Is it worth setting up off-shore company as French tax resident?

[GenevaDude]

Hello all,

I am new here and have already learnt a lot from many smart‌ people. Thank you all.

I need to understand if it is worth setting up off-shore‍ busines for tax optimization and security.

I am currently French tax resident with family private⁠ visa (Eastern Eurointending to set up and operate a marketplace. All activities will be done⁤ from France and I will be UBO.

At first, I intended to incorporate in Belize⁣ or Delaware. However, a French tax lawyer I've consulted has somehow tried to discourage me.⁢ The main reasons were:
1. French tax authorities dislike of off-shore companies (particularly, Belize).
2. Consequently, having me flagged snd investigated more than normal.
3. No benefit, since as French︀ tax resident, I will have to do all tax reporting anyway.

Honestly, taxation is not︁ what I am worried about at the moment. I am just starting a marketplace and︂ all totally for legal and legit business. My main concern is that given the stories︃ I've heard of French Tax administration, assets and bank accounts being frozen for alleged fraud︄ and investigation (can take 5 years) sometimes upon a suspicion (my nationality, for example). Having︅ both an off-shore company and a bank account will provide me with a piece of︆ mind until I have more revenue and, therefore, other problems. It is not THAT easy︇ I guess to freeze those in another country and not worth since I am not︈ yet making big profits.

Finally, I don't trust easily a lawyer (if at all), and︉ perhaps he said that knowing problems will happen and I will come back to him︊ and hire for a litigation and he gets more money.

He kept saying taxation is︋ very easy in France which I know is not and pressured him to finally agree.︌ At the same time, he admitted, his office's 90% of activities is tax litigations. So,︍ not so simple then.

I would very much appreciate your advice and direction to the︎ right place.

 

[GenevaDude]

@centme308win - Thank you for advice. Does it mean I will have double taxation? France‌ insists on declaring everything and it os difficult to get off the hook.

 

[CyprusLaw]

Hi, is there any chance you would consider relocating to Cyprus, for at least 60‌ days? Or is the plan 100% set on living in France?

 

[GenevaDude]

I am married in France now. There is no way we ever are going⁠ to Cyprus.

 

[GenevaDude]

Thank you. Does it change a taxation‍ requirements in France? Does company in Cyprus provide a protection given profits are declared anyway.⁠ Do I require incorporate a company in France too? I am a bit puzzled on⁤ why should I have to incorporate anything in France by law if all profits are⁣ to be declared anyway.

 

[CyprusLaw]

It will be working this way - Cyprus company profits taxed at 12.5% -⁣ any dividend paid to yourself will be SDC/tax exempt, you will only be paying 2.65%⁢ on dividend for the GHS. The catch here is that as you will not be︀ in Cyprus you will have to declare dividend income in France and pay any applicable︁ tax there.

With respect to the Company being a Cyprus tax resident, you will need︂ nominee services in order to establish substance and control in Cyprus, and therefore minimise the︃ risk of the structure being challenged by the tax authorities.

 

[GenevaDude]

Thank you for clarifying. If I understood you correctly, company profits taxed at 12.5% and dividends︀ are to be disclosed to French tax authorities (of course) and applicable tax paid. As︁ I will be reinvesting any profits back into the company for the first year, dividends︂ will not be an issue.

Is it legal, though, to have an off-shore company ONLY︃ in France without local i corporation?

 

[GenevaDude]

As time to edit post expired, writing a new one. What happens if I⁠ stay 60 days in Cyprus?

 

[CyprusLaw]

Ok so the 60-day rule relates‍ to your personal income - if you stay 60 days in Cyprus per year, and⁠ not more than 183 days in any other jurisdiction, you become a tax resident in⁤ Cyprus. This will also give you the status of a non-dom for 17 years, which⁣ means that any dividend will be tax exempt, and as you will be a Cyprus⁢ tax resident you won't have an obligation to pay taxes in another jurisdiction. But as︀ you have mentioned that it is not possible to relocate to Cyprus this will not︁ be an option.

 

[GenevaDude]

Ok clear. Sounds as a very interesting option. Sadly, yes, maybe 60 days in Cyprus could︀ be negotiated, but France is permanent, so I will be staying here the whole year.︁ Thank you for the explanation, though. I will keep it in mind.

