You should probably be filing 5472 and with it an 1120 (would be rare situations where this wasn't required). Explanation is simple, no trade or business in the and no US source income.
Cyprus VS Bulgaria VS other - where to incorporate in 2019?
- Thread starter kevino
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You should probably be filing 5472 and with it an 1120 (would be rare situations where this wasn't required). Explanation is simple, no trade or business in the and no US source income.
Please see my analysis to Admin listed above. There's nothing intrinsically wrong with Cyprus (except their banks are super shaky so I'd never advise anyone keep more money there than the deposit insurance threshold, which is pretty low, which as mentioned means anyone with a business of substance, which you should probably have if you're looking at offshore structures (the idea of a freelancer earning 5 figures a year trying to do offshore planning almost never makes economic sense) is going to want to bank elsewhere at least on top of Cyprus and then you're in the same situation as Gibraltar so...). I use Cyprus every now and then but it's by far the minority of cases not because it's bad but because it's rarely the best and with banking getting much tougher one of the advantages it had (being able to fairly easily open up an account locally at banks that had pretty decent online banking, etc.) is becoming less attractive.
But it's really case by case.
Probably the most common question I get is "what jurisdictions do you use?" or "what's the best place for an Offshore set up?"
The answer is "there is none, it all depends on your unique circumstances. It's different if you're a resident of Portugal vs NHR in Portugal vs Brazil vs Germany vs Australia and so on. It's different if you're accepting payment by credit card vs wire. It's different if you're selling something in the adult industry vs plain Jane info products. It's different if you've got a team what they are doing and where they are based. It's different if your suppliers and/or customers are in EU or US or elsewhere. It's different depending on the currencies you need to accept and pay in. And so on and so forth so there is no right or best jurisdiction, there are just a bunch that are pretty good that you can look to".
There are plenty of people for whom Cyprus works and has worked and probably will continue to work. Some of them might have been able to choose a better option and didn't know about it and for some of them even knowing all the facts it would still be the best option. But that should be a facts based analysis done case by case based on the specifics of the business involved rather than a generalization.
That's my view anyway based on my experience, I'm open to alternatives if the logic makes sense.
I think irs definition of us source income is that it comes from/paid from the US? So if you have US customers you have us source income. That doesn't make it taxable unless you have eci, but as irs gets the report they might dig further into your situation to check if you might have eci. I'm asking if anyone has experience with this. US tax laws are not clear so (often) it's no possible to say 100% sure that you are not taxable in the US. Using a US llc doesn't change the fact, but if you sell from HK or Europe then at least IRS doesn't get this report of all your income. Also if they decide you have eci you will not be allowed to deduct any expenses if you have not filed a tax return. For ecommerce that would be disastrous not be be able to deduct cost of goods sold.
PayPal is availble for Gibraltar companies, isn't it? They support withdrawal to US accounts (so no currency fees if you mainly sell in usd).
Look, let this not turn into a dick measuring contest about jurisdictions.
As mentioned above there's nothing intrinsically terrible about Cyprus. Probably a lot of people used it in the past because it was easy to get bank accounts. For a long time it was one of the few places you could open remotely, which for many people was a big advantage.
It's not like Cyprus is unworkable long term even without local presence it's just likely you won't be able to bank there and will have to look elsewhere at which point the advantages of banking go away and then the question becomes "why there vs somewhere else?" Or you've got to set up locally, at which point the question again becomes "why there vs somewhere else?"
If the only reason you were choosing Cyprus was because of the ease of opening a local bank account then yes Cyprus isn't a great long term choice and historically it was the easiest zero tax option in the EEA. Easy tends to sell among a certain group of people (probably many of whom are the type who visit these forums), which is why people used Belize banks (please don't do that, very dumb idea) and comparable. It's why banks like EuroPacific in spite of being very expensive and difficult to work with operationally have managed to have a business at all. If you compare Cyprus to Belize as a simple example for many businesses especially over the last few years there's a very strong argument for why Cyprus might have been a better option. Probably over time Georgia will go through a similar evolution unless they are smart enough to make themselves competitive when other disadvantages start to show up but time will tell.
