Covid-19 restructure

[ecool]

I run an online business (Software as a Service) via a freezone company in RAK UAE where I have a residence visa and I'm forced to travel to UAE every 6 months to keep the visa active.

Due to Covid-19 I cannot travel there anymore because where I live currently (Malaysia) has travel restrictions. Additionally maintaining bank accounts in UAE without living there is a pain and difficult to deal (for example, they send me letters which I cannot receive, they request me to go to sign documents and I'm away, etc).

So I've been thinking to change my company and banks. As I live in Malaysia, I don't have tax on foreign sourced income, so the location of the business is not a problem for me (for personal income tax). Also, my business is legal and there is no need for privacy or secrecy. And I'm not from the USA.

My requirements are:
- 0% tax
- Easy to operate online
- Possibility to open/deal with bank accounts without having to travel
- I have to be able to charge my clients using some payment processor. Paypal is not an option due to the volatility of their service (they can freeze or close your account at any moment).
- We are two founders, so is required to have 2 shareholders 50% each

Options I've checked:
- Estonia e-residency, the problem is banking, they say Transferwise is possible but is not a real bank and they can close your account instantly and break your operations
- Seychelles, looks like a good option but it's "bad tax heaven" so I'm not sure if I'll have then problems transferring the money to Malaysia. Also, we need a payment processor and I couldn't find any for Seychelles
- RAK offshore, with this I solve the travel for the visa to UAE but I don't solve the bank's situation
- Labuan in Malaysia, but looks like there is a 3% tax (which is bearable) but then I have to employ people there, get an office and spend 10k USD per year there

If you have any other questions please ask or send me a private message.

Any help is greatly appreciated, thank you in advance

Last edited: Oct 8, 2020

 

[CaptK]

UK LLP with both of you as partners would work and they are tax transparent meaning that you pay tax on where you live not the UK. Getting merchant would be easy as well.

 

[Gediminas]

Hey,

One of the options might be a Lithuanian partnership. As a general rule, it is subject to 5 or 15% (depending on the income) corporate income tax rate (CIT). But you can pay yourself a salary/management fee (which is considered as allowable deductions from the Lithuanian perspective). It means that if all profits are paid in this way, you don't need to pay CIT. These payments are also not subject to withholding tax. You can switch your UAE set up to freelancer in order to save license fees and remain UAE tax resident. Income in UAE from such a partnership should not be subject to tax.

The alternative is a Dutch CV. Since you have a partner I think Dutch CV might be an even better option. As long as CV is not engaged in business activities it is not subject to tax in NL. As a standard set up, we establish Stichting as a managing partner, while you and your partner might become limited partners. The managing partner is liable for obligations of the CV so in most cases we appoint a legal entity (limited liability) (such as Stichting) as a managing partner. Moreover, in such a case CV would not need to submit financial accounts.

As for banking, you need to find business friendly EMI which would solve all the banking issues.

Hope this helps. 😉

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[ecool]

CaptK said:
UK LLP with both of you as partners would work and they are tax transparent meaning that you pay tax on where you live not the UK. Getting merchant would be easy as well.
Click to expand...

Thank you for your answer. As I'm living in Malaysia, that would mean paying corporate tax in Malaysia which is quite high, so I don't think this is an option. Additionally opening UK bank accounts most probably requires physical presence.

Gediminas said:
Hey,

One of the options might be a Lithuanian partnership. As a general rule, it is subject to 5 or 15% (depending on the income) corporate income tax rate (CIT). But you can pay yourself a salary/management fee (which is considered as allowable deductions from the Lithuanian perspective). It means that if all profits are paid in this way, you don't need to pay CIT. These payments are also not subject to withholding tax. You can switch your UAE set up to freelancer in order to save license fees and remain UAE tax resident. Income in UAE from such a partnership should not be subject to tax.

The alternative is a Dutch CV. Since you have a partner I think Dutch CV might be an even better option. As long as CV is not engaged in business activities it is not subject to tax in NL. As a standard set up, we establish Stichting as a managing partner, while you and your partner might become limited partners. The managing partner is liable for obligations of the CV so in most cases we appoint a legal entity (limited liability) (such as Stichting) as a managing partner. Moreover, in such a case CV would not need to submit financial accounts.

As for banking, you need to find business friendly EMI which would solve all the banking issues.

Hope this helps. 😉
Click to expand...

Thank you for all the information.
The Lithuanian option sounds interesting, but can it be opened and managed completely online? What about the banks? And as our running expenses are very low, it means that all company income will go to salaries. Isn't that suspicious?

The same questions arise for the Dutch CV. Can it be done all online? And what do you mean by "not engaged in business activities"? Our company is obviously engaged in business activities, unless I don't get what you mean.

 

[Gediminas]

ajimix said:
Thank you for your answer. As I'm living in Malaysia, that would mean paying corporate tax in Malaysia which is quite high, so I don't think this is an option. Additionally opening UK bank accounts most probably requires physical presence.


Thank you for all the information.
The Lithuanian option sounds interesting, but can it be opened and managed completely online? What about the banks? And as our running expenses are very low, it means that all company income will go to salaries. Isn't that suspicious?

The same questions arise for the Dutch CV. Can it be done all online? And what do you mean by "not engaged in business activities"? Our company is obviously engaged in business activities, unless I don't get what you mean.
Click to expand...

In both countries all registrations can be done online, you will need to send certain notarized and apostilled documents by DHL. You can notarize them in the country where are you currently living. If turnover is more significant I would recommend proceeding with Dutch CV, rather than Lithuanian partnership. As regards Dutch CV - it should not have activities with NL.

If you need some help with that, don't be shy to drop me an email. I would be more than happy to help. 😉

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[CaptK]

CaptK said:
UK LLP with both of you as partners would work and they are tax transparent meaning that you pay tax on where you live not the UK. Getting merchant would be easy as well.
Click to expand...

Im sure that foreign sourced income in Malaysia is exempt from Tax or at least heavily discounted.
I will double check.

 

[ecool]

CaptK said:
Im sure that foreign sourced income in Malaysia is exempt from Tax or at least heavily discounted.
I will double check.
Click to expand...

Yes you are right, I just checked, and also for businesses the foreign-sourced income is exempt from taxes.
But how do you tell to the UK that you are managing the company from Malaysia so you don't get taxed in the UK but in Malaysia (0%) instead?

 

[CaptK]

Its an LLP it is set up for exactly that reason.
When you fie accounts the accountant will do that for you.

 

[crsp]

So if the UK LLP is managed from Malaysia but with only foreign source income, no corp tax to pay?

 

[ecool]

yes, that is what I understand. But looks like it's very difficult to open a regular business bank account for an UK LLP

 

[crsp]

ajimix said:
yes, that is what I understand. But looks like it's very difficult to open a regular business bank account for an UK LLP
Click to expand...

Might have to try an EMI, I guess.