In terms of taxes, what's the best jurisdiction to open an Offshore Company for launching a Mobile App on the Apple & Google Play Stores?

Status
Not open for further replies.
So you deliberately disclosed in your profile what is your tax residency so nobody will have‌ to ask violating your privacy, ok now i understand.

But let's stick to the topic,‍ since US tax law may impose a 30% withholding tax on payments that are considered⁠ “US source” income it would be better to form a company in a country with⁤ a double tax treaty with US.

Guess what, neither HK or SG have a double⁣ tax treaty with US.
 
Any advice without knowing the information that would make the advice valuable is just bla‌ bla bla.. then pay a local lawyer and sign a contract to protect your so‍ valuable “privacy”.
Take a tour within the forum and you’ll see that citizenship and residency⁠ is always asked so anyone in the forum with enough knowledge can give a valuable⁤ answer and benefit others, with the answer or with the discussion that could be started.⁣
Good luck
 
Exactly. In most similar cases, there are no⁢ definite answers to such questions as in the OP. The answers would be different based︀ on various factors. Based on the limited information available I would not expect an articulate︁ answer backed up with solid arguments. At best, you'll get a service provider recommending setting︂ up a structure (in say SG) and inviting you to use its services. I'm assuming︃ the OP-s intention was also to challenge his confirmation bias and shake up the echo︄ chamber. To make this discussion more of substance, please at least provide hypothetical inputs, so︅ gentlemen here can exchange ideas on what would be the best take.
 
You missed this:

Not only is my location in my profile, it's also in my post history, all of⁠ which you were too lazy to look up when you derailed this thread with your⁤ off-topic post.

Thank you.⁣

What is your source that the︂ US, Google, or Apple withhold 30% of income from international App companies and that App︃ income is considered "US source" income?

https://support.google.com/googleplay/android-developer/answer/9384608?hl=en
Again, not about privacy as my location is in my profile and post history.

My question was of a generic nature and one of the reasons it was︊ generic is because I don't plan to live here forever, so I'm less concerned about︋ where I live today.

Thank you.

See above on the generic nature of⁣ my question and the reason why it's generic.

So assuming one does not need to⁢ pay taxes in the country where they live when setting up an Offshore Company, what's the best jurisdiction to open an Offshore Company for launching a Mobile App on︀ the Apple & Google Play Stores?

UPDATE:


You seem to be completely wrong about this:︅
 
My statement‌ is 100% correct.

US tax law may impose a 30% withholding tax on payments‍ that are considered “US source” income”

You said that you wanted to launch an app⁠ without any specification about the kind of income the app would generate.

In app purchases⁤ for example are royalties income hence subject to 30% withholding taxes.

If based on the⁣ kind of income that the app would generate you don’t need to rely on double⁢ tax treaties you could even use a US LLC and not pay any taxes.
 
They are some of the worst countries you want to setup‍ a company right now! You don't know how the world looks like tomorrow. If you⁠ didn't slept under a rock you know the world situation right now, it's not pointing⁤ in the direction of the Asian countries.

You want to setup something in Cyprus, Belize,⁣ Seychelles or even Romania (micro company) Bulgaria - that would work well for you. In⁢ addition, you could simply leave the company if the temperature is going to be to︀ high in the company!
 
Please clarify in what specific circumstances an App in the Apple⁤ iOS and Google Play stores has to pay 30% US withholding tax and please provide⁣ a source.

Please provide a source for this claim as I︀ cannot corroborate it online.

I am aware︃ of this option, but I am not keen to have any relationship with the United︄ States given how notorious the IRS is and the additional paperwork involved. That's my personal︅ preference and others may feel differently.

I understand the apprehension regarding Hong Kong and its relationship with China, but Singapore is one︉ of the most stable jurisdictions in the world.

https://en.wikipedia.org/wiki/List_of_countries_by_Fragile_States_Indexhttps://www.theglobaleconomy.com/rankings/wb_political_stability/

Furthermore, both countries rank in︊ the Top 3 in the world for ease of doing business:

https://en.wikipedia.org/wiki/Ease_of_doing_business_index#Ranking

Both

Would setting up in Cyprus, Romania, and Bulgaria be tax-free?