If you had other reasons for using Cyprus aside from the accounts (we recently had a situation where Barclays Isle of Man was the banking options for a Cyprus company so this is a situation where clearly an example) then it might remain a solid choice long term. Like I said, it's all about the facts behind the situation you're in and what's the best choice based on those available facts and those will vary person to person, business to business so do the analysis or get professional advice from someone who knows how to evaluate all the variables or realize you might end up with something that's less than optimal, which might still work for you.
No, that's inaccurate. Selling to or from US customers does not determine US source income. If that were the case every business around the world selling to the US would be subject to US tax, which is obviously not true.
US source income definition varies based on the type of income but loosely speaking you could break it into two categories:
1. Active income - this is essentially defined as "where is the work being done?" If the work is being done by someone on US soil (for example selling via a US physical store, going door to door making sales, sitting in a call center in the US making calls, etc. or going to physically do service work in the US whether from on your phone/computer or in person) then it's US source income. (This is a slight oversimplification but it conveys the basic point)
2. Passive income - this is essentially defined as "where is the payer located?" If they are located in the US (distributing dividends, rents, royalties, interest) then it's US source income. If not, then it's not US source income.
I sort of mashed the idea of US trade or business with US source income in there but the point remains those are the factors to look at. If you don't have passive income and you don't have anyone a "dependent agent" or "permanent establishment" in the US then you're not subject to US tax as a foreigner.
There's some hacks you can use yes but it's a hassle especially for most people because they won't settle to a non-Gibraltar company and how do they get a US account?
Thanks for your feedback. I still think this is not clear, and I have spent a couple of thousand dollars on a US CPA that concluded that even foreign companies can be taxable in the US if the sales to us customers are "regular, substantial and continuous."
Seems it already began! I'm waiting curious what comes next 😎
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I open this thread myself for ask questions, so it's not me who have the power to tell if X jurisdiction is better than Y.
I just give my opinion as someone neutral who dig during few months on this topic, to help other people in my case (the point of this forum btw). When we mentioned about Cyprus banking, we have 2 kind of answer :
And :
When we ask more information and reliable supplier to people who tell it's still possible to banking in Cyprus even the business has no substance, no answer, despite many people advertise it's possible.
At opposite, lot of evidences show it's really not possible now to banking with a business without substance.
So I just wonder, why people pretend it's "bulls**t" and deeply advertise Cyprus but keep mute when we ask more info? 🙂
I'm open minded and
I agree very much with you, but where is the evidence if I may ask?
Personally I know ( I have seen it posted here on the forum many times) that some people are unable to shudder between truth and lies.
So what may look like evidence may in reality be a lie.
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#1 evidence : I myself made many contacts with suppliers in Cyprus or contact in Cyprus who were not in incorporation business, all told me same thing : cannot bank anymore in Cyprus if your business has no substance there
#2 evidence : other people in this forum told same thing, for example among other :
#3 evidence : I asked many time in this forum in pubic and private a simple question YES / NO : "can we get a CLEAN company with a CLEAN bank account without TRICKS in Cyprus if the company have no substance nor business coming from Cyprus? By trick I mean provide fake document or do something which is potentially harmful for the company in long term. In other words can we do things in clean way (legal) to get a company and bank account in Cyprus if we don't run business there physically (no shareholder there, no customer there, no employee there)? "
As many advertise Cyprus here, I was expecting at least one people could tell me "of course it's possible, please contact XXX for the setup". But nobody was able to answer this simple question by YES, so it's an evidence the answer is NO.
#4 evidence : Only one people here finally answer my question, and this answer seems to be a NO
Besides all the answers from <<snippet>> are highly professional. I don't know for you, but when someone like <<snippet>> give his opinion, I consider it sounds a little more reliable than a :
#5 evidence : I'm ready to get another sound of thruth from people who claim no banking possible in Cyprus is bulls**t, but they keep mute. It's more than 10 years I'm entrepreneur in Asia (yes I'm not a newbie in offshore stuff!) and my logic always told me to don't trust too much the opinion of people who cannot support their opinion with concrete facts. Darkster is not the only one, many people in this forum suggest Cyprus but when we ask them "OK, any supplier to recommend?" then they keep mute...
