Are you an Online Game Developer? Are you planning to design and or launch a new game?
If so, you’ll be pleased to know that such an enterprise lends itself well to an “Offshore” Corporate structuring Plan.
Howso???
A video game is a Digital Asset.
Whenever there is economic disruption on a major scale (such as we are experiencing presently thanks to the Corona pandemic), opportunity comes knocking.
People working from home and or with more time on their hands are starting to realize that valuable digital assets can be sold online and there is more demand for such products than ever before.
Examples of digital assets include:
- EBooks
- Original music (including beats, jingles, film music , ringtones etc)
- Videos (eg original films, tutorials etc)
- Photos (eg for website use, Look up tables, mock up images etc)
- Icon designs/artwork (eg business logos, business cards, website home pages etc)
- Video/Online games
- Software (eg add ons/plugins for video games, website templates etc)
- Knowledge (eg Coaching, teaching, financial, legal etc)
- Marketing services (eg Email campaign templates, add flyers etc)
What do all these products/services have in common?
They can be marketed and delivered online.
Online and Offshore
A business where goods or services are advertised for sale, and delivered, online lends itself (extremely) 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 or Online Product/Sale portal 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)
- Your website/landing page should 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 customer’s 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 or text 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).
If you plan to raise sales revenue by charging a recurring subscription fees that business model can also work using an Offshore Company – Check our Blog article logged 28.6.20 “How to set up a subscription based startup business tax free offshore” which explains how.
If you plan to also manufacture the game you might be wise to set up an IP Holding Company PLUS a Trading Company. In this scenario the IP Company (which would be based in a nil tax jurisdiction) would hold/own the IP (“Intellectual Property”) behind the game (including source code, character designs, logos etc) and would issue a License to the Trading Company (which could be incorporated onshore or in a low tax, or potentially, in a nil tax) jurisdiction, to commercialize the IP/turn it into a product and sell it in the market place. (ie the Trading Company would pay royalties ort license fees as agreed to the IP Company).
Such a structure can potentially deliver tax optimization, asset protection and more flexible business sale options (eg you could sell the Trading Company but retain the IP Company and draw passive income, potentially indefinitely, even after you’ve exited the business!)
For details check our Blog article filed 7.7.2019 “How and why to set up an Offshore IP Company“ + check out our most recent Blog article (ie set out below) which sets out some useful ideas in terms of where you might want to set up an IP Holding Company.
Would you like to know more? Then please Contact Us:
info@offshorecompaniesinternational.com
DISCLAIMER: OCI Ltd are not Tax advisers or Legal Advisers. You should seek local tax, legal and financial advice before committing to set up an Offshore Corporate or Fiduciary Entity.
