One Man Freelancer - Where to Form a Company

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kt88

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Jul 28, 2020
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Hello,

I am a one man UK based freelancer, selling SEO related services to customers throughout the world. 95% of my business is to non-UK customers, and I have a good amount of business on marketplaces such as Fiverr.
Currently trading as a UK Ltd company, but increasingly, I am seeing a lot of my fellow freelancers being based in other jurisdictions.

I am about to launch my own marketplace, similar to Fiverr, where I can direct my current client base to better manage and process my sales, with the hope of gaining new business from other freelancers using the platform, and this platform is in the final stages of development. Due to the nature of this new venture, if the platform took off and other freelancers started using it on a large scale, I would quickly go over the UK VAT threshold, and this is not something I am not liable for now, since most of my business is outside the EU. So, I would like to avoid this if possible.

Which jurisdiction would you recommend? Obviously, another aim would be to minimize any corporation taxes that are due as part of this.
 
UAE.

I'm sure most of your customers wouldn't mind.

Let's wait other users opinion
 
Let's see if I got this right:

1. You're a freelancer and you've always stayed below the VAT threshold.

2. You're also going to launch a freelance portal where you're going to charge a commission for matching other freelancers with clients.

3. You are worried that if the portal does well, you'll have to pay VAT, which you would like to avoid.

4. If possible, you'd prefer to save on other taxes as well.

Did I understand that correctly?
 
Ok. Are your customers mainly businesses or private customers? I'm a bit surprised because I would have expected that it would mostly be business clients that buy SEO services.
 
To achieve all 4 is either going to cost you a lot of money or you get on a plane somewhere there is no tax.

Your only option to achieve all 4 is the UAE, VAT liability will be on your Comms not the full amount which the clients pay anyway at 5% but it's only for UAE clients.

Your going to surpass the threshold so offshore is the only way.

What you can do is set it up in the UAE run it from the UK but you are liable for personal income tax. So you would mix it up via dividends and a small salary.

Don't forget all your costs and fees paid are deductable from the profits as a loan to the company from yourself.

Reinvest the profits and keep it in the business. When it's is big then you definitely have to move over there run it for a year and then bring back the profits tax free on your return.

Again for this to be totally tax efficient you need to move there.
 
VAT question: i always thought that VAT for international invoices shall not be charged.
So if OP has only foreign customers, technically wherever he incorporates, he will not be charging VAT, or not?
 
kt88 said:
kt88 said:
I would quickly go over the UK VAT threshold, and this is not something I am not liable for now, since most of my business is outside the EU. So, I would like to avoid this if possible.
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What would be the issue with that? That you'd be 20% more expensive for non-vat registered individuals in the UK and EU?
 
kkein said:
kkein said:
VAT question: i always thought that VAT for international invoices shall not be charged.
So if OP has only foreign customers, technically wherever he incorporates, he will not be charging VAT, or not?
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Vat for services in the uk is based on where the supplier is for b2c or where the customer is for b2b, with a few exceptions for some fields.

Anyway, if OP runs a foreign company from the UK it will likely be UK tax resident and also based in the UK and should follow the same vat rules as a local UK company.
 
bibing said:
bibing said:
UAE.

I'm sure most of your customers wouldn't mind.

Let's wait other users opinion
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Depends on the OP's budget, for a one man show it may be very expensive, on the other side if he earn 500K a month he may be fine with the setup costs.

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CaptK said:
CaptK said:
To achieve all 4 is either going to cost you a lot of money or you get on a plane somewhere there is no tax.

Your only option to achieve all 4 is the UAE, VAT liability will be on your Comms not the full amount which the clients pay anyway at 5% but it's only for UAE clients.

Your going to surpass the threshold so offshore is the only way.

What you can do is set it up in the UAE run it from the UK but you are liable for personal income tax. So you would mix it up via dividends and a small salary.

Don't forget all your costs and fees paid are deductable from the profits as a loan to the company from yourself.

Reinvest the profits and keep it in the business. When it's is big then you definitely have to move over there run it for a year and then bring back the profits tax free on your return.

Again for this to be totally tax efficient you need to move there.
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If the UAE company is run from UK, it is considered as an UK company... Isn't it?
 
Jgool said:
Jgool said:
If the UAE company is run from UK, it is considered as an UK company... Isn't it?
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In reality yes it's considered a UK tax entity. But you can argue a portion of it via DTA. If it's a mainland company with enough substance then you can mitigate the tax burden.
 
fshore said:
fshore said:
Vat for services in the uk is based on where the supplier is for b2c or where the customer is for b2b, with a few exceptions for some fields.

Anyway, if OP runs a foreign company from the UK it will likely be UK tax resident and also based in the UK and should follow the same vat rules as a local UK company.
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You are totally correct that supplier's country VAT is charged on B2C services that require human intervention (non digital services). But many people keep posting that VAT is not charged on B2C like they know what they are saying. That is misleading everybody else.
 
avalanche said:
avalanche said:
You are totally correct that supplier's country VAT is charged on B2C services that require human intervention (non digital services). But many people keep posting that VAT is not charged on B2C like they know what they are saying. That is misleading everybody else.
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Question is if this is ever controlled at all.

You can just claim that your customers are from non-EU countries.

I think its rare that a country asks a foreign company for VAT.

So probably many people doesnt pay any VAT at all.
 
Dandyline said:
Dandyline said:
Question is if this is ever controlled at all.

You can just claim that your customers are from non-EU countries.

I think its rare that a country asks a foreign company for VAT.

So probably many people doesnt pay any VAT at all.
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I'm talking about if your services are not fully automated then you must pay VAT in your country of incorporation / tax residence
 
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