Start a company in France instead of Ireland/Hong Kong?

[thomasparra]

I am French but never worked or paid any taxes in France as I mostly lived overseas. I am back in France and plan to start a company advising/consulting business. It can all be done remotely and the clients would be in Europe (France, Spain maybe) and maybe some in Asia as well. The suppliers (that I will pay in USD most likely, through Payoneer maybe) would be from all around the world mostly Europe and US)

As I don't have visibility into the future success of the company, should I create a company in France, see where it goes and potentially create a company in Ireland or Hong Kong (where I am still a resident of) in the future depending on the success of the company? Or should I think to start a company overseas first?

 

[bibing]

You are still resident in Hong Kong?

Then it's a no-brainer, you better incorporate there

 

[thomasparra]

You are still resident in Hong Kong?

Then it's a no-brainer, you better incorporate there

I am until March 2023 as I left HK in Sep 2021. I will probably lose the residency especially as I am technically a French resident for tax purposes now. Most of my clients would likely be in Europe to start with though

 

[bedouin]

It will be much harder to relocate exiting France (another tax hell) instead of setting up directly in HK. If you are already out of EU's radar, keep it that way. Forever if possible.

 

[bibing]

I am until March 2023 as I left HK in Sep 2021.

You can still legally register it and declare it as a Hong Kong resident. No need to declare you are a French resident (I suppose you still have HK ID)

What will happen in the future it depends on you.

Just to say, you have 1 year to get a residency permit in another country (Dubai will be easy) and declare it to Hong Kong when renewal or request of updated data is due (if ever).

Never declare you live in France.

Are you planning on living forever in France?

I want to add, as you still are legally a HK resident it will make it super easy to open a bank account for your company.

This is what I would have done, if I were you.

Hong Kong is open again so you would have no problems to go in and out if there's any issue

 

[thomasparra]

It will be much harder to relocate exiting France (another tax hell) instead of setting up directly in HK. If you are already out of EU's radar, keep it that way. Forever if possible.

Thanks, I agree but I do now know if I will be able to generate high revenue in the first 2 years. Also what story should I tell my clients and how can they pay me if my company entity and bank account are in HK? The business I will carry has some internal and supplier compliance elements as well.

I don't mind paying French tax to start with, and get out one day if tax becomes too heavy.

I am not sure about where I will live in the future to be honest. It could be France, UK, Portugal and maybe going back to Asia... I am a lone wolf

You can still legally register it and declare it as a Hong Kong resident. No need to declare you are a French resident (I suppose you still have HK ID)

What will happen in the future it depends on you.

Just to say, you have 1 year to get a residency permit in another country (Dubai will be easy) and declare it to Hong Kong when renewal or request of updated data is due (if ever).

Never declare you live in France.

Are you planning on living forever in France?

I want to add, as you still are legally a HK resident it will make it super easy to open a bank account for your company.

This is what I would have done, if I were you.

Hong Kong is open again so you would have no problems to go in and out if there's any issue

It seems like a lot of work to create the HK company and move somewhere else. I might stay in France for a bit hence having a HK company might be hard to achieve?

 

[bibing]

Definitely hard if you opt to live in France for long

 

[algotrader]

France (another tax hell)

Not necessarily. Depends always on your situation. An interesting setup is to create a company in Switzerland and live in neighbouring French border regions as Frontalier. Then you pay as low as 10% CT in CH and 20% on dividends in F if your health insurance is in Switzerland. On a low salary you pay less than 20% social security and source tax in CH or F, depending on the Canton.

 

[marioIT]

Not necessarily. Depends always on your situation. An interesting setup is to create a company in Switzerland and live in neighbouring French border regions as Frontalier. Then you pay as low as 10% CT in CH and 20% on dividends in F if your health insurance is in Switzerland. On a low salary you pay less than 20% social security and source tax in CH or F, depending on the Canton.

