Register my company in the UK, or abroad?

[Kiwi1234]

Hi there,

I own a new video editing agency. Currently a sole trader in the UK. All my "employees" are legally defined as freelancers working for me, living abroad in Latvia, Armenia, and other similar countries in the near future.

I doubt I will have employees in the UK, since paying people elsewhere is less expensive, and the money is worth considerably more to them. We do everything virtually anyway. I am wondering whether I should incorporate in Estonia, and get an e-residency as I know some digital nomads and people do. Or register in the UK.

I am offering services to clients primarily in the USA - 80% in the USA, and 20% in the UK.

Just wondering what would be best. if I barely operate in the UK besides living here myself (although I plan to move to Bali in the near future) - then I feel an e-residency might be more appropriate, since there are little benefits to incorporating here?


Best,
Oli

 

[Ian J]

You may have problems opening a bank account with a UK bank if you register the company elsewhere

 

[SteveHa]

Where you register the company is somewhat irrelevant. The only reason that the question tends to be asked is to gain a corporation tax advantage. However, for CT purposes, the company is resident in the country from which it is controlled. In your case, the company would be UK resident for CT purposes regardless, though it would likely become resident in Bali once you move assuming your UK residence ends at that point.

 

[Kiwi1234]

Where you register the company is somewhat irrelevant. The only reason that the question tends to be asked is to gain a corporation tax advantage. However, for CT purposes, the company is resident in the country from which it is controlled. In your case, the company would be UK resident for CT purposes regardless, though it would likely become resident in Bali once you move assuming your UK residence ends at that point.

I thought the country of residence only affects the income tax, not the corporation tax too?

If I incorporate in Estonia, with lower corporation and income tax, then move to bali (using an e-residency) - then the corporation tax for the Estonian company would remain the same, not change depending on my residency? Since that company is its own entity?

I am unsure how this works, but if that is the case I could just incorporate in the UK and live in Monaco and get near enough 0% corporation tax and income tax on my UK company? That doesn't make sense to me?

 

[Ian J]

I am unsure how this works, but if that is the case I could just incorporate in the UK and live in Monaco and get near enough 0% corporation tax and income tax on my UK company? That doesn't make sense to me?

That is effectively what SteLacca has said but if it were simply a matter of paying taxes in the country in which the company was registered we would all be registering our companies in Monaco and paying no tax

 

[SteveHa]

If you are the sole director of a UK registered company, and therefore control the company, the residence of the company for corporation tax will follow you provided that the DTA between the UK and the company where you are resident dictates this. Where the DTA is silent (or does not exist) then the company will be UK resident for CT purposes.

See CTA 2009, Chapter 3. Specifically, S.18.

 

[Kiwi1234]

If you are the sole director of a UK registered company, and therefore control the company, the residence of the company for corporation tax will follow you provided that the DTA between the UK and the company where you are resident dictates this. Where the DTA is silent (or does not exist) then the company will be UK resident for CT purposes.

See CTA 2009, Chapter 3. Specifically, S.18.

That is effectively what SteLacca has said but if it were simply a matter of paying taxes in the country in which the company was registered we would all be registering our companies in Monaco and paying no tax

Great to know guys - thanks. Just to clarify - I don't need to be concerned too much about where I locate the company, since for both corporation and personal tax purposes, it is the residency I need to watch out for.

I guess this means if into the future I do move to Monaco, which I likely plan on doing - then even with a company located in the UK I would be paying next to nothing in tax?

 

[SteveHa]

Assuming that there's a DTA with Monaco (I haven't checked) and subject to what it says about residence for CT, but generally as you've described is what I would expect.

 

[Kiwi1234]

Assuming that there's a DTA with Monaco (I haven't checked) and subject to what it says about residence for CT, but generally as you've described is what I would expect.

so just to conclude, what would you recommend based on your experience?

Some background story is that I'm 18 years old, had a few smaller businesses (selling one soon for $20-30k), but this is a proper business that I see a lot of potential in and could be earning $30k per month at the end of this year if all goes well, as a sole owner.

I am just really unsure where I should incorporate - I see some of Richard Branson's companies moving to Geneva etc. and since I will build an empire also, I feel starting in the right country might be very important.

Alternatively, it might not make much of a difference since for my next venture, once I've got significant capital for international tax advisors I can think about it then.

What do you think?

 

[Corjr]

Your nationality may also be of importance.

.

 

[Kiwi1234]

Your nationality may also be of importance.

.

