taxes, incorporation, tax-structureI’m a resident of the UK and run a website selling digital services. All of the assets are based in Canada, and the majority (93%) if transactions come from the US.
Under these circumstances, where should the business be registered, and to which country should it pay tax? My intention was to incorporate in the UK, and report any income once the income is placed in a UK bank account, however the majority of the money that the business receives should be exempt from UK tax, since the buyers are non-EU residents and they are not receiving an item from the EU. Therefore should I be paying business tax in the UK, and only my personal income tax in the UK?
Could someone offer some advice on this, and correct me if I’m wrong anywhere?
Firstly - your UK company is liable to UK taxes. I do not know what tax you refer to when you say “business tax” - I take it you are talking about Corporation Tax. This tax is due on profits, regardless on if you sell locally or around the world. Several countries have corporation tax, but at different levels. If you are a small mom/pop shop then careful expenditure controls can ensure you don’t make a profit (or make a small profit) so that the corporation tax is nill, or null.
Buying goods from north America that you expect to sell back to north america could leave you liable to their taxes. If not, it would leave a foreign business having an unfair advantage over a North American business. You need advice from an accountant in the US or Canada to clear this up. Avoid at your peril - Some years back Tony Blair agreed that extradition to the US was possible based on less evidence than would be required to bring a case in UK law. Search for the NatWest 3 as that was a test case.
Opening a business in another country to skirt tax is bound to rub someone somewhere the wrong way. Tax efficiency is legal. Tax avoidance is illegal.
Most (all?) countries require a local resident to represent the Company. Some countries require a minimum of two people (ie England/Wales require a Company Secretary and a Managing Director, two or more people). Germany has a UG status (similar to Ltd in the UK) but one officer is sufficient.
Thus - If you open a business outside your country of residence, you will have to pay for someone else to act on your behalf. Various legal documents can be used to help cover your risks, but they can never be 100% eliminated.
I’ve had a UK Limited company for 20+ years - It is good that you ask questions about tax structure, but if I can offer one piece of advice: Taxman has seen it, felt it, sniffed it, touched it, tasted it, slept with it, bedded it, bought the t-shirt and seen the movie. Avoid spending time/energy on avoiding tax, instead, think your business thru, then think about tax efficiency (increase you expenses, therefore reduce profits for example - training courses, business travel, hardware are all valid expenses, and if you are vat registered, you get to claim back any UK VAT paid).
Some extra reading: https://startups.stackexchange.com/a/3259/7909
Best of luck!
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