Italy and Germany would rape his a*s in a similar situation AFAIK (figuring as frontaliers while owning a company in CH and being the sole employee, even if you travel everyday).
Is France really different? what about social contributions?
Isn't just better to really move to CH e.g. Geneva on the french side (tax hell by CH standards btw) and go eat/shopping over the border if that's what you want?
I know it's expensive living in CH but an unfavorable tax ruling is much worse imho lol

 

[algotrader]

Isn't just better to really move to CH e.g. Geneva on the french side (tax hell by CH standards btw) and go eat/shopping over the border if that's what you want?
I know it's expensive living in CH but an unfavorable tax ruling is much worse imho lol

Dividends are progressively taxed as income in Switzerland (although assessment basis is only 70% in GE) while there's flat tax in France. Then, there's wealth tax in CH. Real estate is 2-3 times more expensive than across the border.
Social contributions depend on where you chose to have your health insurance, Switzerland being the better option with high income as the health insurance is a fixed amount not dependend on income and it lowers your frend dividend tax by 10% (you don't need to pay CSG). The mandatory employer/employee pension is around 11% together and needs to be paid in Switzerland. In addition, there's a mandaroty private pension contribution for salary above a certain amount but it can be used to buy residential property.

 

[marioIT]

Yes but that wasn't what I wanted to know.
On the switzerland side everything is legal, frontaliers and foreigners can start companies...
But the neighboring countries are complaining that by doing that (employing yourself with a one man swiss company while frontalier) you are violating the reciprocal treaty, as it's considered by them a fake employement contract just to use the frontalier tax regime and evade the regular personal taxes in the other country, while living actually there.
Don't know the French frontaliers treaty, but the Italian for sure says this and iirc even the germans are taking this stance.

I know an italian friend that is right now under fire for this, even if everyone and their dog was doing it till now.
You must have substance in switzerland to make such a thing fly it seems.
i.e. they check your name on zefix (switzerland public business register) and if it shows that you owns all the shares while at the same times figuring as employee under the frontalier regime, then they'll start to piss you off... my friend was stopped at the customs for a regular check and it all happened there.
Now the police is sending the report to the italian tax agency and he's very likely to get a big fine at least.
This is what I meant, how the stance of France on this?

 

[algotrader]

Yes but that wasn't what I wanted to know.
On the switzerland side everything is legal, frontaliers and foreigners can start companies...
But the neighboring countries are complaining that by doing that (employing yourself with a one man swiss company while frontalier) you are violating the reciprocal treaty, as it's considered by them a fake employement contract just to use the frontalier tax regime and evade the regular personal taxes in the other country, while living actually there.
Don't know the French frontaliers treaty, but the Italian for sure says this and iirc even the germans are taking this stance.

Yes, you will need substance in Switzerland (an office) and be able to prove that you commute regularly to your office. But if you live in the area there's no problem doing your business in a neighbouring EU/EEA country since your PoEM is there. It's a constitutional EU right. Don't understand why it should be considered a "fake" contract. Business owners in Germany and France also pay themselves low salaries + high dividends to optimize their taxes.

 

[thomasparra]

Thanks a lot for the inputs. My current base is southwest France hence Switzerland is a bit of a stretch currently, just to save 10% on dividends. As I am starting the company this year and have no visibility into future performance (I forecast a moderate/pessimistic 25k in operating margin in my first year). Should I create the entity in France first and after 1-2 years revisit to move my business (and potentially myself) elsewhere depending on where my clients are located, revenue generated etc? I want to make sure setting up the company is as easy and painless as possible at first, to focus on the actual business rather than putting too much time, efforts in an offshore option which might actually be more expensive at the beginning?

 

[Marzio]

use the frontalier tax regime and evade the regular personal taxes in the other country, while living actually there.

That's the crux of the matter because of how the Italian frontalier regime works, in other countries like FR or DE frontaliers pay taxes in their country.

Now the police is sending the report to the italian tax agency

What are reporting to the italian tax agency? That the guy owns a company in CH, is the sole shareholder and employee at the same time?

Yes, you will need substance in Switzerland (an office) and be able to prove that you commute regularly to your office. But if you live in the area there's no problem doing your business in a neighbouring EU/EEA country since your PoEM is there. It's a constitutional EU right. Don't understand why it should be considered a "fake" contract. Business owners in Germany and France also pay themselves low salaries + high dividends to optimize their taxes.

You are 100% right, no CFC. no PoEM, no "fake" contract but this could easily fall into GAAR (ATAD 1) if the only reason for the arrangment is to gain a tax advantage.