Could you elaborate? I'm also totally British

 

[The Byre]

OK, it's like this -

I have a UK company, a holding in Luxembourg and two private limited liability partnerships in Germany. Who pays what, where and when (and sometimes how!) is very much open to debate! Tax laws vary wildly even between EU countries (can't wait for Brexit to make the UK taxman even more impotent than he is already!) so Latvia, Armenia, Estonia and Bali - well, knock yourself out!

And it's not just the amounts of tax or what types of tax, but the very premise upon which taxes are raised varies wildly! In the UK, your location is (usually - with exceptions) the deciding factor. In Germany, the legal location of the company decides where you pay taxes.

So where does a Brit, living in Germany, working as a travelling salesman in Poland for a Luxembourg-registered company with its offices in Ireland pay his taxes?

Now lets funk it up a bit - where does a Brit, living in Bali, working as a travelling salesman in the US for a Luxembourg-registered company with its offices in Ireland pay his taxes?

A Scotsman I knew went to the German tax office (Finanzamt) to tell them that he was working for a London company from his home. They told him to go away, with the words "What an Englishman earns in England does not interest us!"

He tried to explain the difference between Scotland and England, but this debate was lost on the good folks at the Finanzamt, so he went away as instructed and spent the next ten or so years not paying a penny in taxes. (I believe the situation has since changed and there is now a basic principle within the EU that you have to pay taxes somewhere! Pity!)

The key is the holding company. But then you may also have a license holding agency in a country other than the location for the holding - and that may be a regional holding for EU stuff only, with somewhere else for North America.

It is answering these crazy conundrums legally that pukka CFOs get paid the big bucks for!

 

[Kiwi1234]

OK, it's like this -

I have a UK company, a holding in Luxembourg and two private limited liability partnerships in Germany. Who pays what, where and when (and sometimes how!) is very much open to debate! Tax laws vary wildly even between EU countries (can't wait for Brexit to make the UK taxman even more impotent than he is already!) so Latvia, Armenia, Estonia and Bali - well, knock yourself out!

And it's not just the amounts of tax or what types of tax, but the very premise upon which taxes are raised varies wildly! In the UK, your location is (usually - with exceptions) the deciding factor. In Germany, the legal location of the company decides where you pay taxes.

So where does a Brit, living in Germany, working as a travelling salesman in Poland for a Luxembourg-registered company with its offices in Ireland pay his taxes?

Now lets funk it up a bit - where does a Brit, living in Bali, working as a travelling salesman in the US for a Luxembourg-registered company with its offices in Ireland pay his taxes?

A Scotsman I knew went to the German tax office (Finanzamt) to tell them that he was working for a London company from his home. They told him to go away, with the words "What an Englishman earns in England does not interest us!"

He tried to explain the difference between Scotland and England, but this debate was lost on the good folks at the Finanzamt, so he went away as instructed and spent the next ten or so years not paying a penny in taxes. (I believe the situation has since changed and there is now a basic principle within the EU that you have to pay taxes somewhere! Pity!)

The key is the holding company. But then you may also have a license holding agency in a country other than the location for the holding - and that may be a regional holding for EU stuff only, with somewhere else for North America.

It is answering these crazy conundrums legally that pukka CFOs get paid the big bucks for!

haha - well yes. That is very confusing.

In my situation, what would you recommend based on your experience?

 

[Lucas Schwartz]

OK, it's like this -

I have a UK company, a holding in Luxembourg and two private limited liability partnerships in Germany. Who pays what, where and when (and sometimes how!) is very much open to debate! Tax laws vary wildly even between EU countries (can't wait for Brexit to make the UK taxman even more impotent than he is already!) so Latvia, Armenia, Estonia and Bali - well, knock yourself out!

And it's not just the amounts of tax or what types of tax, but the very premise upon which taxes are raised varies wildly! In the UK, your location is (usually - with exceptions) the deciding factor. In Germany, the legal location of the company decides where you pay taxes.

So where does a Brit, living in Germany, working as a travelling salesman in Poland for a Luxembourg-registered company with its offices in Ireland pay his taxes?

Now lets funk it up a bit - where does a Brit, living in Bali, working as a travelling salesman in the US for a Luxembourg-registered company with its offices in Ireland pay his taxes?

A Scotsman I knew went to the German tax office (Finanzamt) to tell them that he was working for a London company from his home. They told him to go away, with the words "What an Englishman earns in England does not interest us!"

He tried to explain the difference between Scotland and England, but this debate was lost on the good folks at the Finanzamt, so he went away as instructed and spent the next ten or so years not paying a penny in taxes. (I believe the situation has since changed and there is now a basic principle within the EU that you have to pay taxes somewhere! Pity!)

The key is the holding company. But then you may also have a license holding agency in a country other than the location for the holding - and that may be a regional holding for EU stuff only, with somewhere else for North America.

