Existing E-commerce Going Offshore

[Khun Jean]

Currently i have a few websites that are starting to make some money.

As i am living (registered) in the Netherlands a large lump disappears to paying taxes.

As i have almost nothing to deduct this tax pressure is at the current rate 52%.

I am looking for possibilities to lower this tax rate by going offshore with some websites.

One website is growing from only the Netherlands to supporting Europe. This is a community style website where companies share their workforce and heavy equipment.

Two other websites source products in Thailand and sell worldwide.

Does anyone have experience setting up a company in Singapore or Hongkong? Or any other low tax area?

Are there common pittfals i should watch out for? Any recommendation of companies that offer services.

Or is it better to do things yourself (prefered).

I browsed through many websites of firms that oofer these services, but i am a little sceptical about their rices and quality.

I prefer more direct information from people who actually are doing this.

Thanx?

[typist]

I've done this (websites, offshore).

As long as you are tax resident in the Netherlands an offshore company in a low tax jurisdiction controlled by you will most likely NOT be helpful. As soon as dutch authorities find out, they'll slap you with fines etc. Ask a dutch accountant about this - I am saying this based on taxation principles in other European countries.

my 2 cents: move away from the Netherlands, to a more favorable taxation regime (or none at all), THEN get an offshore structure.

HK and S'pore are heavily regulated, and may require a lot of compliance activities (accounting, auditing, returns, reporting...). Unless the reputation of a heavily regulated jurisdiction is very important for your business, I'd avoid both.

Panama is popular with people form civil law countries; people familiar with common law obviously prefer common law jurisdictions (BVI etc).

Currently i have a few websites that are starting to make some money.

As i am living (registered) in the Netherlands a large lump disappears to paying taxes.

As i have almost nothing to deduct this tax pressure is at the current rate 52%.

I am looking for possibilities to lower this tax rate by going offshore with some websites.

One website is growing from only the Netherlands to supporting Europe. This is a community style website where companies share their workforce and heavy equipment.

Two other websites source products in Thailand and sell worldwide.

Does anyone have experience setting up a company in Singapore or Hongkong? Or any other low tax area?

Are there common pittfals i should watch out for? Any recommendation of companies that offer services.

Or is it better to do things yourself (prefered).

I browsed through many websites of firms that oofer these services, but i am a little sceptical about their rices and quality.

I prefer more direct information from people who actually are doing this.

Edited September 12, 2007 by typist

[Khun Jean]

Thanx for the post, Typist.

In the Netherlands the tax law is that when you earn money in another country but are resident in the Netherlands you will have to pay the difference in tax anyway.

For that reason the money should not be paid as salery but in some other form. Maybe dividend?

It quickly gets tax evasion instead of the tax minimizing which i want. After all doing something illegal is not my wish.

I will research it more.

And please if someone has done this before, can you share your experiences, or have some pointers where to find the information.

Thanx.

[cclub75]

As long as you are tax resident in the Netherlands an offshore company in a low tax jurisdiction controlled by you will most likely NOT be helpful. As soon as dutch authorities find out, they'll slap you with fines etc. Ask a dutch accountant about this - I am saying this based on taxation principles in other European countries.

Why you want them to find out ?

That's the whole point. They can't.

And anyway, 2 websites and a shaddy off shore company are not really a big target...

In HK, list of shareholder are public. Just incorporate your business in the BVI : no list, no books to keep. Nothing. How convenient, right ?

This is not a movie, like many people say too often, or a "scam" : look at the newspaper : BVI are everywhere. Our dear ex prime minister Thaksin use them a lot for his businesses, and even with the most important deal like the Shin Deal (sold to Singapore, january 2006).

Most of big thai and chineses bosses use BVI. The principle is simple as warm water : thoses structures allow them to reduce the profit of their on shore companies, and therefore to reduce taxes.

Some of them can use complex scheme. But at the end, the principle is the same.

-Thai company A sells to B in BVI, but with a postal address and bank account in HK, at low price

-Then company B sells to C, the real customer, at high price

Most of margin stay therefore in company B, with absolutly zero taxe.

However, and especially in Europe, never, never make a direct transaction to a company in BVI, or other off shore paradise. IRS services would be highly suspicious.

But a wire transferts to a bank account in Hong Kong, to a company with an address in Hong Kong... Well it's one of the busiest trading place in the world... who could tell that there is something shaddy ?

Asian people are so much wiser -and smarter- than us : some of them were oppressed by insane regime, and we say that they are "gregarious" societies... But actually, only them are capable to think "Stop, the state will no continue to steal my wealth, I'm a free man".

I say : respect.

Edited September 13, 2007 by cclub75

[Khun Jean]

The website that makes the most money has subscribers that pay every month, most have 3 year rolling contracts.

The customers pay money (automatic) to the company in the Netherlands.

I own 30% of that company.

At the moment i have a salary of which i pay quit a large sum to taxes.

My plan was to change from a salary to a monthly/quarterly or yearly payment for using the website that i build.

I read that for licensing in Hong Kong you don't need to pay tax, when the contract is signed outside of Hong Kong.

