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Where to form an International Trading Company?

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JimmyWho

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Apr 4, 2019
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I have immigrated to Israel, and as part of the incentives of immigrating to Israel, any foreign company I own will not be classified as an Israeli resident company for the first 10 years. See here: https://taxes.gov.il/english/income...kagefornewimmigrantsandreturningresidents.pdf

I will still need to pay personal income taxes in Israel. (47% on everything above ~140,000USD 😳). My Israeli corporate lawyer has advised me that my company will need to pay me the median CEO salary if I do not want this setup to be contested. This means anything beyond my salary can be paid to me as a dividend with no further taxation. He also advised me to select a jurisdiction with audited books, to have perfect book keeping, and keep all documents.

My business entails buying exclusive rights from suppliers in the United States (#maga) and licencing those rights to retailers in European/Asian countries. I do not actually move any products and my business can be seen as shuffling papers around, assessing the credit worthiness of the European/Asian buyers, collecting payments, and paying the suppliers. I pick suppliers that see this as a win-win, as they are not familiar with the Asian markets, and my expertise brings them profits. I guess my business can be seen as wholesale drop shipping?

I am looking for a jurisdiction that has the following:
audited books
0% dividend tax
0% corporate tax
be on TransferWise's list of countries that can accept USD: TransferWise Help | Why can't I get USD account details?
legally consider my company locally domiciled
preferably be in EEA (if this isn't against my interest?)
be a respectable country

What issues should I be aware of? Would the US or any other country consider the profits to be made in their territory for my kind of business? Is there any kind of way I can better structure myself? With these new OECD rules will I need to hire in-jurisdiction staff or maintain a in-jurisdiction domiciled?

Thank you everyone in advance!
 
To be considered trustworthy with such a structure you didn't need‍ the new OECD rules. This has been known to be the most valid way to⁠ convience any authority that your operation is legit and real.

I would look into a⁤ Cyprus non resident company for your setup, it full fill 99% of your requirements and⁣ is easy to setup. No issues with payment processors, banks, EMI's and other facilities you⁢ may require.
 
Any reason for Cyprus over Gibraltar, Isle of Man, Jersey? I know there is a‌ tax treaty in between Cyprus, US, and Israel. Israelis seem to love to use Cyprus‍ I am just wondering why.
 
What is the 1% that won't be fulfilled by Cyprus?

Will such a structure be‌ considered trustworthy if I am the sole employee and based in Israel? If not, what‍ positions need to maintained in Cyprus?
 
I am not US. No worldwide taxation from origin country and I am not a‌ tax resident of origin country for years.
 
Cool then the‍ world is your oyster.

You really need to make sure the foreign company is really⁠ resident in the foreign country and not considered by the foreign country and Israel to⁤ be operating in the home country of the director (Israel). The majority of offshore companies⁣ setups i.e Seychelles companies etc place of operation is often where the director is resident⁢ and not the Seychelles. Israel has CFC laws and taxes undistributed foreign income as if︀ it was distributed to an Israel resident 🙁. I would 100% make sure with your︁ lawyer that the document you showed in the link overrides this rule completely and is︂ current firstly thu&¤#.
 
How do I make sure? Pay a management company $10k/yr to maintain an office with‌ staff? Honestly I don't mind if I hire all my help out of whatever country‍ the company is in. I can hire a PA, book keeper, etc to work from⁠ home in whatever country it is.
 
If I read @Martin Everson right then the only thing this would require is that‌ you find a agent that is able to setup a offshore company i.e. Seychelles with‍ a real office, real director and real shareholder, all locals.

For such setups you can⁠ pick most offshore jurisdictions where it is possible to get office and director etc in⁤ real. I understand that this is actually what most countries will require and have required⁣ for years to accept the company not to be a resident company of where the⁢ owner live.
 
Find a lawyer who⁤ is firsthand familiar with this type of relocation and the rules before spending any money.⁣ The best solution is to seek an advance ruling from the Israel tax authority for⁢ your proposed setup if in doubt. I don't think this will cost you more than︀ a couple of 100's via your lawyer. However knowing someone who has done this before︁ will go a long way. You are definitely not the first person to have this︂ issue.
 
I have asked my Israeli corporate lawyer for clarification.

In the Israeli Income Tax⁠ Ordinance the exemption is worded as follows:
"First time Israel residents and returning residents 14.⁤ (a) An individual who became an Israel resident for the first time and a veteran⁣ returning resident shall – during ten years after the date on which they became residents⁢ as aforesaid – be exempt of tax on their income from all the sources enumerated︀ in sections 2, 2A and 3 that were produced or accrued abroad or that are︁ derived from assets abroad, unless they made a different request in respect of all or︂ part of the income;"

sections 2, 2A, and 3 basically define all forms of income.︃
 
My lawyer will apply for a legal opinion from the Israeli Tax Authority for my‌ proposed setup. Hope to receive it within a month.
 
How about using Revolut USD account for your business⁣ ?
 
Revolut is actually one great alternative to Transferwise depending on what other requirements you may‌ have.
 
Israel is close to Cyprus⁠ and only pay 2% for royalties
 
Really critical thing missing from the assessments people are giving you here.︎

You said "licensing those rights to retailers..."

This is a huge problem because that's royalties️ income. Royalties income is usually subject to withholding tax at the source country. So the‌ first thing you'd want to do is either:

A) Treaties that allow you to not‍ have this
B) Recharacterizing the income to not be royalties income

It gets somewhat worse⁠ if you're earning royalties income because for example HK would consider this to be locally⁤ taxable income.

Bottom line, you don't want royalties income if you can avoid it, you⁣ want sale of goods and/or services if possible.

Why do you want to be in⁢ the EEA?
 
My lawyer is restructuring the entire way the business is operating due to many of‌ the issues brought up in this thread.
 
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