New company for 0% VAT in EU?

[Cabbage500]

Hi everyone

Need some help 🙂

We sell digital services into EU from a Seychelles company. We have lost our bank account recently and now face a dilemma. We need to set up a new company that can sell into the EU, without charging VAT as it would make our service uncooperative. We mainly sell to consumers, not companies.

Ideally with a low corporate tax rate.

Please can anyone suggest how we would achieve this?

Turnover is about 1 million pa

Thanks

 

[RealDude]

Maybe this article will help you get started:

https://blog.billflow.io/how-to-automate-saas-sales-tax-vat-with-stripe-tax/

 

[Martin Everson]

Yup you may also want to read this link first. I talked about this back in 2018. VAT when selling into EU is fact of life you will have to live with sadly.

https://www.avalara.com/vatlive/en/...c-services-books-video-apps-and-software.html

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Please note my posts should not be taken as financial or tax advice. Please seek professional advice in that respect.

 

[AMD]

Assume, UK LTD register for VAT and Wise account will do the magic ? Why all this reading about VAT there is not much to say, you have to charge people VAT unless they are businesses and you to "reverse charge" for the VAT.

 

[NicolasMaduro]

you cant sell digital services legally to eu customers without paying local vat rates

I know some EU countries have used creditcard payment data to verify if some eCommerce shops in EU were evading VAT in their country.

I dont know what actions they would take against a Non-EU Company who dont pay VAT.

 

[JohnnyDoe]

NicolasMaduro said:
you cant sell digital services legally to eu customers without paying local vat rates

I know some EU countries have used creditcard payment data to verify if some eCommerce shops in EU were evading VAT in their country.

I dont know what actions they would take against a Non-EU Company who dont pay VAT.
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Worst case scenario they block the bank account if it is in Europe. In which case, just setup a new company and open a new bank account.

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@JohnnyDoe ”“ Your #1 Source for Guidance in Different Offshore Fields​

 

[Cabbage500]

thanks for the responses, so seems that it cant be done Legally. Damn frustrating!

JohnnyDoe said:
Worst case scenario they block the bank account if it is in Europe. In which case, just setup a new company and open a new bank account.
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OK .... they won't pursue the company or share holders for the unpaid VAT?

 

[CyprusBusiness]

Cabbage500 said:
Hi everyone

Need some help 🙂

We sell digital services into EU from a Seychelles company. We have lost our bank account recently and now face a dilemma. We need to set up a new company that can sell into the EU, without charging VAT as it would make our service uncooperative. We mainly sell to consumers, not companies.

Ideally with a low corporate tax rate.

Please can anyone suggest how we would achieve this?

Turnover is about 1 million pa

Thanks
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I will urge you to consider Cyprus. It is an EU country and offers a low tax package.

Also, If your business qualifies for IP box regime your effective tax rate will be just 2.5%. Of course, proper planning is necessry to achieve a solid structure.

For the VAT component if you have B2C transactions in EU the place of supply is where the consumer lies and you will need to pay VAT to the country of the consumer. For this there is a new platform “OSS platform” (one stop shop) whch reduces the administrative hassle and you just have to register report and pay to one country and the funds are transmitted to the relevant countries automatically.

Hope this helps

 

[JohnnyDoe]

Cabbage500 said:
thanks for the responses, so seems that it cant be done Legally. Damn frustrating!


OK .... they won't pursue the company or share holders for the unpaid VAT?
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They might, but you can use nominees and avoid the problem

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@JohnnyDoe ”“ Your #1 Source for Guidance in Different Offshore Fields​

 

[Martin Everson]

Cabbage500 said:
thanks for the responses, so seems that it cant be done Legally.
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Exactly.

Cabbage500 said:
OK .... they won't pursue the company or share holders for the unpaid VAT?
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Yes they will. Extradition for VAT fraud happens. Just google it. Pay the VAT due to EU or don't sell to customers in EU. VAT collection and import duty is almost a national security issue in some countries as it forms a significant part of government financing. It is not a light crime.

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Please note my posts should not be taken as financial or tax advice. Please seek professional advice in that respect.

