With ever-increasing KYC and AML obligations and new VISA and VAT regulations for distance selling, our clients are looking for ways to set up an online business in a jurisdiction that is both a) bank-acceptable and processing compliance requirements, and b ) tax efficient and easy to manage. The wish list could also include confidentiality protection, fast corporate bank account services and many other benefits that are actually quite difficult to combine in a simple structure - but let's try!
KYC/AML transparency for acquirers Ultimately, acquirers must comply with their KYC/AML obligations, which essentially means disclosing their entire corporate structure to their UBOs and individual controlling directors, etc. In today's world, it is difficult to use legal structures to disguise ownership, and even the most opaque corporate structure is just a letter from the regulator away from full transparency.
It's always best to keep things as simple as possible, both to make it easier to set up banking arrangements and to pass the acquirer’s due diligence tests, which is quite a bit tougher.
Something to consider here: there is a new set of Visa rules regarding merchant outlet location that go into effect on 15 October. In a nutshell, Visa is trying to crack down on merchants who are not actually based in Europe accessing its European card acquirer network by setting up a European company. The new rules stipulate that it is not enough for the merchant to have a European company; the 'merchant outlet location' must also be in Europe. What does this mean?
Generally speaking, it’s where the business is operated from: where the offices are located, decisions made, etc. It also refers to where the customers are. If the merchant is not physically located in Europe, then the expectation will be that a fair amount of its processing traffic comes from Europe.
There are a number of other requirements and conditions, but the overall idea is that merchants wanting to use acquiring services in Europe should have a bona fide European operation and/or European customers.
Given that within the European Union there are no withholding taxes on IP royalties between member states, we can suggest a number of countries where royalties are particularly advantageous.
CYPRUS The intellectual property royalties tax regime in Cyprus has changed as a result of the recommendations of the Organization for Economic Co-operation and Development (OECD) Action Report 5 and the Ecofin Council conclusions published on 8 December 2015. Legislation has been changed to limit the companies that can benefit from research and development (R&D) exemptions, but the tax rate in Cyprus is still one of the most favorable in the EU for foreign companies using Cyprus intellectual property want to license -resident companies (intermediaries), where this right is then sub-licensed to the end user. Overall, the effective tax on IP royalty income should be less than 2.5%.
IRELAND In 2015 Ireland introduced an effective corporation tax rate of 6.25% on intellectual property income based on an allowance for research and development costs borne by the company. By linking the two components in this way, Irish law encourages companies to conduct R&D directly within the EU - leading to the creation of intellectual property - while discouraging them from acquiring licenses without directly committing to R&D.
BELGIUM Belgium has introduced a tax system that favors those with income from acquired copyrights. This tax regime can have many different applications and can be used to protect artworks as well as a useful tax break for IT developers. Income from IP rights royalties is taxed at 15%. This income is not taken into account when calculating social security contributions. In addition, these taxes are reduced by 50% for imports due to the application of standard import costs. The first €15,000 that a copyright owner earns in a year is therefore taxed at 7.5%, and the next €15,000 at 11.25%. This tax system applies to people with a total annual income of up to 56,450 euros.
LUXEMBOURG In general, corporate tax in Luxembourg is 29.22%, but for IP licensing income it can be as low as 5.8%. This is due to an 80% corporate income tax exemption. Interestingly, this exemption also applies to companies that have registered a patent for use in connection with their own business, which then calculate a notional net income as if they had received the licensing income.
ITALY Italy is a larger market compared to the other countries discussed and can be a very attractive place for a company to invest in R&D since 2015 companies have been able to deduct intellectual property income from their taxable income base. The tax deduction was set at 30% in 2015, 40% in 2016 and 50% from 2017. Businesses will therefore enjoy a significant tax rebate by reducing their taxable income.
THE NETHERLANDS Since 2010, IP income has been taxed at only 5% in the Netherlands. Except for patents, there is no income limit. Patent holders can actually have access to this tax regime if their share of the expected revenue is between 30% and 70%, taking into account the total combined revenue from patents and other sources. These rates also apply to foreign companies owning intangible assets or companies that have received research and development accreditation from the Dutch Ministry of Economic Affairs if they are owners of software IP or trade secrets. The only other caveat to this favorable tax regime is that it doesn't apply to marketing and branding-related assets.
Confidus expert accountants and lawyers will be happy to offer you the following services:
Preparation and submission of financial accounts and reports; Payroll accounting; Drafting annual reports; Drafting and bookkeeping all internal accounting documents; Communication with local tax offices, if required; Corporate account management; Legal advice and bookkeeping assistance during audit; Revision, improvement and modernization of internal bookkeeping system. Choosing Confidus Solutions as your professional accountant will also provide you with the following benefits:
Cost reductions - We can help you get rid of unnecessary expenses and consolidate transactions and accounts; Efficiency and productivity lift - Our services shall give you broader vista for productivity and time to achieve your essential business goals; Quality accuracy and fast turnaround time - We adhere to high efficiency rate. We ensure that the highest possible quality of work is carried out; Clearness and data security - We draft and submit ongoing reports systematically. Rest assured your data are safe and secure with our professionals.
