business-model, business-registration, business-structureI’m pretty sure this is basic business stuff but I really have to ask:
Assume a software product company, say something like a paid app on App Store/Google Play. Since it sells products in various countries, should it be registered in all the countries it makes sales in? Or will it be sufficient and safe to register in one single country and pay tax only in that country (overall money earned)?
Similarly, for software services like consulting/development/etc. Should each country have it’s own company registered? I’ve seen that in big companies (say abc), they have separate entities in each countries (like abc USA, abc Australia, etc) and a CEO for each. Does this mean they are registered separately in each country and pay tax in all the countries of operation? And do they all operate under one parent company? Is that a business model? Is it mandatory? Am I asking too much?
Note that I’m willing to pay tax in all countries, if I really have to.
You only need to register a business in countries where you’ve (actual) employees. You can do everything else from where you’re based, whichever country that is.
Complications for not incorporating right, left, and center include the occasional US company with bizarre accounting processes in place that require that they wire your payment to a US-based bank account. If you’ve one of those maybe it makes sense to pull out your checkbook and waste money incorporating there.
For everything else, it’s all tax optimization related. Do the maths: if it costs you more to do business from a separate foreign branch - including the cost of setting it up, opening bank accounts, recruiting an accountant, and keeping it alive - then go for it. If not, leave it at that and keep things in your home country.
The simple answer…
If you are seling services or downloads online you only need to be registered in your locality normally.
If you get big enough that it may matter, then you can employ the specialist advice you would need!
Re consultancy, again don’t get ahead of yourself. Register in your home country and pay local taxes. I think it is a mistake for a startup to be thinking much about global tax optimisation at an early stage. It is expensive, complex and detracts from the main goal. I think you need to concentrate on getting a product together and producing some revenue!
RE: You other question about paying tax in every country, normally you wouldn’t pay tax twice on the same money (double taxation). Multinationals use complex chains of companies to move tax around to the most efficient place. For instance Starbucks in the UK pay a license fee to Starbuck in Switzerland for the rights to use the Starbucks name (it is structured as if they buy the beans for switzerland!). This is charged at such a high price that starbucks makes a loss in the UK so pays no UK tax. A lot of people have a problem with this ethically and it can do damage to a brand.
I keep offering this advice, concentrate on making positive cash inflows, then worry about how that might be taxed once there is some cash to share.
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