Offshore Juristictions & Banking

I am new to this forum and the ‘adult content’ business in general although I have run a number of non-adult bricks-and-mortar businesses in the past. It seems to me that Internet based ‘adult content’ businesses lend themselves to offshore registration e.g. incorporated in HK or Panama etc., and offshore banking for security and tax planning – however I can’t find any (much) discussion on this forum about the best locations for incorporation of a new company (best legal and tax regime, most friendly to business type etc.) and the best place to look for an offshore bank.

Most of the comments on this forum are from USA based operations… why haven’t you guys registered your companies offshore? Why don’t you bank in HK?

All comments appreciated.

Re: Offshore Juristictions & Banking

Pretty much all lawyers/accountants will say incorporate where you do business.

Re: Offshore Juristictions & Banking

in what way do you feel that adult businesses lend themselves to offshore? 2257 applies to where you are and you work, not where your corporation is formed, as do laws about where you shoot your content. otherwise i’m not aware of any laws that would be affected by where an adult business is registered.

Re: Offshore Juristictions & Banking

It’s getting increasingly difficult to incorporate offshore for tax reasons. It’s not as easy as just opening a company offshore. If you work and live in a country it’s very likly you will have to pay tax there no matter were you incorperated.

I did use offshore banking a while back away as a non-domicile living in the UK. However that came back to bite me in the ass big time and I paid a heavy price.

I think you need to look at why you feel the need to incorporate offshore. If it’s for tax reasons I wouldn’t recommend it. There is a lot of truth in the old saying, "Nothing is certain but death and taxes".

Some UK adult companies have gone to Spain and others to Cyprus (due to change in DVD distribution laws). Both seems to be fairly relaxed in terms of legislation on Adult products and services. A lot of gambling and similar companies have turned to Gibraltar. But as far as I know none have gone to those countries for tax reasons.

Re: Offshore Juristictions & Banking

2257 only applies to the USA, we haven’t got anything even remotely similar in Europe.

I should also add that 99% of all the sponsors I deal with are based in the USA, Canada or Western Europe. I can only think of 1 or 2 companies I’ve dealt with in the past that been based in Panama (which proved to be a mistake). And I have a feeling most of us have alarm bells going off when we see an adult company based in odd locations.

Re: Offshore Juristictions & Banking

Incorporate where you do business.

The true cost of incorporating outside of the country you live is rarely beneficial and will only draw additional attention to you if discovered. If you were a tax compliance investigator and discovered a guy has an offshore company, would you think, “Oh yeah, this guy is legit!” Hell no.

You will incur significant additional costs in formation, maintenance, bookkeeping and moving funds. Funds that you use for yourself or otherwise repatriated still is subject to tax so unless you plan to leave that money in an offshore account the tax benefits disappear. The loopholes that worked in the past have been closed but continue to feed bad advice regarding offshore operations.

Retirement funds that will sit in an offshore account may have some attraction as those funds don’t come back into your pocket for years to come and large multi-nationals can legally take advantage of moving operations but you need to be generating revenues in the tens or hundreds of millions of dollars before it makes sense.

I cannot imagine a start-up having any financially sound or legitimate reason to set up an off-shore operation unless you actually live in that offshore location.

Visa requires a resident in the region where you have a merchant account or 3rd party billing. So if you have a Hong Kong corporation, you cannot avail yourself of Visa US or Visa EU for settlement, and I think some surfers see alarm bells when your join page or settlement goes to some odd place.

Don’t take financial advice from poor people and don’t take legal advice from amateurs.

Re: Offshore Juristictions & Banking

Obviously depends upon who you ask. However consider this; more than 50% of the commercial property in the City of London (by that I mean the financial center) is owned by companies registered offshore. Thousands of companies register offshore for tax reasons every year.

That’s not to say its right for everyone… but the point of my original question was to try and gauge why there was no discussion on this subject on this forum.

Re: Offshore Juristictions & Banking

Lots of small businessmen and women tend to think of their income as the same as their company’s income – which it not (for tax purposes). Offshore earnings only become taxable when your company pays you/you pay yourself.

If your company is doing well and you can afford to leave some earnings in your offshore company account then you don’t pay any taxes on it. This is just one of the big advantages of registering offshore.