 

[neweraoffshore]

Offshore companies are not illegal if you pay your taxes and declare everything correctly.⁠ You can then choose the jurisdiction which gives you the best protection. But this doesn't⁤ mean that you can't be made liable for illegal activities in your home country. Courts⁣ will overrule you in this case easily.
So if you really want to pay tax,⁢ then get a jurisdiction with favorable protection laws and also stable banking which allows you︀ to use the main payment processors like Paypal and Stripe. For example Belize would have︁ good protection, but bad banking. Delaware has good protection and good banking options, however good︂ banking would require a personal visit.

 

[kranj99]

To the OP: do you speak/understand French? If so, there are a fair number of‌ good YouTube videos who address specifically French residents opening up LLCs in the US etc.‍ In a nutshell, it's totally allowable, you just need to declare the profits in France⁠ on a special tax form. But if your expected revenues are say less than 250K,⁤ I'd suggest you may be better off incorporating an SAS in France. I used to⁣ be a part owner of one and the tax/reporting obligations aren't that bad. One advantage⁢ in France is that there are lots of loopholes and even opportunities for state subsidies.︀ They're not widely published and so a local accountant can advise better. But once you︁ get the hang of the French system, you will see there are actually some good︂ opportunities, despite the perception of it being a tax hell.

 

[GenevaDude]

Thank you for your honest and sensible response. This is what I have found recently︄ too. Although, there are many horror tax stories, it seems better to be on a︅ good stance with tax authorities when starting in France. Although, paperwork is extensive.
Once I︆ go above 250K, situation may change altogether as tax laws and incorporation structures do in︇ different countries. So, I will handle it then and there. Thank you again.

 

[GenevaDude]

@vbam99 a question, why have you specifically mentioned SAS and not SARL, for instance? SARL︄ has more protection implying limited responsibility, doesn't it?

 

[kranj99]

There was‍ no real rationale behind it - I was just a former (minority) shareholder in an⁠ SAS that I exited a while back, hence the reference. That aside, I'd say the⁤ SAS is perhaps the closest the French have to the US LLC, where the SARL⁣ may be closer to say a UK Ltd. or something. I'm not an expert on⁢ this, but I'm of the belief that the SAS has less administrative overhead - and︀ if you're essentially going to be a one-man shop when starting out, this may be︁ of interest. It would also seem that the SAS seems to be more flexible with︂ the ownership structure, shareholder agreements etc. You can also look at something called a 'SAS︃ a capital variable" rather than fixed share capital. This allows for some anonymity for shareholders︄ as well. Like I said, France is not the tax hell it's often made out︅ to be - but there are some interesting tools available that make France an interesting︆ place to set up - especially given that you are tax resident there.

 

[GenevaDude]

Alright. Clear now. Thank you for the explanation and valuable︆ nuances. I have just checked SAS and it looks like its primary value is in︇ creating foreign partnerships amongst other benefits.

I will explore available tools and structures in detail.︈ Some have been changed by recent French administration. Thank you again for this valuable information︉ and explanation.

 

[Cetme308win]

yes it's fully⁣ legal as long as you disclose it to the French tax authority

 

[kranj99]

I think the original intent of the SAS was to facilitate JV partnerships⁤ with foreign partners. But it's really evolved over the years where it's a very common⁣ company structure on its own. Again I don't have the expertise to advise on SAS⁢ vs SARL and the nuances but if you're comfortable with the French language, you will︀ find some excellent resources here: Le coin des entrepreneurs : création, reprise et gestion d'entreprise︁

 

[GenevaDude]

You are right. Indeed, it should have been developed into a more⁢ comprehensive structure over time.
I will consult accountant(s) and lawyer(s) to choose the best solution︀ for now. SAS, SARL or EURL. A very important (decisive, in fact) factor responsibility must︁ be limited to the investment into the company. I don't want them to have an︂ access to personal assets as this increases appetite for investigations, I assume.

Hiring an accountant︃ and auditor (in some cases) is required by law for some structures. Some companies help︄ with incorporation too as local French administration is not very efficient to say the least.︅

Thank you for the link. I will have a look. My French is not yet︆ perfect, but Google translation does the job. There are many resources online too. Thanks again︇ for all the help.