This would classify it as income earned from abroad and is exempt from taxes. (At least that is my understanding so far).

First scenario i thought would work is this:

Open a company in Hong Kong using my own name,

Open a business bankaccount in Hong Kong on the company name.

Send bills from this company to the Dutch company.

use your atm card to withdraw money from Hong Kong bank.

This will work but is not really legal because i would have to report this income to the Dutch government.

If i will not do that, they can find out by examining the bills and retrieve my name.

Obviously not the right solution.

Now if i understand ccclub75 right i would have to do this.

1) Get a postal address in Hong Kong

2) Open a company in Anguilla, British Virgin Island or other country with the same rules. with the Hong Kong address.

3) Open a bank account in Hong Kong on the Company name started in BVI but having a postal address in Hong Kong.

4) BVI company with address in Hong Kong send bill to dutch company for say 5000 euro a month.

5) Take out money from ATM and have a party.

Meanwhile still having a lower income in the Netherlands because without it it would attract suspicion.

Now with above steps i still have some questions:

1 How to do that, and this should already be without using my name, right.

2 An agent can do that, is that anonymous? Thaksin did not keep it a secret , how can i?

3 A registration paper for the company and the address got in step 1 is enough to open bank account (again not using my name?)

4 That is the easy part.

5 That is the fun part.

It seems that registering the company, postal address and bank account should be done all without using my name. Any part registered with my name would be an easy way to find out who i am.

Is that possible, it looks like it would be used by criminals too if it was that easy.

I know i know nothing.... just trying to get a grip on these matters.

Thanx for the post.

[cclub75]

2 An agent can do that, is that anonymous? Thaksin did not keep it a secret , how can i?

Because he was stupid enough to make an official deal, and a very big one (Shin) with many BVI companies, and several transactions back to Thailand, to avoid to pay taxes.

He went too far.

However, we need to aknowledge that BVI and off shore are much less demonized in Asia than in socialist Europe for instance...

It seems that registering the company, postal address and bank account should be done all without using my name.

Wrong. Of course your name will appear for the bank account.

Is that possible, it looks like it would be used by criminals too if it was that easy.

But... it is. The principle is easy. Now of course, the schemes used by real "criminals" are more complicated, with cascade of companies and accounts for instance.

But eventually, you're never wondering why such derogatory system still exist in the world ?

First to serve the very "legit" people (politicians and business).

The fact that "criminals" are using the same system is merely a "collateral damage" !

Edited September 13, 2007 by cclub75

[Khun Jean]

It seems that registering the company, postal address and bank account should be done all without using my name.

Wrong. Of course your name will appear for the bank account.

Of course it is the fact that the banks don't disclose the name without your consent.

Sometimes i am a little naive. But then again i have never been in this position before. A steep but interesting learning curve.

I start to get the picture.

The company formation in BVI is crucial because anonymous, no tax, no meetings, no auditing etc..

Then get the virtual office, bank account in Hong Kong to have a respectable address.

Most difficult is then to find a good agent that can take care of this.

Anybody experience with some agents?

[Khun Jean]

Meanwhile i kept on reading and studying about this subject.

At this moment the 'best' solutions is.

1) IBC on Belize (Doesn't need auditing,meetings etc..) and can be domiciled anywhere.

2) Arrange an address in Hong Kong (through an agent) This for letterhead and business cards.

3) Open a Hong Kong business bank account and use my name as an account holder

4) Arrange some virtual office that offers limited postal service.

A few agents offer this as a complete package.

The quest is now to find a reliable agent. For that i feel i need some references. After all sending a few thousand dollars to someone for arranging this package needs some insurance that the agent is legitimate.

I feel only the first step (registering a business on Belize) needs an agent. Would opening a business bankaccount in HOng Kong be that difficult? Anyone experience with that?

A trip to Hong Kong would be nice anyway, so i might use it to setup things.

Does somebody on this forum use such a construction and would you be willing to share your experiences.

I would be most grateful.

Thanx.

Edited October 4, 2007 by Khun Jean

[john_bkk919]

3) Open a Hong Kong business bank account and use my name as an account holder

This seems to be the weak link.

Edited October 4, 2007 by john_bkk919

[Khun Jean]

Banks don't disclose the names of accountholders. Unless your a terrorist or some other criminal. It will not be disclosed because of tax reasons.

Without that i would think Hong Kong banks would not be different than any other bank, and they would lose most of their customers.

My feeling the weakest link is the agent, who's address and services you use.

But that can always be changed.

[john_bkk919]

Banks don't disclose the names of accountholders. Unless your a terrorist or some other criminal. It will not be disclosed

OK, let's just say you get audited in NL. Let's assume it's a comprehensive audit.

A company you control suddenly starts making 'royalty' payments during a revenue spike to an HK account. All other aspects of the business remain the same.

1) The auditor asks you to substantiate this royalty. Contracts, correspondence, a contact number for someone at the 'HK company'. What do you do?

2) The auditor has the HK account number from your records. They couldn't just call the bank and get confirmation that 12345678 belongs to 'Khun Jean' ? I've called a bank to verify a cheque before and received much more information than that. One could also simply give your name and the account number and see how the bank responds.