It is answering these crazy conundrums legally that pukka CFOs get paid the big bucks for!

Wow, what a post. It was so entertaining reading it that if you wrote a book on the subject I would be the first to purchase it!

 

[The Byre]

Wow, what a post. It was so entertaining reading it that if you wrote a book on the subject I would be the first to purchase it!

I like the idea - but sadly I have other things to do! Drinking beer and launching new crazy enterprises (Could there be a link? I wonder!) comes to mind, though today, it has been installing windows, drinking beer and wondering why my windows didn't fit (Could there be a link? I wonder!) and creating the order list for a new building and drinking beer.

All these questions! I'll mull them over, over a few beers.

 

[Kiwi1234]

I like the idea - but sadly I have other things to do! Drinking beer and launching new crazy enterprises (Could there be a link? I wonder!) comes to mind, though today, it has been installing windows, drinking beer and wondering why my windows didn't fit (Could there be a link? I wonder!) and creating the order list for a new building and drinking beer.

All these questions! I'll mull them over, over a few beers.

Are you free to conclude your point with your recommendation?

 

[The Byre]

Recommendations?

1. "Wer zu viele Fragen stellt, bekommt manchmal eine Antwort zu viel!" (He who asks too many questions, may find themselves receiving one answer too many!) That was advice from a friendly German tax official!

2. Specific to your situation - "Der Teufel steckt im Detail!" (The devil is in the detail. Goethe's 'Faust') Or as Smokie The Bear put it "Only you can prevent forest fires!"

3. And whilst we are on the subject of Goethe, if you are caught doing something you shouldn't, it's best not to emulate Götz von Berlichingen, who was caught red-handed robbing passing traders - Sag deinem Hauptmann: Vor Ihre Kaiserliche Majestät hab ich, wie immer, schuldigen Respekt. Er aber, sag's ihm, er kann mich im Arsche lecken!

I leave you to go to Google translate for that one, as it is rather rude and may frighten the horses!

 

[Kiwi1234]

Recommendations?

1. "who to lots ask provides, gets sometimes a answer to a lot of!" (He who asks too many questions, may find themselves receiving one answer too many!) That was advice from a friendly German tax official!

2. Specific to your situation - "Der Teufel plugged im Detail!" (The devil is in the detail. Goethe's 'Faust') Or as Smokie The Bear put it "Only you can prevent forest fires!"

Gotz von Berlichingen, who was caught red-handed robbing passing traders - Tell Your Captain: Before Your Imperial Majesty I have, as always, guilty respect. But he, tell him, he can lick me in the ass!

I leave you to go to Google translate for that one, as it is rather rude and may frighten the horses!

I only ask you because of your experience, I will try to take it from people who actually have multiple companies and experience. If you would be kind enough to answer the question that would be great... otherwise I will probably pay $400/hr to some international tax advisor

 

[The Byre]

As much as I would like to help - what I am trying to say is that it is all about knowing the details of your tax affairs and the details of the laws of places like Bali and wherever else you intend to do business.

 

[Adam93]

If you’re really earning as much as you say you are, it may be worth getting an accountant to advise you.

If you incorporate in the UK that company will always be UK resident for Corporation tax, regardless of where the company is centrally managed and controlled.

If incorporated overseas, the company will only be UK resident for corporation tax if centrally managed and controlled in the UK.

There are so many pitfalls you may find yourself down if you are not careful. Not being aware of the full picture when it comes to tax can lead to large unexpected tax bills in the future.

 

[The Byre]

If he is to be living in Bali, the contractor is in Estonia and the customer is in the US, exactly how is a UK accountant going to help?

 

[Adam93]

If he is to be living in Bali, the contractor is in Estonia and the customer is in the US, exactly how is a UK accountant going to help?

As above, if the company is incorporated in the UK, it will remain UK resident for Corporation Tax purposes even if the director's and shareholders relocated to the Moon.

 

[The Byre]

This is true - but the underlying message is that the OP would rather not pay taxes (just a feeling I get!) and to achieve that, a detailed knowledge of his affairs and the tax laws of the various countries is required. That is not the sort of skill a High Street accountant brings to the table.

(Are there any accountants on The High Street? I've never seen one. Lawyers, yes, but accountants seem to lurk in suburbia or in office blocks.)

Tip for the OP - on-line banks in Luxembourg will run accounts in any currency.

 

[Adam93]

If you want to go down the offshore route, engage a large accountancy practice as there are so many anti-avoidance rules and tax traps you may find yourself being caught by.

All I would say is don't try and run before you can walk.