Question Where to Incorporate GameDev Company to reduce taxation?

[Valhalla]

Hello everyone,

We are game development studio and we are planning to incorporate (finally). We are receiving monthly payouts on personal account from Google, Apple and other ad networks. No crypto stuff, no shady stuff, every payout goes from NASDAQ listed company. The revenue coming is purely from advertising within applications.

We wanted to use WISE and register Business account there just to have all business-related expenses in one place (payouts and expenses), make business-related purchases with WISE business cards, and to issue virtual cards and manage employee expenses.

I have thought on incorporating in UAE due to 0% tax rates and use it with WISE but it is no longer available there. Furthermore, WISE seems to not onboard entities from BVI/Cayman/etc.

Could you please suggest which jurisdiction to choose for low tax rates so that it could work with WISE? Or any other alternative.

Thanks!

 

[Sols]

Unless you plan to move a tax haven (such as UAE, although note that there is corporate tax coming), the company will become tax resident wherever you are based. This means it has to pay tax just like any other local company. Applies to most jurisdictions in the world, especially those people try to avoid to "reduce taxation."

So the easiest would be to just form a local company and focus on growing the business, not on saving taxes. But if you are EU nationals, you could look into Malta or Cyprus for an easy and relatively quick place to relocate to and start a business.

 

[Valhalla]

Thank you for your answer!

Is there a particular reason to choose Malta or Cyprus? And does WISE works with Malta/Cyprus?

 

[Sols]

Malta and Cyprus have low tax and if you're EU nationals you can just pack your bags and move there. No visa required. Just show your EU passports and go register with immigration as residents. The combination of ease, low tax, and low cost are unmatched across the EU/EEA. Weather is nice, too, most of the year.

Wise does work with both but have had to pause new applicants for almost a year now due to a huge backlog.

 

[Valhalla]

Thank you once again for the reply.

A few more questions regarding your advice:

1) Malta has 35% CiT, I assume when you say it is low, there is a way to reduce it, right?
2) Cyprus - the company should be structured in a way that it controls IP and licenses it to the other entity, so that it can enjoy 2.5% IP tax, is that correct? Or perhaps it should be structured that it receives dividends from another entity and pays 0% tax?
3) Do you have to be physically located in Cyprus to have a legal entity operating in Cyprus? I mean to live in Cyprus.

 

[Sols]

1) Malta has 35% CiT, I assume when you say it is low, there is a way to reduce it, right?

Keep Googling. It does indeed get lower than that. 5% effective tax rate, when you claim 6/7 of the taxes paid back.

2) Cyprus - the company should be structured in a way that it controls IP and licenses it to the other entity, so that it can enjoy 2.5% IP tax, is that correct? Or perhaps it should be structured that it receives dividends from another entity and pays 0% tax?

You might be able to do an IP box. @CyprusLaw or @CyprusLawyer101 might be able to offer you more guidance there.

Otherwise, you're looking at 12.50% corporate income tax.

3) Do you have to be physically located in Cyprus to have a legal entity operating in Cyprus? I mean to live in Cyprus.

No, you can do it entirely remotely. But as I was indicating earlier, it's pointless to form an offshore/foreign company nowadays unless you plan to also live in a tax haven/low-tax jurisdiction.

 

[Valhalla]

1 & 2) Understood and thank you for referrals!

Regarding 3) It is a bit pointless for me since I cannot use Wise and this whole idea of managing all business expenses digitally will not be working. Is there an alternative to Wise that will do the same?

Yes, I plan to have a residency in a country that provides tax relief on world income.

 

[CyprusLaw]

1 & 2) Understood and thank you for referrals!

Regarding 3) It is a bit pointless for me since I cannot use Wise and this whole idea of managing all business expenses digitally will not be working. Is there an alternative to Wise that will do the same?

Yes, I plan to have a residency in a country that provides tax relief on world income.

From the information provided it is likely that your business would fall under the scope of the IP Box regime, this means that with proper advice and structuring you can lower your effective tax rate to as low as 2.5%. Happy to discuss by PM.

 

[Valhalla]

How do I send you a PM? Cant seem to find it?

 

[Marzio]

you can lower your effective tax rate to as low as 2.5%

Plus 2.5% on dividends distribution.

 

[MiddleEuroAsia]

s there an alternative to Wise that will do the same?

If your company is registered in the EU, look for pleo, they offer the exact thing you are looking for

and if your company is registered in the US, look for brex, airbase or divvy.

 

[Valhalla]

Hello!

Thank you very much for Pleo!

Is it like a bank with IBAN and etc?