money is not taxable because technically the UK onshore company is owned by Seychelles Holding company (which attracts 0% tax)?? Or did I get the wrong end of the stick???

 

[JohnLocke]

Are you suggesting they obtain merchant account in the UK, Spain and Cyprus with the local (onshore) companies? and once the merchant accounts have been approved, they will then sell the shares of local (onshore) companies to the Seychelles Holding company but KEEP the merchant accounts?

Yes it was what I mend because they will avoid further due diligence to be performed on the offshore entities.

What did you mean by this? The UK company will start having activities after they sell the shares to the Seychelles Holding company. The fact that money (from purchases) goes into their UK merchant account, is that not considered taxable income? Did you mean they will transfer the money from UK bank account out of the country into an offshore bank account immediately?

There are several ways to do this, but I would suggest to consult a UK tax consultant to help since I'm not aware of all the tax complications. One way would be to invoice the UK company from the Seychelles company another way is to take out the money as dividend.

What did you mean by 'transferred directly to this (cyprus) account'? My interpretation of the above is that money comes into their UK bank account and this gets transferred out to their Cyprus bank account, but this money is not taxable because technically the UK onshore company is owned by Seychelles Holding company (which attracts 0% tax)?? Or did I get the wrong end of the stick???

Your right.

 

[TwoFaces]

Hi Amin. Thank you for clarifying. This forum is brilliant! I am learning heaps everyday. Would you mind clarifying the following, in relation to your answers to the original post? Thank you in advance!

There are several ways to do this, but I would suggest to consult a UK tax consultant to help since I'm not aware of all the tax complications. One way would be to invoice the UK company from the Seychelles company another way is to take out the money as dividend.

Two questions with regard to the above.


1) Did you mean the Seychelles/Cyprus Holding company will invoice onshore UK trading company? How is this possible when technically it owns the onshore company? Would you invoice everything that the onshore UK company makes to minimize the taxable income?


2) There is another issue i.e. VAT. The above structure (Seychelles/Cyprus Holding company + UK onshore trading company + Cyprus bank account) means the onshore UK company will have to be VAT registered (assuming it goes over the VAT threshold, which is not that hard). Do you have any advice as to how the onshore UK company can overcome this?

 

[JohnLocke]

1) Did you mean the Seychelles/Cyprus Holding company will invoice onshore UK trading company? How is this possible when technically it owns the onshore company? Would you invoice everything that the onshore UK company makes to minimize the taxable income?

Why should you not be able to invoice the UK company, there may be some transfer pricing issues but practical it is possible, consult a UK tax adviser for clarification.

2) There is another issue i.e. VAT. The above structure (Seychelles/Cyprus Holding company + UK onshore trading company + Cyprus bank account) means the onshore UK company will have to be VAT registered (assuming it goes over the VAT threshold, which is not that hard). Do you have any advice as to how the onshore UK company can overcome this?

unfortunately this will not going to be possible. The UK company will always have to pay VAT if it reach the threshold!