 

[CyprusLaw]

JohnnyDoe said:
They might, but you can use nominees and avoid the problem
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How exactly do you avoid the problem by using nominees?

 

[Sols]

Yeah, nominees aren't going to go to jail for you. They will just point out that they are nominees and direct the constables to the UBO.

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This is the probably the answer to your question.

 

[JohnnyDoe]

Sols said:
Yeah, nominees aren't going to go to jail for you. They will just point out that they are nominees and direct the constables to the UBO.
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It's full of people on the street willing to act as nominees for a few bucks, and you don't need to give them your ID and sign a contract.

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@JohnnyDoe ”“ Your #1 Source for Guidance in Different Offshore Fields​

 

[Sols]

JohnnyDoe said:
It's full of people on the street willing to act as nominees for a few bucks, and you don't need to give them your ID and sign a contract.
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What you're talking about here is fraud and potentially a plethora of other crimes, not nominees in the manner the term is normally used.

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This is the probably the answer to your question.

 

[JohnnyDoe]

Sols said:
What you're talking about here is fraud and potentially a plethora of other crimes, not nominees in the manner the term is normally used.
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Since the guy wants to do VAT fraud, it's better that he does it in a proper way.

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[CyprusLaw]

JohnnyDoe said:
Since the guy wants to do VAT fraud, it's better that he does it in a proper way.
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My understanding from the question posed is whether this can be done legally, I don't think he indicated at any point that he is willing to commit fraud...or to open himself or others to potential criminal liability.

You should have in mind the following:

(a) In the EU now the nominees have the obligation to register the details of the UBO in the national UBO register.

(b) Nominees will point out to the UBO once they realise they are in trouble with authorities.

(c) Even though the company is a separate entity the corporate veil can be pierced in a number of cases, such as fraud and take action against the shareholder.

What you suggest could have been possible many years ago or in some third world countries. Certainly not today and no in the EU.

 

[JohnnyDoe]

CyprusLaw said:
My understanding from the question posed is whether this can be done legally, I don't think he indicated at any point that he is willing to commit fraud...or to open himself or others to potential criminal liability.

You should have in mind the following:

(a) In the EU now the nominees have the obligation to register the details of the UBO in the national UBO register.

(b) Nominees will point out to the UBO once they realise they are in trouble with authorities.

(c) Even though the company is a separate entity the corporate veil can be pierced in a number of cases, such as fraud and take action against the shareholder.

What you suggest could have been possible many years ago or in some third world countries. Certainly not today and no in the EU.
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I heard of people (vat fraudsters) who find nominees on the street (homeless etc.), pay them a few bucks and send them to apply for a passport. Then they use the passport so obtained to appoint the person as a director/shareholder of the fraudulent company. Eventually the company goes bust, but the authorities never find the responsible. They might find the homeless guy in the street, but that guy has no idea of who is the person who paid him for the passport.

It is 100% illegal but it works.

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@JohnnyDoe ”“ Your #1 Source for Guidance in Different Offshore Fields​

 

[NicolasMaduro]

JohnnyDoe said:
I heard of people (vat fraudsters) who find nominees on the street (homeless etc.), pay them a few bucks and send them to apply for a passport. Then they use the passport so obtained to appoint the person as a director/shareholder of the fraudulent company. Eventually the company goes bust, but the authorities never find the responsible. They might find the homeless guy in the street, but that guy has no idea of who is the person who paid him for the passport.

It is 100% illegal but it works.
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It works but its illegal and gives many years in jail if caught High risk High return.

Many poor East europeans are used for this. The criminals go and offer them some money or a job. In return they give their identity.

 

[JohnnyDoe]

NicolasMaduro said:
It works but its illegal and gives many years in jail if caught High risk High return.

Many poor East europeans are used for this. The criminals go and offer them some money or a job. In return they give their identity.
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VAT fraud is probably the second more risky business after drug dealing. Very very high return.

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@JohnnyDoe ”“ Your #1 Source for Guidance in Different Offshore Fields​

 

[Hm2ia21K]

Not sure whether a UK company is required to charge VAT to EU consumers for digital services, the HMRC OSS shut down after Brexit so the only way for a UK company to charge VAT is to register for OSS with another EU state.