I know Belize and Seychelles️ would be 100% tax-free, but can companies from these 2 jurisdictions launch Apps in the‌ 2 main App Stores and can banks be easily opened with such companies in order‍ to receive the Ads and App Sales and in-App Purchases revenue ?
 
That image doesn't corroborate what I asked about Apps.

First, it seems to be‌ about Youtube.

Second, when searching for royalties related to Google Play, only Books and Music‍ come up, not Apps.

Third, see this: Can one claim App Store sales as royalties⁠ on a U.S. tax return?

In relation to Apps, you specifically mentioned:

“US tax⁤ law may impose a 30% withholding tax on payments that are considered “US source” income”⁣

"In app purchases for example are royalties income hence subject to 30% withholding taxes."

So please clarify what is your source that in specific circumstances an App in the Apple⁢ iOS and Google Play stores has to pay 30% US withholding tax (and please provide︀ the source)?
 
Romania Micro company could be one of the possible setups you are looking into for‌ your business.
 
Because the image is income type specific.

The first element in the image is Adsense.‍

Adsense income is adsense income regardless of where it is generated (app, webiste, TV)

What is said about Apple Store is correct because it's not royalties income.

If you sell⁠ in-app purchases those will fall in the third category "copyright royalties" because you are a⁤ Google Play developer.

This guy from Australia posting in the Australian Tax Office community board⁣ (WHAT? Astralian tax office has a community board?) was in the same situation.

Well, not⁢ exactly the same situation because Australia has a double tax treaty with US unlike Malaysia︀ and Singapore and Hong Kong.

So are you corroborated now by my corroborating words?
 
It’s funny that OP almost feels entitled to have all of is questions answered.. People‌ here are trying to help you… FOR FREE…

But yes all US app sales from‍ the playstore will be withholding 30% (Only US Sales)! So if you only sell in⁠ let’s say France this doesn’t apply.. And if only 10% of your sales are comming⁤ from the US I would not worry about it to much as well..

But if⁣ a really high % are US sales I would setup in a low tax country⁢ with a US tax treaty (Cyprus or maybe Georgia) however you will run into LOB︀ clauses most of the time which requires a lot of additional taxplanning.. I believe Hungary︁ used to have a treaty with no LOB but I believe the US terminated that︂ one…
 
Thank you, although that option does not seem‍ to be tax-free from what I've just read.

No, because this︄ is your interpretation of that screenshot and you have not corroborated with any other evidence︅ so far and I cannot corroborate it either and I'm doing quite extensive research since︆ you first mentioned this because this is true, then it will obviously impact the answer︇ to my original question. It does not seem you are speaking from experience specifically with︈ Mobile Apps.

Needless to say, it's an absolutely crucial point whether any kind of 30%︉ Withholding Tax is charged on App Sales, Ads, and/or in-App purchases. That's why I'm making︊ a point of being precise so that we do not spread misinformation.

It honestly does︋ not seem like you yourself are certain that App are subject to such tax in︌ some circumstances as it seems you are making an assumption based on what you've seen︍ elsewhere in relation to Youtube. But assumptions will not help those researching the most tax-friendly︎ jurisdiction for their App business because it can lead to incorporating in the wrong place️ and paying taxes that are not necessary.

For example, Apps tend to use Admob (not‌ Adsense) for Ads, and this is what Google's site says about that:

https://support.google.com/admob/answer/4381375?hl=enhttps://support.google.com/admob/answer/2772627

So the above hard evidence contradicts what you are saying about Mobile Ads in Apps being‍ subject to 30% Withholding Tax for people with no US Activities like myself.