 

[marioIT]

I got back some info from my friend. The issue is that my friend lives on the border, inside the 20km italian zone. He has a swiss frontalier permit.
Has his gmbh in Switzerland just over the border, he travels daily and rent his office there.
They (finance police GDF) reported him for possibly gaming the system, as while owning the business he's taking a low employee salary (that's fully taxed in switzerland at lower rates than italy) instead of the one as company manager/director and dividends that would be fully taxed on him in Italy???
It seems there are some issues, one of them being a conflict between the frontalier treaty and the internal legislation, because in the italian version of the treaty says the job contract must be "subordinated" and the italian legislation says that to be considered "subordinated" you shouldn't own the majority of the company, as you can't fire yourself.
I think they're just nitpicking, grasping at straws just to try and get some money. Pretty sure police is wrong and you are right, and not sure how are they going after these if a Swiss Fiduciary is listed as director and the guy is covered with a regular frontalier permit, but you never know how things go in italy, till it gets to the supreme court he's fucked for life
It seems though that Switzerland recently agreed to send automatically each year a list of all names, salaries, dividends, social contributions, stocks etc paid to/from the Frontalier permit holders, to their home countries.

he linked me too this local newspaper story too but its italian only (google translate it):
Verifiche fiscali sui lavoratori frontalieri. Nel mirino i “falsi dipendenti”

it's all on his lawyer now but there's no official communication from the tax agency as today. Even if it doesn't stand in court it'll be a giant PITA to handle if he gets a crazy fine from the tax agency and have to fight it...

 

[Marzio]

Pretty sure police is wrong and you are right, and not sure how are they going after these if a Swiss Fiduciary is listed as director

Italian tax administration is right, you can't be an employee of yourself and the Swiss Fiduciary isn't really a director because your friend could remove it in any moment so he is the real "dominus" of the company.

He simply can't enjoy the advantageous cross border regime which is only obtainable by dependent workers.

 

[RealDude]

And does his salary stand up to comparison with others?

 

[thomasparra]

I got back some info from my friend. The issue is that my friend lives on the border, inside the 20km italian zone. He has a swiss frontalier permit.
Has his gmbh in Switzerland just over the border, he travels daily and rent his office there.
They (finance police GDF) reported him for possibly gaming the system, as while owning the business he's taking a low employee salary (that's fully taxed in switzerland at lower rates than italy) instead of the one as company manager/director and dividends that would be fully taxed on him in Italy???
It seems there are some issues, one of them being a conflict between the frontalier treaty and the internal legislation, because in the italian version of the treaty says the job contract must be "subordinated" and the italian legislation says that to be considered "subordinated" you shouldn't own the majority of the company, as you can't fire yourself.
I think they're just nitpicking, grasping at straws just to try and get some money. Pretty sure police is wrong and you are right, and not sure how are they going after these if a Swiss Fiduciary is listed as director and the guy is covered with a regular frontalier permit, but you never know how things go in italy, till it gets to the supreme court he's fucked for life
It seems though that Switzerland recently agreed to send automatically each year a list of all names, salaries, dividends, social contributions, stocks etc paid to/from the Frontalier permit holders, to their home countries.

he linked me too this local newspaper story too but its italian only (google translate it):
Verifiche fiscali sui lavoratori frontalieri. Nel mirino i “falsi dipendenti”

it's all on his lawyer now but there's no official communication from the tax agency as today. Even if it doesn't stand in court it'll be a giant PITA to handle if he gets a crazy fine from the tax agency and have to fight it...

This is is one of the reasons I do not want to get myself involved into this, especially as I will not make 6 figure revenue in my first year or two. Is it wise to start the business in France first (so I can claim free healthcare and some social contributions as well) versus Ireland or Hong Kong for example?

 

[Marzio]

Is it wise to start the business in France first

Nope because of French exit tax (among other things).

Exit tax: Unrealized capital gains from the transfer of individual assets, a main office, or an establishment from France to an EU/EEA country that has concluded a mutual assistance agreement for the recovery of tax with France are spread over five years. Any tax due on the unrealized gains must be paid within two months following the transfer, either in full or in five equal annual installments.

 

[algotrader]

If you intend to make only 5 figures there's no point creating a LTD company in HK or Ireland, especially if you don't want to live there. In France, you can have the "microentrepreneur" or "autoentrepreneur" regime with lower social contribution and income tax rates.

The exit tax only applies to company assets over 800k € held in a french limited company, so not relevant here.