If you are resident in the UK and buy internet services from a UK provider then normally you would be charged VAT (17.5%) tax on those services. As an offshore registered company you would not be charged that tax.

I could go on…

Re: Offshore Juristictions & Banking

[QUOTE=gaydemon;57459]It’s getting increasingly difficult to incorporate offshore for tax reasons. It’s not as easy as just opening a company offshore. If you work and live in a country it’s very likly you will have to pay tax there no matter were you incorperated.

I did use offshore banking a while back away as a non-domicile living in the UK. However that came back to bite me in the ass big time and I paid a heavy price.

I think you need to look at why you feel the need to incorporate offshore. If it’s for tax reasons I wouldn’t recommend it. There is a lot of truth in the old saying, "Nothing is certain but death and taxes".

Some UK adult companies have gone to Spain and others to Cyprus (due to change in DVD distribution laws). Both seems to be fairly relaxed in terms of legislation on Adult products and services. A lot of gambling and similar companies have turned to Gibraltar. But as far as I know none have gone to those countries for tax reasons.[/QUOTE]

Sorry Bjorn but that is simply not true. Look on the internet of go see your solicitor. Its very easy.

Let me say now that I am not suggesting one registers offshore in secret. Registering offshore is a legitimate thing to do AND you should tell your accountant and of course the IRS or IR. You continue to pay taxes… only less taxes… its legitimate if you do things right.

“Some UK adult companies… Spain… DVD”. You say these have NOT gone offshore for tax purposes… but this is precisely why they have gone offshore – to take advantage of reduced taxes, in this case VAT.

Re: Offshore Juristictions & Banking

[QUOTE=ChadKnowsLaw;57471]Incorporate where you do business.

The true cost of incorporating outside of the country you live is rarely beneficial and will only draw additional attention to you if discovered. If you were a tax compliance investigator and discovered a guy has an offshore company, would you think, “Oh yeah, this guy is legit!” Hell no.

You will incur significant additional costs in formation, maintenance, bookkeeping and moving funds. Funds that you use for yourself or otherwise repatriated still is subject to tax so unless you plan to leave that money in an offshore account the tax benefits disappear. The loopholes that worked in the past have been closed but continue to feed bad advice regarding offshore operations.

Retirement funds that will sit in an offshore account may have some attraction as those funds don’t come back into your pocket for years to come and large multi-nationals can legally take advantage of moving operations but you need to be generating revenues in the tens or hundreds of millions of dollars before it makes sense.

I cannot imagine a start-up having any financially sound or legitimate reason to set up an off-shore operation unless you actually live in that offshore location.

Visa requires a resident in the region where you have a merchant account or 3rd party billing. So if you have a Hong Kong corporation, you cannot avail yourself of Visa US or Visa EU for settlement, and I think some surfers see alarm bells when your join page or settlement goes to some odd place.

Don’t take financial advice from poor people and don’t take legal advice from amateurs.[/QUOTE]

Your comments mainly assume that I am suggesting you do something illegal or underhand i.e. without making proper declarations. This is a common misunderstanding that ‘going offshore’ is somehow illegitimate.

As I said above in my reply to Gaydemon – I am NOT suggesting one registers offshore in secret. New banking rules including The Patriot Act make it almost impossible to carry out any financial activity unseen by the authorities, but that does not negate the fact that legitimately registered offshore entities can save tax (for example sales taxes in the USA and VAT in Europe).

Put it this way; American readers of this forum will be familiar with the many and numerous deductions and allowances that the IRS permit. It’s just that a company registered offshore has more opportunity to mitigate its taxes (legally).

“Visa requires a resident in the region…” I am sorry but I don’t follow your explanation. Perhaps you could re-write.

“Incur significant costs in formation….”. Forming or incorporating a company offshore is (almost) as cheap as chips. Check out Ocra.com. They are a legitimate company offering a range of services to companies and individuals who want to register offshore. Some things cost a little more, but the charges are certainly not ‘significant’. I am not associated with any of these kinds of companies… they are but one example.

Maintenance and bookkeeping… ditto. For example more and more companies offer accounts services ‘in the cloud’ and because of this the charges are quite reasonable.