Surely if⁠ the Apple and Google Play Stores were Withholding 30% of any kind of revenue from⁤ Apps for US Tax purposes from companies based outside of the US, this would be⁣ all over the internet and therefore very easy to corroborate directly instead of via a⁢ screenshot from Youtube's tax info. So for the sake of all readers, I am extremely︀ skeptical of the claim that Apps by people with no US Activities are subject to︁ any kind of 30% Withholding until I see hard evidence, which no one has provided︂ yet and which I myself have been unable to find so far.

I don't feel entitled︅ to anything. I'm providing a lot of my own research and evidence as well. But︆ if someone states something without backing it up which contradicts what I am finding, then︇ of course I'm going to ask for proof. So please don't confuse my push for︈ precision to avoid misinformation with entitlement. No one is forced to answer just like I︉ am not forced to accept assumptions or anonymous statements online as fact. Misinformation on something︊ as crucial as this can damage a lot of people.

Please provide evidence of this. All the evidence I am finding for the︌ withholding of 30% from US users for foreign businesses is related to Youtube's recent changes︍ (stated clearly here), not Apps.

This contradicts what @marzio mentioned above that the Sales themselves are not subject to‍ Withholding Tax because they are not treated as Royalties. Again, this is why being precise⁠ with something so crucial is so important, and why such statements need to be corroborated⁤ with hard evidence.

This assumes you︂ are correct that "US app sales from the playstore will be withholding 30% (Only︃ US Sales)!", but that does not seem to be correct. First we need to︄ confirm that App Sales, Ads, and/or in-App purchases are indeed subject to any kind of︅ 30% Withholding Tax before we can cross this bridge.

Again, something as significant as that︆ should be easy to corroborate, but I am not finding any hard evidence that the︇ App Stores charge any kind of 30% Withholding Tax to non-US companies their App Sales,︈ Ads, and/or in-App purchases revenue.
 
Maybe these︊ could be useful:

Sure, I can address tax issues here based on the comment section.︋ You have a foreign corporation (“FC”) formed in Hong Kong with no US offices selling︌ an app through Apple USA.

A FC pays tax in the US on its effectively︍ connected income coming from a United States Trade or Business (“USTB”) under Section 882(a). While︎ the internal revenue code and treasury regulations do not specifically define a USTB, the courts️ have looked at this issue extensively over the years. Selling from the US to a‌ US customers represents a USTB. Then, we look to see if the FC has effectively‍ connected income.

While US source income represents effectively connected income, Treasury does not consider foreign⁠ source income as effectively connected if the FC has no US offices (Section 864(c)). So,⁤ we need to evaluate the income source here from the App transactions.

Here, we use⁣ the so called software treasury regulations for the answer. An App transaction falls under copyrighted⁢ articles if the transferee receives a copy of a program but acquires no rights (Treasury︀ Regulation Section 1.861-18(c)(1)(ii)). So, we most likely categorize the App transfer as a sale. And,︁ a copyrighted article represents inventory as defined in Section 865(i)(1).

Treasury sources inventory property to︂ the physical location of the buyer under Sections 861(a)(6) and 862(a)(6). However, post year 2017,︃ Treasury has altered a tax provision here affecting a FC which produces its own unique︄ product. Thus, App produced in the FC’s home country represent foreign source income (Section 863(b)).︅

If the FC receives any advertising monies from the Apps, this income represents service income.︆ And, Treasury sources service income to the place services performed. So, a FC operating out︇ of home country office with no US office, has foreign source income for services performed︈ (Section 862(a)(3).

Given both the App sales and advertising both represent foreign source income, Section︉ 882(a) addressed in the second paragraph does not apply. So, the FC does not pay︊ pay tax in the US on the App transactions (sales or service from advertising). Of︋ course, most likely the FC’s home country will tax these transactions.

