Taxation for manufacturing my own products

[SimpleGuy]

Hi all,

I need help to know if a tax arrangement works.

Let me explain my current situation.
I sell products online that we manufacture ourselves. I have a holding company in the UAE (1 employee) and two subsidiaries, one in Delaware (without employee) to collect the money (because with Stripe in the UAE there are too many costs, otherwise I will collect from the UAE), and another subsidiary in Madagascar where I concentrate all my staff (20 employees). I set up another independent company in the Czech Republic (4 employees, completely external to the holding company and its two subsidiaries) which is a parcel shipping company. They manufacture and ship my products to Western Europe, but not to the Czech Republic. The only customer of the Czech company is my subsidiary in the USA, via a subcontract. So I pay the Czech company with my US company, only for the Czech company to have enough to cover its expenses and pay its 4 employees.

So far so good, the Delaware company pays VAT, so there is no problems as far as I know.

However, I would like my Czech company to become a UAE subsidiary and I would like to know if the subcontract would still work. I.e. will I still be able to cash in with the Delaware company, and ship from the Czech Republic without paying taxes there? If the company in the Czech Republic prepares and ships the packages and is part of the same group of companies, will the fact that I collect the money in Delaware be questioned?

If it is not possible, what to do to keep all companies in one group ?

Thanks in advance,

 

[SimpleGuy]

Please any help ?

 

[TheCryptoAnt]

Please any help ?

Your situation is very complex an involves at least 4 jurisdictions for what I just read.

What you need is lawyers in each jurisdiction that can confirm what you are trying to do is ok.
Potentially one of the big four because of the complexity of the set up.

Whatever anyone says in this forum its gotta be taken with at massive grain of salt cause yeah we can larp all we want but I dont think anyone here can give you a proper answer, specially for free.

Otoh Id say that everything is legal unless you get caught so

 

[bigdaddyleon]

Like TheCryptoAnt, I would recommend you consult a tax advisor, it's a very complex issue.
However, unless the company is making profits in CZ, it should not pay taxes.
So your thought would probably be correct that you only drive as much profit as you have expenses -> no profit = no taxes.

 

[Mike Forman]

You would need as others indicate find some local consultants.

The recommendation I would have is to use a non related company (different director and ubo) and sell from the Czech company to this corporation bills and delivers to your customers. You can delivery directly to the end customer as drop shopper.

This will make vat filing complex nonetheless as I believe for b2b you cannot claim intracommunity sales unless your Delaware company has also local VAT numbers in every country you sell, and for b2c sales the company selling will also require in each country a vat number and file/pay vat (if European company can use OSS) . Unless you are under the thresholds but these are very low nowadays.

I don't believe such a setup would be worth it as it will make things very complex and increase risk on non compliance due to its complexity and vat filing.

If your Delaware company has some substance and provide real services you can bill service bills to the Czech company (such as providing customer service, marketing,...) . If you ship outside the EU there is not such a problem,as long as the companies doing direct business are not related. Related companies require transfer pricing and have a high risk to be under scrutiny one day.