Moving Funds…… Now we are talking. This is true. SWIFT/Wire international transfers can be expensive and tiresome for small offshore enterprises. But I remember reading somewhere that Barclays offered English/Spanish expats free transfer of funds between onshore and offshore accounts. Lets have more discussing from those with some experience of problems/benefits working with onshore and offshore banks.

Who are the best providers, for example?

Re: Offshore Juristictions & Banking

[quote=blackmango;57484]Sorry Bjorn but that is simply not true. Look on the internet of go see your solicitor. Its very easy.

Let me say now that I am not suggesting one registers offshore in secret. Registering offshore is a legitimate thing to do AND you should tell your accountant and of course the IRS or IR. You continue to pay taxes… only less taxes… its legitimate if you do things right.

“Some UK adult companies… Spain… DVD”. You say these have NOT gone offshore for tax purposes… but this is precisely why they have gone offshore – to take advantage of reduced taxes, in this case VAT.[/quote]

Not sure why you are asking if you already know the answers? Why would I make this up?

My personal experience is that it’s not possible or practical to incorporate or use offshore banking if you are going to be working and living in the UK. A couple of years ago it was possible and quite easy, but not anymore.

My own offshore “experiance” cost me a massive amount back then. Believe me Inland Revenue doesn’t care about “Tax Theory” no matter what it says on the internet. If they want tax from you they will get it no matter of your setup. They did force all offshore banks and tax havens in the EU to hand over 10 years worth of bank statments for anyone living in the UK!

At that point I also looked into incorporating in Bahamas as well as setting up banking there. However in my case that would not be practical and not be tax efficient, it would even be likly that I would end up being liable for tax anyway as I’m working and living in the UK. I can tell you now its no fun having to try and prove what and where everything is from!

And yes, I have used a well known Tax Specialist (BDO) and have a very good accountant.

The situation changes dramatically if you have very large amounts of funds, then there are many more options open to you. But for most, the basic rule is you pay tax in the country you live and work in. No matter were you have incorperated.

The exodus of DVD retailers from the UK to Spain had nothing to do with VAT, they simply had no choice when the new laws came into force - this was in regards to selling DVDs through any other means than a licenced sex shop (which are now is under dispute in/through the EU). I had to drop all my DVD ads just because of this. And yes, I also employ a very reputable law firm in the City.

Re: Offshore Juristictions & Banking

visa doesn’t care where you incorporate or where your business is technically - they require a drivers license, not just incorporation papers. if someone tries and set up a ccbill or epoch account with a corporation in one country and the responsible party’s drivers license or passport from another country, they’ll be turned down.

Re: Offshore Juristictions & Banking

LOL! Exactly.

However, DO take Candy from strangers when you can. 666

Re: Offshore Juristictions & Banking

[QUOTE=blackmango;57482]Obviously depends upon who you ask. However consider this; more than 50% of the commercial property in the City of London (by that I mean the financial center) is owned by companies registered offshore. Thousands of companies register offshore for tax reasons every year.

That’s not to say its right for everyone… but the point of my original question was to try and gauge why there was no discussion on this subject on this forum.[/QUOTE]

Commercial property in London and a web-based business are very different situations.

I don’t imply that an offshore business is shady, but the perception is just that. I believe that if a red Ferrari and a compact Toyota are both traveling over the speed limit, the Toyota will not be stopped but the fast car will attract the attention of every patrol officer for miles. An offshore company just attracts additional attention.

I have set up legal offshore entities but only after exploring many different options, researching the tax and reporting implications and the actual costs. It is not often an offshore company makes sense after taking pen to paper and detailing everything it entails.

If you want a Visa merchant account they require an entity in that particular region and the principal of the account needs to be a resident. A Vanuatu entity owned by a resident of Panama cannot get a Visa US or Visa EU merchant account, but a UK entity owned by a resident of Spain would probably be approved for a Visa EU merchant account. Visa US requires a US entity and a US resident as principal or a sole proprietor that is a US resident.

A start up needs to focus on building the business; spending time, energy and money on creating an offshore entity is rarely a good use of start-up resources unless your initial investment is in the hundreds of thousands of Euros. You don’t start riding a motorcycle on an 1100cc superbike – you learn on a 250cc Honda and move up to bigger and better things once you get the hang of it.

