Best place to set up a company selling digital services?

Question

What’s the best place?
For residency I’m looking at Portugal and they have the NHR (non habitual resident) program which would exempt dividends from foreign income.
So all I’m really looking for is the best place to actually start the company.
Biggest factors are of course low taxes and ease of setting up the company plus a business bank account that enables me to receive payments through Stripe.
What I found so far:
Hong Kong
Corporate tax rate of 16.5% (8.25% for the first HK$2 million)
⊕/⊖ offshore income from outside HK is exempt from taxation but it’s not clear whether this can be done in the first year and prorated or if it’s only through filing the offshore exemption claim. This might take two years and requires not income from HK at all. More info on that would be great
⊖ seems very difficult to get a business bank account
⊖ necessary services and fees are roughly around €2000 / year
⊖ accounting requirements seem to be very strict
⊕ Doesn’t require local partner
⊕ Agencies available that seem to handle most of the work
Singapore
Corporate tax rate of 17% (0% on the first S$100k, 8.5% up to S$300k)
⊖ requires a local director. What are the implications of this?
Malta
Corporate tax rate of 35%
There is the “full imputation system” but I don’t really understand it.
"In most cases, the tax refund to the shareholder is 6/7 of the tax paid by the company on profits distributed as dividends. The tax refund rate may be different in the following cases: " This would result in an effective corporate tax of around 5%.
⊖ European customers would have to pay VAT and I’d have to deal with that
Cyprus
Corporate tax rate of 12.5% and there seem to be ways to lower this
⊖ European customers would have to pay VAT and I’d have to deal with that
⊖ requires staying in Cyprus for 2 months / year
I find it surprising how much research this requires and how much “it depends” information is out there when I’d assume that there are probably thousands of digital nomads who probably have very similar requirements.

alexnapierholland · Accepted Answer

I’m British and - after looking at various options for the business I’ve recently launched - decided to set my business up in Britain.
I decided that convenience and simplicity were probably more useful to me than getting the lowest tax rates possible, starting out.
We have a great range of challenger banks and financial services - owing to a streamlined process for setting up banking startups that was launched in 2014 by our Prudential Regulation Authority.
Another factor for me is that I own property in the UK and getting new mortgages with better rates might be easier if I’ve got a profitable and well-kept UK business.
Another complication is the UK’s ambiguous tax residency laws. We don’t get the standard 180 days that many countries get - depending on the property you own, family here etc. Cheers to the non-resident oligarchs snapping-up London property for that!
Finally, if I get a serious injury, I might want to fly home and use our NHS healthcare system. I haven’t even checked the legality of that, if my business is in Singapore. But ethically, I feel I should pay my dues if I want to rely on that backstop.
In short, I don’t think tax is the be-all. Convenience and services are a major factor.
As my business grows, the real-world benefits of lower tax rates might incentivise me to go elsewhere. But for starting out, having easy access to services and credit are useful!

etc · Answer

levelsio:

Hong Kong is a bad idea due to China’s increasing reach. They might freeze your assets if you say something bad.

There are lots of reasons not to incorporate in Hong Kong, but I don’t agree with this assessment. I understand why one might surmise this from a lay perspective, but there’s no mechanism for this currently in place nor are there empiric grounds to base this claim.
The asset controls are still done by way of Hong Kong courts and, in fact, have been going the opposite direction. Chinese assets are being frozen in HK courts through judicial proceedings.
China does exert extra-judicial control within the HKSAR, but it is through constitutional interpretations rather than direct action. Furthermore, it is unlikely that China would breach the economic frameworks in this way, as it would have a profound impact on the market economy and exponentially increase the political risk of economic engagement in the region, likely beyond risk tolerance thresholds.
I do agree that HK might not be the best place, purely from a maintenance and administration standpoint. Compliance is becoming increasingly costly and it’s hard to justify in light of other options. There are also some political risks for HK residents. However, the risk of China exerting control of assets, for matters outside of criminal consequence, is on par with western markets - negligible.

etc · Answer

manyluv0:

I got a friend with Shanghai residence and a HK Ltd from 10 years and he’s now having problems with chinese checking frantically accounts and stuff. A big NO NO.

I’m assuming you’re referring to some of the compliance actions put in place to facilitate the Common Reporting Standard (CRS) that began being implemented last year. This is not actually specifically a Chinese effort. It’s an OECD initiative where member countries proactively report certain banking information to national sources. It’s undersigned by over 100 members. China started reporting officially last month.
In 2017, the following countries started reporting CRS compliant data:
Anguilla, Argentina, Barbados, Belgium, Bermuda, British Virgin Islands, Bulgaria, Cayman Islands, Colombia, Croatia, Curaçao, Cyprus, Czech Republic, Denmark, Estonia, Faroe Islands, Finland, France, Germany, Gibraltar, Greece, Greenland, Guernsey, Hungary, Iceland, India, Ireland, Isle of Man, Italy, Jersey, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mexico, Montserrat, Netherlands, Niue, Norway, Poland, Portugal, Romania, San Marino, Seychelles, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Trinidad and Tobago, Turks and Caicos Islands, United Kingdom
In 2018:
Albania, Andorra, Antigua and Barbuda, Aruba, Australia, Austria, The Bahamas, Bahrain, Belize, Brazil, Brunei Darussalam, Canada, Chile, China, Cook Islands, Costa Rica, Dominica, Ghana, Grenada, Hong Kong (China), Indonesia, Israel, Japan, Kuwait, Lebanon, Marshall Islands, Macao (China), Malaysia, Mauritius, Monaco, Nauru, New Zealand, Pakistan, Panama, Qatar, Russia, Saint Kitts and Nevis, Samoa, Saint Lucia, Saint Vincent and the Grenadines, Saudi Arabia, Singapore, Sint Maarten, Turkey, Switzerland, United Arab Emirates, Uruguay, Vanuatu
One of the reasons why people are starting to “feel it” in China is because the regulatory apparatus has, up to this point, been very lax. Whereas, countries like the United States and UK already had a heightened compliance and reporting regime in place. China has spent years trying to reel in what was “the wild west” so that it could fully comply with CRS requirements.
In truth, we’re probably <10 years away from most developed countries having a tax on global income. The CRS was one step towards that common initiative.

