Using multiple offshore companies for different clients

[DaveFischer]

I'm currently working for 2 US companies and 1 UK company, but I've noticed that people go a lot based on reputation. I would prefer to use a EU-based company for my British client, but e.g. a Georgian company for my US clients as they're transferring often via PayPal/EMI and not so worried where I pay my taxes.

It's also important for me to gain experience and build experience/knowledge with offshoring. I'm a bit nervous about the whole process.
I used to be nervous about long-term investing in ETF's/Vanguards, so I think it's a good idea to just make a move and I can always improve my set-up later.

Are there going to be disadvantages over using multiple companies except for the costs? I think I'd prefer to pay 5% more and build some more experience with offshoring in different countries. I can always shut down 1 of the companies later if I have some personal experiences with the governments. I'm not a great fan of bureaucracy and regulations, so this could be a way for me to learn more about tax jurisdictions and offshoring.

Seeing as my life is fairly unstable, I've lived in Asia, South America and worked for many different clients at different rates, from $150k yearly to $400k yearly, I like to have a lightweight set-up that I can easily adjust after I have more experience. E.g. if I start a Cypriot company and I find the regulations/bureaucracy a pain in the a*s, I'd like to ability to try Malta. I love the easiness of the Estonian set-up, but 20% of corporation tax seems high. Because of having a fairly unstable life, I think it could be good to gain experience as I'm currently unable to make a long-term plan for the upcoming 5-10 years and I'd like to maintain some flexibility and freedom.

My personal tax residency is still unsure. I created a topic about it here on Offshorecorptalk: What are options for tax residency as a digital nomad that never spends more than 3 months in a country?

 

[JustAnotherNomad]

You can use a US LLC for your US clients. It is taxed where you are. So if you don’t pay any taxes, there is no tax to be paid.
You could also use a UK LLP, which works the same way.
That would be the simplest options.

Estonia has 20% on dividends only. If you pay yourself mostly through your salary, then there is no tax. The same applies to almost all other countries though.

Lithuania has 5% CIT if your revenue doesn’t exceed €300k per year, otherwise 15%.
Malta also has 5%, but the system is more complex.

Honestly I would just go with a US LLC and/or UK LLP in your case.
Just be aware that banking can be difficult (you might have to use an EMI) and that you won’t be able to get a tax residency certificate (in case you deal with clients that might require it).

 

[DaveFischer]

Thanks, your reply is very helpful!

I've heard that the tax penalties on US-based corporations are enormous. Making a administrative mistake or missing a deadline in Delaware could cost you $10.000. However, I guess it could be an option.

I have plenty of experience with the UK, but then I would invoice other European customers through the UK Limited Company. Invoicing my British clien through a UK company would still mean I have to pay 20% corporation taxes, correct?

There may be tax advantages to an offshore company. Offshore companies are only subject to UK tax on their profits arising in the UK. Even UK source dividends paid to an overseas company should be free of tax.

It seems better to use my UK limited company for my US customers then, because my US customers generally don't mind paying into a UK company as they know I've lived in the UK before.

 

[JustAnotherNomad]

You should use a CPA for the filings. The CPA I spoke to told me that the fines are usually waived when you can show that you were acting in good faith (i.e. paid a CPA). And with a CPA, there shouldn’t be fines to begin with.

No, I don’t think there should be any tax, but I could be mistaken. I don’t have any personal experience with either structure. But I believe that both are simply transparent for tax purposes, so you pay taxes as if they did not exist. So if you wouldn’t pay tax in the UK as a partner, then the LLP won’t have to pay tax either. It’s the same in the US: You only pay tax on US-sourced income. But US-sourced means that the work is physically carried out in the US. I would imagine it’s the same in the UK with the LLP. If you don’t have permanent establishment in the UK, then I don’t think there should be any tax. But definitely double check this with an accountant.

 

[Spinat]

I'm currently working for 2 US companies and 1 UK company, but I've noticed that people go a lot based on reputation. I would prefer to use a EU-based company for my British client, but e.g. a Georgian company for my US clients as they're transferring often via PayPal/EMI and not so worried where I pay my taxes.

It is like many if the large corporate businesses do. Just make sure that both companies have professional websites with real data or that you showcase how your corporate structure is on one professional website.