Re: Offshore Juristictions & Banking

If there are so many straight forward benefits of starting up an offshore company, wouldn’t Google or any of the other big mainstream websites have done so already? I suspect it isn’t as straight forward as it may seem.

Re: Offshore Juristictions & Banking

In many cases the biggest companies are incorporated in multiple jurisdictions, a union of independent entities under one large controlling entity. So Google may also be incorporated in China, but that is for the specific purpose of serving a Chinese market. When the company started, the home base and incorporation was at home. The founders of Google did not say “Wow, we have a cool idea. Let’s market our product in the United States and Canada but complicate things and incorporate in Turkey” They incorporated in a garage in Menlo Park, California.

Re: Offshore Juristictions & Banking

Thanks for your comment. I did not know about this requirement.

Re: Offshore Juristictions & Banking

You make some good points here and in your earlier post and I can see now that you are definitely aiming your replies at the smaller end of the SME market… but since you mentioned Google I thought I would copy a section from a recent article in the Guardian newspaper (UK):

"Google, which has an estimated 90% market share of UK internet searches, last year used a cross-border network of subsidiary companies to ensure it did not pay a penny in corporation tax on its £1.6bn advertising revenues in Britain.

The international corporate structure enables Google to avoid paying what could otherwise have been a corporation tax bill in the UK of as much as £450m.

Recently filed accounts for subsidiary company Google UK Limited show none of the search engine’s advertising revenues from British customers were accounted for in the business, despite operations in London and Manchester incurring “administrative expenses” of £177m last year, including a wage bill of £70m.

While much of the costs linked to the running of Google’s British operations are recognised for tax purposes in the UK; revenues from customers in Britain, however, are diverted to another Google company in Ireland, where the corporation tax rate is between 10% and 25%. British corporation tax is levied at between 28% and 30%."

Re: Offshore Juristictions & Banking

[QUOTE=ChadKnowsLaw;57540]Commercial property in London and a web-based business are very different situations.

I don’t imply that an offshore business is shady, but the perception is just that. I believe that if a red Ferrari and a compact Toyota are both traveling over the speed limit, the Toyota will not be stopped but the fast car will attract the attention of every patrol officer for miles. An offshore company just attracts additional attention.

I have set up legal offshore entities but only after exploring many different options, researching the tax and reporting implications and the actual costs. It is not often an offshore company makes sense after taking pen to paper and detailing everything it entails.

If you want a Visa merchant account they require an entity in that particular region and the principal of the account needs to be a resident. A Vanuatu entity owned by a resident of Panama cannot get a Visa US or Visa EU merchant account, but a UK entity owned by a resident of Spain would probably be approved for a Visa EU merchant account. Visa US requires a US entity and a US resident as principal or a sole proprietor that is a US resident.

A start up needs to focus on building the business; spending time, energy and money on creating an offshore entity is rarely a good use of start-up resources unless your initial investment is in the hundreds of thousands of Euros. You don’t start riding a motorcycle on an 1100cc superbike – you learn on a 250cc Honda and move up to bigger and better things once you get the hang of it.[/QUOTE]

I agree with much of what you say only with the proviso that (I think) startups should research all their options before they start to trade. Once a business has started down a particular road its too late or very expensive to change course. Tax is such a significant part of running a business/life that ignoring the possibility of setting offshore would be foolish.

Re: Offshore Juristictions & Banking

[quote=blackmango;57953]

"Google, which has an estimated 90% market share of UK internet searches, last year used a cross-border network of subsidiary companies to ensure it did not pay a penny in corporation tax on its £1.6bn advertising revenues in Britain.

The international corporate structure enables Google to avoid paying what could otherwise have been a corporation tax bill in the UK of as much as £450m."[/quote]

This is exactly my point and unfortunately how the system in the UK works. If you have £1.6 bn you can afford the best tax lawyers and normal Taxation laws can be avoided. For you and me, well at least most of us that’s out of reach. You will need to making very large amounts of money before it’s worth considering setting up offshore structures.

There are other ways of minimizing taxation in the UK. For example taking no salary and only pay yourself dividends, company paid private pension schemes, folding / restarting new companies every 3 years etc. Those kind of things will be more efficient for our size of businesses.