Those evidences support my conclusion about the fact banking in Cyprus is not possible anymore if you have a business without substance there. Or maybe with some tricks you still can but it's not at all a secure solution in long term. But again I'm open minded and I can be wrong. If some members proove me with some evidences Cyprus is a wonderful place to incorporate with banking even for business without substance, then go ahead to share information....which is btw the point in this forum 🙂
this is strange, where did you setup the company, which agent and have they helped you with the account opening?
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I don't get your question. I didn't open company because when I contacted some agents, they all told me it's not possible if my company don't have substance in Cyprus.
I would recommend to look at another option which is Romanian limited company . The thing is you will need to travel there for 1 day, in order to set it up with the local lawyer, notary and then go personally to the bank to open a business account in some well known western bank branch office. Many people on this forum want to open company online incl. bank account, but I think unless you live in far east or US, or Australia, you definitely need to travel to EU to sort things out face to face with lawyers and bankers like in the old days.
Just my 2 cents....
Just my 2 cents....
Romania has open company register with financial info viewable by anyone which is not good for privacy.
I can recommend you a provider for Bulgaria. Set up for 400EUR no probs. As stated, regarding Romania, it's the same - a trip is needed. So if you are interested let me know.
So you may post it here otherwise I will delete your post!
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If they told you that they made a common mistake and that was neglecting a word in the interpretation, which is "in". If you're doing selling IN the US (not to people in the US but rather than sales process is taking place in the US) then yes that would be accurate.
You can apply pretty simple logic here. How many HK companies sell to the US everyday shipping to customers there? By this logic they would all be taxable in the US but very obviously they are not.
Which kind of setup for 400 EUR? Actually the point is to know all the cost for one year including all what the agent will ask. Unfortunately it's not a one time payment few hundreds euros. Example of quote I get :
Incorporation of a Single Merchant Entity or a Limited Liability Company-279 €
VAT ”“ Registration-400 €
Registration for EORI number-240 €
Provision of company address-60 € / month
Consultation in the office-120 € / hour
Verbal foreign language interpretation-120 € / hour
Preparation of documents for A1-certification-480 €
Annual accounting servicing-from 1800 €/ year
Publication of Annual Tax Return and Annual Financial Statements-480 €
Changes, related to an incorporated entity-400 €
Sale of a registered company- 1500 €
Liquidation of an entity-1200 €
Off-the-shelf company-2000 €
Nominee Director-750 €/ 1000 year
Nominee owner-750 €/ 1000 year
Incorporation of an offshore company-2800 + €
Opening a bank account- from 1500 €
Foreign entity bank account-from 5000 €
Company registration of foreign legal entity-1200 €
Ready-made package-6000 €
Banking Declaration Services-from 200 €
At end to have a company we can really use it's not just the first item at 279€ but we need to select many items for incorporate + banking + accounting for one year + virtual office + etc. At end how much for incorporation + cost for one year for a company with no substance in Bulgaria?
Any reliable supplier? Romania is another story for my quest of reliable suppliers in Europe...
When I looked for suppliers in Cyprus, they looked reliable but they told me it's not possible to incorporate if my company has no substance. Btw when an agent tell you that, it's mean basically he cannot take your money and loose you as potential customer, so he must have a strong reason for that!
When I looked for suppliers in Bulgaria, they looked reliable but at cost of 5000€! I'm still waiting contact from <<snippet>> at 2K.
For Romania...well...it looks like when you google for agents, it's same company but with different names. After contacting many it looks like they just help you to open company but after there is no support anymore. An issue with government? Manage yourself. An issue with tax? Manage yourself. Even for receive mails from taxman or government the company don't provide. At end I didn't really find an agent in Romania which I consider RELIABLE. And I'm not comfortable with the idea to take a random one, open a company...and we will see what's happen. Feel free to provide contact in Romania if someone has.
Travel there for open bank account? No problem for me.