3) The auditor is suspicious and asks you to explain your relationship with the 'HK company'. How do you answer?

I'm just playing devil's advocate here.

It seems that what you're trying to do (hide income) pretty clearly falls in the illegal, tax evasion category. Personally, I'd rather recharacterize the income as something else (dividends, trust, retirement fund, company car, business trips, etc) than try to hide it. The revenue dept might reject this characterization but it wouldn't be a criminal matter.

The other option, as a previous poster suggested, would be to leave NL and claim payments from the HK account as "foreign income" under an expatriate exemption or make use of a double taxation treaty.

[kudroz]

You need to stop right here and call a tax attorney or a reputable international accounting firm and ask a few questions. What you are suggesting in your post here is tax evasion and that is a criminal offence. I'll give you a rundown of what they'll thell you.

1.) Tax residency in the Netherlands

Tax residency in the Netherlands is deemed acquired if either the company in incorporated in the Netherlands or if the "Mind and Management" of a company, regardless of its place of incorporation, is in the Netherlands. Having a nominee director in an low-tax jusrisdiction is not enough, if the mind and management (spirit) of the company is excerced in the Netherlands, the company is a tax resident of the Netherlands.

2.) Disposition of Assets

Websites, domain names, intellectual property and intangible personal property are assets. If you wish to transfer these assets to another corporation in a low-tax jurisdiction, you may do so but by selling these assets at FMV (fair market value). The transactions needs to predicates that the two parties (seller and buyer) negotiate with opposing economic interests. e.g. If the owner of these assets is a resident of the Netherlands, the owner will be subject to taxation on the disposition of these assets.

[Khun Jean]

It was the advice of a 'Belasting Consulent/Fiscaal jurist'. I think they would not setup illegal things.

I am not really resident in any country. I split my time between Thailans and The Netherlands.

Although i am officialy registered in the Netherlands and as such a tax resident.

The tax attorney calls it 'tax planning' and the international accounting firm is telling me it is the most normal thing to do in the world.

Who am i to argue?

The value at this moment is not that high. At least when you calculate 5x turnover. It is that in the future this will be worth much more.

Indeed the 'intellectual property' is going to be transferred. And i don't mind paying tax on that transaction.

Edited October 5, 2007 by Khun Jean

[kudroz]

It appears as if you're googling some information and trying to find a

jurisdiction based on what you read online and your (un)educated guess.

Tax planning is a great idea and it is, indeed, a very common thing.

There is nothing illegal with incorporating in a low-tax jurisdiction,

but what you suggest doing with it - is.

3.) Source of income

It does nothing good to have a company incorporated in a low-tax

jurisdiction if the activities, for which the payment is made, are

carried in a high-tax jurisdiction.

From what I understand in your post, you wish to have a company

incorporated in Belize with a virtual office in Hong Kong. What then?

a ) Invoice Dutch-Co for services performed by Belize-Co

You've mentioned that you wanted to invoice Dutch-Co because it is

using the website you build.

This would reduce your taxable income in Dutch-Co and Belize-Co is not

subject to taxation on its income. Although, if the activities

for which the payment is made is carried in Thailand - it is deemed

Thai source income. Under Section 41 of the Thai Revenue Code, you are

deemed to carry on business in Thailand and legally obliged to remit

taxes personally on behalf of the company. (same goes for the

Netherlands)

b ) Dutch-Co pays royalty payments for the use of the website to

Belize-Co

There is no tax withholding on royalties payment made by Dutch

companies. Although, in order to qualify for a royalty payment,

Belize-Co needs to posses the assets (website). From what I understand

from your post, the assets are currently owned by Dutch-Co. Therefore,

for this to be possible, Dutch-Co needs to sell the assets to Belize-Co

at fair market value. This will trigger significant taxes.

For doing this, you would need to obtain an advanced tax ruling from

the Dutch Ministry of Finance. They will evaluate if the transaction is

at arm's length and if the price of the sale is at fair market value.

Belize-Co is now the owner of the website and it is a fair assumption

that the it will need ongoing maintenance and development. Belize-Co

will need to contract with you personally and/or other people in the

Netherlands for the maintenance and development of the website.

The source of income of the services you will provide to Belize-Co for

the maintenance and development of the website are likely to be in

Thailand and in the Netherlands, therefore you will be liable to

taxation in Thailand/Netherlands.

That being said, I see a couple of legal scenario where you could

minimize your taxes, but it's late and I'm going to bed. Get some real

advise by professionals.

Bottom line: If you receive money while being a tax resident of

the Netherlands you have to declare it. By not doing so, you are doing

tax evasion and that is a criminal offense.

[Khun Jean]

Kudroz,

Thank you for your remarks. I am investigating this so i am open to any suggestion.

At the moment i get my information through a fiscal jurist in Belgium who is specialized in tax minimisation.

I hope at 130 euro an hour he does advice me correctly! But i am al ears, and will keep studying the subject.

And you are right about being legal, that is my goal. I don't like to have to watch over my shoulder al the time.

Never done it and never will.