Singapore Resident forming company for $30K/m profits

[CryptoIsFreedom]

Hello guys, I've talked to many advisors in the field and I've lowered my options to 4 separate structures. (US LLC, Hong Kong, Singapore)

Can you guys take a look and let me know what you think about these structures? Are they legit? Are there risks? Is one recommended over another?

Status:

• Business making $30K/m profits
• Business will make $0.5M-$3M/m profits in a few years
• We are producing a video game
• We sell subscription, content and cosmetics
• Customers are from USA and EU
• Employees are from all around the world, including USA & EU as independant contractors
• Need payment processor, Stripe, Paypal
• Need 0% tax on corporate side
• Looking for a long term scalable solution, business will run 10+ years
• Business will reinvest profits into new products in later years
• Will need to transfer company shares to new partners in the future
• Could possibly get acquired
• Would rather not randomly getting sued
• Do not want to deal with sales tax, VAT, etc..
• Not related to crypto

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1. Only US LLC:

• US LLC payments and operations company
• Digital products do not need to collect sales tax or VAT
• Not subject to federal income and state tax
• Hiring US citizens: Would hire them as independent contractors
• Risks: Can get sued. Tax, laws, future unclear

2. US LLC owned by SG:

• US LLC payments and operations company. SG holding company
• Digital products do not need to collect sales tax or VAT
• Not subject to federal income and state tax
• Hiring US citizens: Would hire them with SG company and not directly through US LLC
• Risks: Can get sued. Tax, laws, future unclear

3. SG with HK consultant:

• SG payments and operations company with SG bank account
• HK company with HK or international bank account
• SG pays HK as consulting and supplier cost
• Director and shareholders of both companies need to be different
• Risk: SG may ask to legitimize consultant HK company

4. HK owned by SG:

• HK payments and operations company with SG holding company
• Each company has their own local bank accounts
• To make this not be a SG resident company HK company management needs another director in addition to the SG resident
• We apply for offshore exemption which could take 4 to 18 months. All HK income would be foreign
• Cannot have HK employees or customers
• SG should receive portion of the profits and pay out to SG resident tax free. HK has more than 15% tax, so it is technically not doubled taxed. Worst case, resident pays 17% corporate tax but no personal tax
• Risk: There a possibility if we are charged for royalties? We can maybe work around that by having HK company owning US LLC. Usually HK is not a problem but there is always risk, about 3%-10%.

 

[CryptoIsFreedom]

https://www.offshorecorptalk.com/threads/singapore-overseas-income-tax-paypal-emi.33998https://www.offshorecorptalk.com/th...ants-are-giving-conflicting-information.34036
Here are some other threads I posted related to this.

 

[Sols]

Where are you or the majority of the decision-makers (not nominee directors) based? Whatever structure you go with, it has to be compliant with the laws of where you live.

You can be sued in Singapore and Hong Kong as well. That risks exists practically everywhere. You'd be looking at a jurisdiction like Nevis if you really want to avoid lawsuits, but then payment processing becomes a big pain. Lawsuits are best avoided by not creating a situation in which someone wants to sue you.

I'm not sure who told you that digital services don't need to collect VAT, because that's not the full story. It's easy to avoid, especially for a small business. But if you get into millions of EUR per month, the EU might wake up and use its legal powers to compel you to pay VAT. Enforcement is rather lax for now but if you look around, you might notice several online SaaS/software vendors outside EU charge VAT to EU customers.

Hong Kong is a tainted jurisdiction now due to the Chinese influence.

From the options listed, I'd say Singapore but be very careful of BEPS regulations before you start creatively invoicing money out of the company. No one will care while you're small but it's once you get into the millions per month that tax authorities start taking a look at you. Singapore doesn't want to be an old-fashioned tax haven. It wants to be a competitive financial services and business hub.

Your chances of getting a bank account in Singapore (and Hong Kong) need to be measured within the onboarding principles of these banks there, which typically includes a high deposit or close connection business partners (customers, suppliers, investors) in the region.

Toggle signature
This is the probably the answer to your question.

 

[CryptoIsFreedom]

Thank you for the great response @Sols !

Sols said:
Where are you or the majority of the decision-makers (not nominee directors) based? Whatever structure you go with, it has to be compliant with the laws of where you live.
Click to expand...

Hmm that is complicated. For simplicity on paper we'll just say Singapore and leave it at that. The rest of the crew will labeled as be contractors.

Sols said:
You can be sued in Singapore and Hong Kong as well. That risks exists practically everywhere. You'd be looking at a jurisdiction like Nevis if you really want to avoid lawsuits, but then payment processing becomes a big pain. Lawsuits are best avoided by not creating a situation in which someone wants to sue you.
Click to expand...

Yeah, its just that US has a culture to be lawsuit happy compared to other parts of the world. We're at the whiter side of gray, but still at gray. And I don't expect any one in any other country other than US would even consider sueing us.

