We are often asked by Ecommerce clients “Can I get a Merchant Account for my Offshore Company with Stripe or Paypal”?
Recently we approached Stripe and Paypal and asked them what Offshore Company Jurisdictions they would and wouldn’t accept.
Here are the responses precisely as received from Stripe and Paypal:
I have taken a look within our system and official documents and could confirm that Stripe (for payments processing) is not currently available locally in either British Virgin Islands (BVI), Seychelles or Belize.
- You can check this information in the link below: https://stripe.com/global
- However, you could use Stripe Atlas to form a company in Delaware and obtain a U.S. tax ID. The one-time fee to join Stripe Atlas is $500.
- From the countries you have listed above, Hong Kong and Singapore is supported
- Hi! Thank you for contacting PayPal my name is John. You can create a PayPal account under British Virgin Islands, Seychelles, and Belize. In terms of receiving payment you would need to contact PayPal support for each country as we do have different supports handling each Country.
How to Setup an Ecommerce Business using a Tax-Free Offshore Company
The Corona Virus has seen a stampede of entrepreneurs rushing to get set up online. If that’s you (ie if you’re looking to launch an Ecommerce Store Online) you’ll be pleased to hear/read that such a business lends itself (really) well to an “Offshore” Corporate Structuring Plan. Here’s how it usually works:
- A nil tax offshore company (commonly an International Business Company “IBC”) is incorporated to own/operate the business
- You design/launch a website which is owned by the Offshore Company
- The IBC owns all proprietary items (including also the/any Trademarks, Operating software/systems, soft products to be delivered to customers etc)
- The website ideally should be hosted in a nil tax/private Jurisdiction (Iceland is currently the most popular destination for such web hosting, Singapore is also often favoured)
- The clients find you and/or contact you via the web
- The IBC is seen to be managed and controlled from (and ideally beneficially owned from, see below) Offshore. This is achieved via the appointment of a (nil tax jurisdiction based) “Nominee” director.
- Your standard sale agreement/website terms and conditions should provide (a) that a contract is not formed until the customers offer is accepted by you (ie the Offshore Company) and (b) that the source of the income is the contract. Before the client clicks buy he/she clicks on a button acknowledging that he/she has read and agrees to be bound by your terms & conditions
- Acceptance of the buyer’s offer would be provided by the Company (which is seen to be managed from “Offshore” via a nil-tax-jurisdiction resident Nominee Director) sending an email to the buyer, after he/she has paid online; In simple terms what that means is that the situs of the Contract ie the place where the contract of sale (ie the agreement between you and the buyer for you to supply goods in consideration of the buyer paying), at law, is formed is the director’s location ie a nil tax environment…
- Hence the income – from which the contract of sale is the source – has been/is derived, prima facie, in a zero tax jurisdiction (every time a client buys and you send an email thanking him for payment that concludes as contract of sale at law)
- An Offshore account (which can/will also be set up to receive card payments via a merchant account) is opened in a nil tax banking centre
- Customers/clients contract with and pay the IBC; All such monies are banked free of tax in the first instance
- You or your local company would/could be contracted by the IBC to manage sales/delivery of product/website maintenance/whatever
- (If you need a regular income) You would invoice the IBC periodically (eg monthly) for this service which income would be assessable income in your home state – though a smart Tax Accountant should be able to assist you to claim a series of expenses against this income (eg home office, equipment, travel, phone/internet/utilities etc) to significantly reduce the amount of tax payable on this income
- Ideally once you start to grow you and to add substance you would be wise to set up your MD/Board and or a sales team to take orders and receive income in a low tax onshore environment (eg Hong Kong, Ireland, Singapore, Cyprus etc as per the Amazon/Google model).
As alluded to, in order to minimise the chances of the IBC being taxed onshore, ideally, the IBC should/would be (and be seen to be) managed and controlled from Offshore. How this can be achieved is by including a Nominee Director as part of the Corporate structure.
Ideally – so you can swear on oath in the event of a tax investigation, law suit or regulatory inquiry – I am not the beneficial owner of this Company, (which should enable your lawyers to be able to argue, in the event of an investigation, sorry this is tax deferral not tax evasion) you will probably want to set up a Private Foundation to act as the shareholder of your IBC. (This should also assist you to get around CFC rules ie if you live in a country which has such regs).
With a bespoke legal/admin structure in place you should only be liable to declare and pay tax on income paid to you by the company (and/or on any distributions paid to you by the Foundation); The rest of your ECommerce store earnings you should be able to accumulate, and or reinvest, Offshore in a nil tax environment. Tax should only be payable when you sell the business (unless at that time you’re living in a nil tax country) enabling you to grow your capital far quicker during the lifetime of your business thanks to the power of compounding.
Similarly, if a product that you sell doesn’t perform and a customer tries to sue you the good news is your personal assets should not be at risk as the customer has contracted with a limited liability Company (ie the Company carries the legal risk, not you personally). Moreover, having your business incorporated Offshore in a foreign/strange land is of itself a deterrent. (Have you ever tried to sue/get money out of an “Offshore” Company? It’s the Litigation Lawyers equivalent of climbing Mount Everest!)
Local laws can have an impact. Hence you should seek local legal/tax/financial advice before committing to set up an IBC for such purposes.
Would you like to know more? Then please Contact Us:
DISCLAIMER: OCI is a Company/Trust/LLC/LP/Foundation Formation Agency. We are not tax advisers or legal advisers. You are advised to seek local legal/tax/financial advice in regards to your local reporting/tax requirements before committing to set up or use an Offshore Company or other entity.