Even though the FC︌ does not have any tax paying requirements, the FC may have reporting requirements. As Treasury︍ says a FC with a USTB even if it has no effectively connected income still︎ files a 1120 F corporate tax return as noted In Treasury Regulation Section 1.6012-2(g). While️ no tax penalty exists here not filing, the FC’s filing this return represents a protective‌ return. If the FC does not file the return and Treasury later finds the FC‍ has effectively connected income, the FC may not use its prior deductions as means for⁠ reducing gross revenue as noted in Section 882(c)(1)(A), (c)(2) and Treasury Regulation Section 1.882-4(a)(1) and⁤ (2)). This means the FC could face tax on its revenue versus its taxable income.⁣

If you are a US person owning the the FC shares, you would face personal⁢ taxes on adjusted FC profits based on the new global intangible low taxed income provisions︀ (Section 951A(b)). Here, you hold the FC in a domestic corporation as means for avoiding︁ this tax given Hong Kong has a tax rate greater than 13.5% (Section 250(a)(1)(B)). Further,︂ a US persons or domestic corporations holding shares in a foreign corporation have annual Treasury︃ information reporting requirements subject to a $10,000 fine for not complying (Section 6038).

Source: internet︄
 
https://community.ato.gov.au/s/question/a0J9s0000001IgHEAU/p00048111
Want even more evidence?‌

Go and register as a Google play developer and you'll find the truth for yourself‍ because honestly we gave you all the answers somebody would need.

It doesn't contractit anything.

What Mr Gus said is 100% accurate.

The problem is that you are bundling together Apple revenue and Google revenue thinking that both︀ companies treat app's income in the same way when the reality is that each company︁ treat app's income differently.

As i said Apple App Store sales are not the problem,︂ the problem here is Google.

And BTW nobody knows if Apple will always treat app's︃ income as "service income" because Google treated that income the same way till a year︄ ago when switched to royalties income.

What's the first sentence in the picture i posted︅ from Google?

"You may be exempt or have taxes withheld on certain income types︆ earned within US"

Tax will be withheld IF your app happens to sell in-app︇ purchases generating US sales.

Mr Gus said well when he said "if only 10%︈ of your sales are comming from the US I would not worry about it to︉ much" because in the end you will pay 30% on 10% of your total︊ app income which is 3%
 
Thank you. I already posted that here in this thread, but other members are still claiming some App revenues are subject to 30%︉ Withholding Tax, so we are trying to get to the bottom of this as it's︊ a crucial point.

That's not hard evidence. It's an anonymous post in the ATO community forum from a member︋ that is a "newbie". They may be interpreting it or doing it wrong. In fact,︌ the answer to that post in that thread which shows as "Most helpful reply" is︍ by a Community Support member saying it's "My personal view". I cannot consider︎ that hard evidence on something so crucial.

I need to setup the company before‍ I can do that, and where to do that is why I am here. Please⁠ post the evidence from within Google Play Console if you have access to it.

But speaking of hard evidence, there is this page directly from Google:

https://support.google.com/googleplay/android-developer/answer/9384608?hl=en
It specifically mentions⁤ withholding tax for "developers" specifically in relation to "in-app purchases" and specifically lists the 8⁣ countries where that occurs and none of those 8 countries are the United States.

If what you and @Mr Gus say is corrent, then why is the United States⁢ not listed on that page specifically about the Withholding Tax?

If you are in full agreement with @Mr Gus and this only affects︄ Google, then why doesn't Google list the United States in the link above specifically about︅ Withholding Tax on in-app purchases?

Are you talking about Apps︍ specifically and the Play Store specifically? Again, when I research this which you and︎ @Mr Gus are mentioning, the only thing that appears is the change that happened to️ Youtube income specifically, not App income. This is what makes me think that you and‌ @Mr Gus may be incorrectly assuming that what happened with Youtube also happened with Apps,‍ yet I cannot find any source to corroborate this and the Play Console's page on⁠ Withholding Tax does not mention the United States.
 
Status
Not open for further replies.

JohnnyDoe.is is an uncensored discussion forum
focused on free speech,
independent thinking, and controversial ideas.
Everyone is responsible for their own words.

Quick Navigation

User Menu