Where to setup a company for ecommerce business?

[Alobart]

Hi Everyone,

I’m new to the forum and amazed with the quality of information. It’s awesome.
I wanted to ask for an advice on my case which is a bit complicated.

I started an ecommerce business as a side job last year. Business has been growing fast and this year it will return handsome profits. I started to plan quitting my job and move to somewhere else with better tax regime.
I am a non-eu citizen resident in Germany at the moment. To complicate things I have a US Green card.
Most of the year, I want to live in a major international city and not on a desert or tiny island (no offense).

my customers are all in EU and i keep our products in EU warehouse at the moment.

I was thinking incorporating a ltd in the UK and move to london. Corporate tax will be 17% and i can get out money as dividends.

My passport doesn’t allow me to freely travel/ in the UK and EU so i need to show some sort of business there to kee my residency visa.

Could there be any other way to incorporate in a lower tax country (HK, Malta, UAE, etc) but still live in somewhere else (partly uk, partly usa, partly asia) for most of the year?

 

[Sols]

I started an ecommerce business as a side job last year. Business has been growing fast and this year it will return handsome profits. I started to plan quitting my job and move to somewhere else with better tax regime.
I am a non-eu citizen resident in Germany at the moment. To complicate things I have a US Green card.
Most of the year, I want to live in a major international city and not on a desert or tiny island (no offense).

my customers are all in EU and i keep our products in EU warehouse at the moment.

As long as you live in Germany, any company you form outside of Germany will be considered resident in Germany for tax purposes. If you haven't incorporated anywhere yet, the income will likely be considered personal income subject to personal income tax in Germany.

This may complicate your visa situation, if your visa is conditioned exclusively on your current employer. But if you are proactive, you can usually avoid any immigration problem since you're running a successful business and most countries are happy to keep such immigrants.

If you have exceeded any of the VAT thresholds and haven't been paying VAT, prepare for a large VAT invoice plus a risk of penalties for late payment.

Germany has the motivation and means to go after tax dodgers. The best thing you can do is find an accountant or lawyer who can help you sort out your affairs in Germany. You don't want the BZSt chasing after you.

Let's also not forget that as long as you hold a US Green Card, you must file US tax returns and potentially pay income tax. You can reduce or avoid the US income tax if there is a tax treaty, which it has with most relevant jurisdictions.

Could there be any other way to incorporate in a lower tax country (HK, Malta, UAE, etc) but still live in somewhere else (partly uk, partly usa, partly asia) for most of the year?

Short answer: no.

Long answer: no, unless the company has a permanent establishment and substantial economic presence there (meaning office, employees, directors, and so on).

 

[speedster]

To state it simply, you will most likely be tax resident in the country you spend the majority of your time in. Any company you are the major shareholder of will be considered tax resident in this same country, irrespective of where it is incorporated, unless it has significant economic substance (staff, offices etc) somewhere else.

The key then has more to do with the country you choose to reside in rather than the country you incorporate the business in.

 

[Tax Cow]

London is a cash sink. Living expenses are high and personal taxation burden on high earners is not low either.

If you're willing to hire a few employees in the EU, look at micro/small company regimes. Romania and Poland, and a few others have one. Beware the new trend of "exit tax", and make sure you scale and sell (or relocate) your business quick enough, before those statutes get you on the hook.

 

[John Andrews]

Have you considered Cyprus non-dom? Minimum stay is 2 months which means you can spend the rest of the year somewhere else, as long as you stay less than 183 days in each country. There will also be no exit taxation in regards to Germany since Cyprus is in the EU.

 

[JohnLocke]

Have you considered Cyprus non-dom? Minimum stay is 2 months which means you can spend the rest of the year somewhere else, as long as you stay less than 183 days in each country. There will also be no exit taxation in regards to Germany since Cyprus is in the EU.

That's really not a bad suggestion. But the you will have to relocate as you already mentioned in your initial post in order to achieve your goals.

 

[Tax Cow]

Non-dom regimes are an insurance plan to get access to banking. They're suitable for the unsettled travelers who can avoid being treated as a resident everywhere else. As a likely-to-be resident somewhere else, you're at risk. To settle a possible tax dispute, you should live most of the time in that non-dom jurisdiction, and pair your non-dom status with a tax residency certificate. Other nations won't take your non-dom status alone for anything of value, if they believe you're their tax resident.

Micro/small company regimes of 1-5% CIT in the EU, on the other hand, require employees, thus granting you economic substance. This way, if you hire a CEO among others, you can legally become a non-managing shareholder. As a result, you can keep the low-taxed profits on company's book while living full-time in the high tax 1st world. Quite a neat way to get around PoEM and CFC.

Both suitable for a different scenario.

 

[JimBeam]

Micro/small company regimes of 1-5% CIT in the EU, on the other hand, require employees, thus granting you economic substance. This way, if you hire a CEO among others, you can legally become a non-managing shareholder. As a result, you can keep the low-taxed profits on company's book while living full-time in the high tax 1st world. Quite a neat way to get around PoEM and CFC.

Yes, just make sure as I think some have limits. For eg. I think that Romania has one that is limited to up to €1M/year and it's like 2 or 3%. Also I think that in this case you don't pay tax on profits than on every euro you accept. So if you're into trade business with low(er) margin this can add-up so you should think about this too. Also you need to make sure how you can get the money out of this company (and if in dividends, you need to check how much tax you need to pay and to what country).