Sols said:
I'm not sure who told you that digital services don't need to collect VAT, because that's not the full story. It's easy to avoid, especially for a small business. But if you get into millions of EUR per month, the EU might wake up and use its legal powers to compel you to pay VAT. Enforcement is rather lax for now but if you look around, you might notice several online SaaS/software vendors outside EU charge VAT to EU customers.
Click to expand...

Actually, many lawyers and accountants did say that we have to collect VAT for every single country who requires it. However we have customers from over 100 countries in the world, it's just not feasible to do that.

More woke tax people say that as a non-resident business, countries and states usually have a threshold before requiring to register. I believe it is about $50K-$100K/year in majority of countries/states.

So as long as I'm not making that much from a single place, I have no problem. Currently I am very far away from those thresholds.

Also apparently, there are many many legit businesses who make 10x more than the threshold in certain locations and have still not registered for VAT and haven't been enforced to do anything. I'm going to use the same strategy: "Not worry about it until a country comes up and requests their taxes, then pay up".

Is my knowledge correct? Does this sound like a good idea?

Sols said:
Hong Kong is a tainted jurisdiction now due to the Chinese influence.
Click to expand...

Yeah I agree. I wish it wasn't the only legit jurisdiction where we can both get payments processors and 0% offshore tax.

Sols said:
From the options listed, I'd say Singapore but be very careful of BEPS regulations before you start creatively invoicing money out of the company.
Click to expand...

First time of me hearing BEPS. Will research it!

Sols said:
No one will care while you're small but it's once you get into the millions per month that tax authorities start taking a look at you. Singapore doesn't want to be an old-fashioned tax haven. It wants to be a competitive financial services and business hub.
Click to expand...

From these options I believe you're for "3. SG with HK consultant"?

If we have different payment providers, such as, 1. Stripe, 2. Paypal, 3. Bank ETF, 4. Appstore.
Would it make sense to break these into different companies, to stay under the millions per month limits? (SG audits after $10M SGD yearly)

Sols said:
Your chances of getting a bank account in Singapore (and Hong Kong) need to be measured within the onboarding principles of these banks there, which typically includes a high deposit or close connection business partners (customers, suppliers, investors) in the region.
Click to expand...

Can easily deposit upto $100Ks to a good bank. And owner is SG resident, with personal bank account. Will be able to visit banks physically.

 

[Sols]

CryptoIsFreedom said:
Hmm that is complicated. For simplicity on paper we'll just say Singapore and leave it at that. The rest of the crew will labeled as be contractors.
Click to expand...

When you discuss this with tax advisers, you will need to prepare for being more detailed than "it's complicated, let's just say Singapore" because if you end up having a couple of directors living in a tax aggressive jurisdiction, it's a very different story than if everyone is in Singapore or in tax havens.

CryptoIsFreedom said:
Actually, many lawyers and accountants did say that we have to collect VAT for every single country who requires it. However we have customers from over 100 countries in the world, it's just not feasible to do that.
Click to expand...

Whether something is feasible is unfortunately not something legislators, especially in the EU, care much about. There are software vendors and for example EU VAT MOSS to make the complicated process easy, though.

CryptoIsFreedom said:
So as long as I'm not making that much from a single place, I have no problem. Currently I am very far away from those thresholds.
Click to expand...

But your growth plans place you firmly above such thresholds. If you become an overnight success in for example Germany, you have poked a very aggressive and competent bear.

CryptoIsFreedom said:
Also apparently, there are many many legit businesses who make 10x more than the threshold in certain locations and have still not registered for VAT and haven't been enforced to do anything. I'm going to use the same strategy: "Not worry about it until a country comes up and requests their taxes, then pay up".

Is my knowledge correct? Does this sound like a good idea?
Click to expand...

And there are many businesses that are, so it goes both ways.

CryptoIsFreedom said:
First time of me hearing BEPS. Will research it!
Click to expand...

The gist of it is you can't artificially lower your profits by moving your profits to another company, which your plan 3 does.

CryptoIsFreedom said:
From these options I believe you're for "3. SG with HK consultant"?
Click to expand...

The HK consultancy company sounds like a sure fire way to get the BEPS treatment.

CryptoIsFreedom said:
If we have different payment providers, such as, 1. Stripe, 2. Paypal, 3. Bank ETF, 4. Appstore.
Would it make sense to break these into different companies, to stay under the millions per month limits? (SG audits after $10M SGD yearly)
Click to expand...

Are you worried about being audited?

Toggle signature
This is the probably the answer to your question.

 

[CryptoIsFreedom]

Sols said:
But your growth plans place you firmly above such thresholds. If you become an overnight success in for example Germany, you have poked a very aggressive and competent bear.
Click to expand...

What would I be looking at, if I had no VAT and became an overnight success in Germany?

Sols said:
Are you worried about being audited?
Click to expand...

There isn't anything illegal. I just would not like to deal with that extra hassle and stress, if there are ways to not have it.



Then I think you're leaning towards 1. Only US LLC.

 

[sonato]

CryptoIsFreedom said:
What would I be looking at, if I had no VAT and became an overnight success in Germany?
Click to expand...

you will be looking for a lot of trouble with the German authorities. Next after the USA and Russia you don't want to mess around with the Germans.