Fees of accounting services Fees of accounting services are established individually for each client, depending mainly on the amount of accounting documents and number of transactions per month. Other factors that determine fees for our services are: complexity of transactions, industry of the business, number of employees and amount of assets. Invoices for the accounting services are usually billed on a monthly basis. However, we can also agree to quarterly, semi-annual or annual payments for services provided. We fully appreciate and understand that each client must plan his/her financial activity beforehand.
Hourly based fees & fixed-fee arrangements There is always an option to calculate accounting fees on time-spent basis. As practice shows, a lot of foreign clients prefer to cooperate on a fixed-fee arrangement terms, as it provides more certainty and predictability. However, if the amount of work is almost unpredictable or accounting operations are of higher complexity level – we may try to negotiate an hourly based fee.
If you would like to receive a fixed-fee proposal for accounting services in advance, please provide us with the following information:
Description of planned operations, movement of goods and services as well as cash flow; Planned amount of incoming invoices; Planned amount of outgoing invoices; Number of corporate bank accounts and currencies, which will be used for payments.
Reducing the volume of taxes collected and ensuring confidentiality are not the only benefits of incorporating an offshore company in a tax haven. Although tax planning is one of the greatest benefits of offshore corporations, the opportunity to significantly reduce business expenses and maintenance costs is also a very attractive benefit.
Below are the six main benefits of incorporating an offshore company in one of the tax havens listed here:
Tax reduction Incorporating a company in a tax haven provides a legal means of reducing the corporate taxes levied and this is usually one of the main reasons for moving your company offshore. Non-resident companies can enjoy a low tax regime depending on the country of incorporation. Remember that international tax regulations can be extremely complex these days and it is essential to consult an experienced tax specialist. It is crucial to ensure that there are no conflicts with corporate tax obligations in the jurisdiction in which the company actually operates.
Privacy In some tax havens, non-resident corporations are not required to release financial records or private information about directors and shareholders. Most offshore jurisdictions do not disclose this information to any third party, including other countries, unless the individual is suspected of involvement in criminal activity.
Easy maintenance There are usually no strict governance requirements or obligations, allowing the directors and officers to make decisions remotely using power of attorney or nominee services. Staffing and space needs can be met with the elegant and cost-effective solution of virtual office services.
Asset protection Many offshore jurisdictions can be used as valuable corporate assets protection tools. Typically, offshore entities are used to hold intellectual property rights or real estate investments.
Lower expenses Compared to onshore and offshore jurisdictions, offshores typically offer a quicker and less complicated incorporation process for companies. Annual maintenance is usually easier and cheaper, making company registration and maintenance much more affordable.
Lower minimum capital requirements Incorporating an offshore company usually requires a very small amount of share capital and certain tax havens have no capital requirements at all, allowing you to minimize incorporation costs.
Offshore Valuation Advice Confidus Solutions has trusted partnership agreements with long-established and experienced international tax advisors and company registration agents worldwide, giving us the ability to incorporate offshore companies in a number of tax haven jurisdictions. To learn more and get a unique solution, contact our team today.
Prime Jurisdictions There are numerous tax havens around the world. Each offers different tools for tax planning and achieving an optimal corporate structure. Depending on your desired goals, we can recommend the best jurisdiction for your business as each of the tax haven jurisdictions has its own unique advantages. Here are the top five jurisdictions that we generally recommend to our clients, but we can offer other jurisdictions if required. Please contact us for more information.
Luxembourg Luxembourg is a small Central European country bordering Belgium, France and Germany. It is known for its business-friendly environment and corporate tax regulations, which together allow foreign companies to reduce the amount of tax they have to pay by incorporating within its borders. Approximately 33% of the US Fortune Top 500 companies have subsidiaries in Luxembourg, which offers many options for foreign investment. One of the best-known legal forms in Luxembourg is the investment fund. Around 3,500 investment funds have been set up in Luxembourg over the past 50 years.
The Cayman Islands The tax haven of the Cayman Islands currently offers a very attractive tax system. According to Crystal Stranger, president of corporate tax firm 1st Tax, the Cayman Islands now "probably" offer the largest [tax] loophole for individuals as well as multinational corporations." The tax planning advantages offered by the Caymans are obviously worth their price, as many famous businesses from around the world have assets in this tax haven.
The Isle of Man The Isle of Man is a British Crown-dependent, self-governing jurisdiction, lying in the Irish sea between Northern Ireland and England. Certain companies are subject to corporate income tax at the rate of 0%; however, banking businesses and land and property income are subject to a 10% tax rate. The Isle of Man can be the perfect location for establishing a limited liability company within the framework of a larger corporate structure for tax planning purposes. The Isle of Man is not part of the EU, but EU citizens are permitted to travel without a visa and to reside on the island. However, for employment purposes a work permit is required. The Isle of Man’s legislation also provides great benefits for pensions.
