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Would UK Ltd be a good idea for investing in software development?

avalanche

avalanche

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Aug 13, 2019
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#1
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Im currently considering opening a UK Ltd company for using my personal funds to develop the software that I'm planning to use later with another company in a less taxed country.

This UK Ltd would not generate any income, it would just be used as a proxy to pay the freelancers and protect intellectual property created during the process.

Planning to deposit my personal funds (around 3k EUR/monthly) and pay workers / freelancers in Russia, Ukraine and Belarus for web development, management and design services.

I have following questions:
  • Would UK be a good choice for my purpose?
  • Are there ooops moments I should look out for? (like sudden tax even I'm not making any income)
  • No tax would be withheld on my investments and outgoing payments right?
  • Would I be able to later transfer the rights to software to a less taxed country without paying any tax?
  • Are there still any reliable EMIs that would be okay with UK Ltd that is run by non-resident? No income will be received, just deposit of personal funds and outgoing payments for services. (I know about TransferWise, but I'm looking for at least 2 EMIs for stability)
P.S
The reason why I'm looking into UK Ltd is because my current country (Armenia) is imposing 20-23% WHT tax on any payments going to any non-resident for any services (which is totally fucked up given its my personally invested funds) o_O Citizenship: Russian.

Hoping for your help guys! Tried looking into Cyprus but its too costly (I can afford 1 qualified employee working for 4 months for the price of this setup!) Also better to avoid non reputable countries like Seychelles because freelancers would appreciate something reputable to receive money from (especially less tax scrutiny)
 
#2
tw is killing all russia-related accounts
you will need some introducer to get you to open an account as you are a high risk client
uk is okay but you can have a cheaper setup with cyprus as whatever jurisdiction you select, you'd better have a substance there by hiring a local dir

anyhow, if it is not ~100k\year of turnover it is usually does not worth the cost these days
 
#3
reesek said:
tw is killing all russia-related accounts
you will need some introducer to get you to open an account as you are a high risk client
uk is okay but you can have a cheaper setup with cyprus as whatever jurisdiction you select, you'd better have a substance there by hiring a local dir

anyhow, if it is not ~100k\year of turnover it is usually does not worth the cost these days
Click to expand...
I had personal TW account as Russian citizen and 3 business accounts. It handled EU volume 30k-50k eur without any questions. Do you mean TW is attacking all accounts sending money to Russia?
 
Last edited:
#4
reesek said:
uk is okay but you can have a cheaper setup with cyprus as whatever jurisdiction you select, you'd better have a substance there by hiring a local dir
Click to expand...
My problem is that I will have to spend 1k EUR/year with Cyprus on useless audit and 2-3k extra on some nonesense accounting + 1k/year on a local director even though the company does not make any income at all and I dont need to optimize any tax or hide anything. Total cost of Cyprus might end up 3k for setup and 3-5k/year ongoing cost.

Compared to UK Ltd setup where 100 gbp /mo accounting and 200 gbp initial cost of setup (according to my provider), that would be insane difference.

Do you think there is really no way I could open reliable EMI for just sending my personal money to freelancers? :/
What about Payoneer?
 
#6
There are quite significant tax savings schemes for startups in the UK, but they might be less relevant in your situation as you are not tax resident in the UK and do not plan to make a profit.
 
#7
You would need to make sure that Armenia doesn’t ruin your plans because you’re managing the company from there.

Where are you planning to accumulate the profits? In the UK? If the company is tax resident in the UK and there are no profits because everything gets paid to some other country, you need to watch out for transfer pricing restrictions.
You’ll also want to use a holding company to own the company, just in case.
 
#8
JustAnotherNomad said:
You would need to make sure that Armenia doesn’t ruin your plans because you’re managing the company from there.

Where are you planning to accumulate the profits? In the UK? If the company is tax resident in the UK and there are no profits because everything gets paid to some other country, you need to watch out for transfer pricing restrictions.
You’ll also want to use a holding company to own the company, just in case.
Click to expand...
Armenia has nothing even close to CFC lol.

As I mentioned before, I'm not planning to make any profit on this UK Ltd company. It will only be used for investing in the development and building the software.

The software itself can be used in the future to make sales via my Armenian IT company which has 0% tax license on IT income.

Scheme:
- UK Ltd for research and development (tax free on salaries)
- Armenian IT company for sales of the developed software (tax free on income)

If I use Armenian company to pay for development I'd have to withhold 20% on every payment going to my workers which sucks
 
#9
It is not about CFC. I don’t get this stupid obsession with CFC rules when they are irrelevant for almost everyone. It is about permanent establishment. Learn the difference and maybe talk to a lawyer in Armenia.
But of course they may not enforce their own laws when foreigners are involved.
 
#10
JustAnotherNomad said:
It is not about CFC. I don’t get this stupid obsession with CFC rules when they are irrelevant for almost everyone. It is about permanent establishment. Learn the difference and maybe talk to a lawyer in Armenia.
But of course they may not enforce their own laws when foreigners are involved.
Click to expand...
Lawyer told me that nobody in Armenia ever declares their foreign companies and it works very well.
 
#11
JustAnotherNomad said:
It is not about CFC. I don’t get this stupid obsession with CFC rules when they are irrelevant for almost everyone. It is about permanent establishment. Learn the difference and maybe talk to a lawyer in Armenia.
But of course they may not enforce their own laws when foreigners are involved.
Click to expand...
Also I'm not planning to actually *make* any profit on such company, it will only have expenses
 
#12
JustAnotherNomad said:
It is not about CFC. I don’t get this stupid obsession with CFC rules when they are irrelevant for almost everyone. It is about permanent establishment. Learn the difference and maybe talk to a lawyer in Armenia.
But of course they may not enforce their own laws when foreigners are involved.
Click to expand...
Some local lawyers there even bill on behalf of their US LLC :D
 
#17
What I meant was: Without having looked into this, I can almost guarantee you that the Armenian tax code says any work carried out in Armenia is taxable in Armenia, even if the company is registered elsewhere.
However, obviously this isn’t enforced. They prefer that rich people come and spend their untaxed money in Armenia.
 
#18
JustAnotherNomad said:
What I meant was: Without having looked into this, I can almost guarantee you that the Armenian tax code says any work carried out in Armenia is taxable in Armenia, even if the company is registered elsewhere.
However, obviously this isn’t enforced. They prefer that rich people come and spend their untaxed money in Armenia.
Click to expand...
This. But again, my foreign company is never intended to make any income
 
#19
reesek said:
tw is killing all russia-related accounts
you will need some introducer to get you to open an account as you are a high risk client
uk is okay but you can have a cheaper setup with cyprus as whatever jurisdiction you select, you'd better have a substance there by hiring a local dir

anyhow, if it is not ~100k\year of turnover it is usually does not worth the cost these days
Click to expand...
By the way I just recently asked TW in their support if its okay to send money to Russia. They told me not listen to gossip lol, its totally okay to send money to Russia
 
#20
not to send to russia
but russians-owned accounts
dont go to tw with russian passport
 
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