levelsio · Answer

Hong Kong is a bad idea due to China’s increasing reach. They might freeze your assets if you say something bad.
Cyprus is EU, so nice if you need that but also increases burden of EU legislation and bureaucracy.
Malta is now known as a shady tax haven and with dodgy stuff happening like the journalist killed in a car bomb.
EU is going to punch down the law on both Malta + Cyprus soon to make them in line with EU soon I think.
That leaves us with Singapore! Which is a legit, reputable place to start a business with attractive legislation and a jurisdiction based on UK.

nerdontour · Answer

I strongly recommend the UK. I’ve been running my British LTD since 2014 as a tour manager and web developer. They are one of the most juridical and business wise established countries in the world. All paperwork is done digitally, including setting up, annual reports and changes to the LTD.
For charging, I use Stripe and receive money either to Revolut Business, Tide or Payoneer. There are also a bunch of other compatible financial services, so you can always switch to the most convenient one.
If you have any specific questions about British LTD, I happy to help.

levelsio · Answer

etc:

There are lots of reasons not to incorporate in Hong Kong, but I don’t agree with this assessment. I understand why one might surmise this from a lay perspective, but there’s no mechanism for this currently in place nor are there empiric grounds to base this claim.

Not sure if you’re following the news recently:

U.S. – 9 Nov 18

Hong Kong bars British journalist from entering

Hong Kong has barred a Financial Times journalist from entering the city as a vi...

They’re already dismissing work visas from people who lived and worked in Hong Kong for years who’ve spoken out against the government.
And they have frozen assets and jailed executives of Taiwanese companies that got too succesful in China (not Hong Kong, but HK is now part of China).

China does exert extra-judicial control within the HKSAR, but it is through constitutional interpretations rather than direct action. Furthermore, it is unlikely that China would breach the economic frameworks in this way, as it would have a profound impact on the market economy and exponentially increase the political risk of economic engagement in the region, likely beyond risk tolerance thresholds.

China’s focus is on making Shanghai and Beijing succesful, not Hong Kong. Their long term goals are not in favor of Hong Kong, don’t be delusional.

simonl · Answer

Check out Panama. Its rated as the easiest and cheapest country to become a resident and open a company. Plus your company doesnt need to pay tax on income earned outside of Panama (Online)

etc · Answer

They’re already dismissing work visas from people who lived and worked in Hong Kong for years who’ve spoken out against the government.

As I stated before, I wholly understand why lay individuals would surmise such a conclusion. However, you’re conflating vastly different situations together and drawing unwarranted conclusions from them.
I’m very aware of the British journalist having his visa denied (this time a visitor one). There’s a lot more context to the situation than this article even attempts to cover. Regardless, denying a visa and freezing a foreign company’s assets are two different things.

And they have frozen assets and jailed executives of Taiwanese companies that got too succesful in China (not Hong Kong, but HK is now part of China).

Which assets did they freeze and which executives of Taiwanese companies that “got too successful” did they jail? The Taiwanese political parties have been doing just fine freezing each other’s assets.

China’s focus is on making Shanghai and Beijing succesful, not Hong Kong. Their long term goals are not in favor of Hong Kong, don’t be delusional.

This is, again, simply not true. Hong Kong is still a critical trade and economic gateway in the region. I could also give you a number of examples that indicate there is a good faith effort by China to try to integrate the two systems together (E.g. self-imposed plans for implementing universal suffrage even though there is no constitutionally mandated timeline for such).
I’m under no illusions re: China’s ultimate stance to Hong Kong. I’m from Hong Kong. I’m a Hong Konger. I’ve spent months now doing nothing more than parsing the legal and constitutional structures of Hong Kong and analyzing the relationship, in a conversion effort to join the solicitor’s roll here. Accusing someone of being “delusional” is quite cavalier and requires self-confidence in a subject matter. I wasn’t aware you were so interested and well-versed on the subject. I’d love to explore it with you sometime.

manyluv0 · Answer

I got a friend with Shanghai residence and a HK Ltd from 10 years and he’s now having problems with chinese checking frantically accounts and stuff. A big NO NO.

roadwarrior · Answer

True
But the money is in the ‘Depends’
Laywers are funding there lifestyle because of it.

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