Belize Belize is a small country on the eastern coast of Central America, to the south of Mexico, formerly known as British Honduras. This jurisdiction has a lot to offer international investors as well as corporate giants, with its favourable tax regime and banking legislation. Under the provisions of the International Business Company (IBC) Act of 1990, companies registered in Belize are fully exempt from all types of taxes and stamp duties on income from any source. An international business company (IBC) incorporated under the laws of Belize is a perfect solution to secure your confidentiality, as nominee services are allowed, but no information on directors and shareholders is entered into the public register.
Panama Panama is a country in Central America, well known as a tax haven. Panama is a vital transport hub, as it has the Panama Canal, which serves as a connection for numerous trade networks between the Atlantic and Pacific Oceans. This jurisdiction is commonly used as a base for opening and operating personal and corporate bank accounts, as local legislation provides an investor-friendly environment. All information regarding bank account beneficiaries is kept confidential. Companies incorporated within the jurisdiction of Panama may be used as a means to achieve your required corporate structure.
Other jurisdictions Other famous tax havens and offshore jurisdictions include St. Kitts and Nevis, the British Virgin Islands, the Seychelles, Hong Kong, Jersey, Liechtenstein, Cyprus, Panama, the Bahamas and Gibraltar.
The logistics performance index of Estonia is 3.35. It indicates satisfactory performance - in general, traffic is handled well, some shortcomings in certain areas are possible, but overall the logistics system is reliable and ready to handle predictable traffic volumes.
Customs performance is rated at 3.4. This indicates satisfactory performance - the customs clearance procedure is generally effective, although a long time can occasionally be a problem; the customs system certainly does not discourage international business activities; required documents and fees are generally publicly available.
The infrastructure quality in Estonia is rated at 3.34. It indicates satisfactory quality - roads, railways, ports and other facilities are capable of handling significant traffic at all times, and are also suitable for various types of transport vehicles and ships.
International shipping quality is 3.34. It indicates satisfactory performance - the services are reasonable and the prices are not too high and usually correspond exactly to the quality, although there is still room for improvement.
The competence of logistics service providers is rated at 3.27. The providers are competent - they ensure a good quality of their services and almost always maintain this level; Deficiencies, while still possible, are usually minor and do not discourage further use by providers.
Shipment tracking options are rated at 3.2. It indicates satisfactory performance - the tracking systems provide all the basic information, as well as additional data about shipments; Mostly it also has a well-established cooperation with foreign and international tracking systems and usually offers information in several languages.
Tracking options for shipments are rated at 3.55. This indicates satisfactory performance - most shipments arrive on time and within scheduled time frames; late arrivals are still possible, albeit uncommon.
In Estonia, 100% of the population has access to electricity. Estonia has 18 airports nationwide. There are 865,494 internet hosts in Estonia. The number of road motor vehicles per 1000 inhabitants in Estonia is 45.
Road network The total length of roads in Estonia is 58,412 km (36,303 miles). Of these, 115 km (71 miles) of roads are classified as freeways, dual carriageways, or freeways.
Gas price On average, one liter of petrol costs USD 1.46 in Estonia. A liter of diesel would cost $1.1.
The people of Andorra speak the Catalan language. The linguistic diversity of Andorra is quite diverse according to a fractionation scale, which for Andorra is 0.6848. The followers of Christianity make up the religious majority in the country. 87.3% of Andorra's population live in cities. This percentage includes the urban population of Andorra. The urbanization rate in Andorra is assumed to be -0.2. The negative rate of urbanization in Andorra indicates a lack of economic strength and stability in the cities of this country. This could indicate that investing in this nation's industries is a gamble; Decreasing urbanization could result in a shortage of labor for large business projects. According to data on inbound tourists in Andorra, 2,335,000 tourists arrive in the country every year.
National anthem Andorra's national anthem is called "El Gran Carlemany", which means "The Great Charlemagne" in English. It was adopted in 1914. The lyrics were written by Enric Marfany Bons and the music was composed by Juan Benlloch y Vivó.
Fast food The first McDonalds in Andorra opened on June 29, 1984 and was located in Andorra la Vella. At the moment Andorra has 4 McDonalds restaurants in operation. The number of operating McDonalds restaurants in a country is an indication of the influence of western culture and globalization in that country. Operating McDonald's restaurants could also have a direct impact on the health of a country's citizens. Around 25% of Andorra's population is obese.
Alcohol consumption The people of Andorra consume 1.4 liters of alcohol per capita every year and this amount is made up of 34.6% beer, 45.3% wine, 20.1% distilled spirits and 0% other alcohol.
National dish One of the most popular national dishes of Andorra is escudella.