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Ask HN: Are there better countries to start my SaaS company for tax reasons?

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Re: Ask HN: Are there better countries to start my SaaS company for tax reasons?

#21

Post by codehotter »

Many countries, and I think most countries in Europe, have language related to "place of effective management" in their tax code. Even a corporation incorporated in Cyprus (say), it could be considered resident in Germany (say), if the tax authorities feel the place of effective management is in Germany.

Interestingly, this link says that in the US: "Generally a corporation is treated as a domestic corporation if it is created or organized under the laws of the United States, any State, or the District of Columbia. No other criteria related to place of management will cause a corporation to be domestic."

https://www.oecd.org/tax/automatic-exchange/crs-implementati...

If you do decide to incorporate somewhere else, and you manage the company from the US, make sure it's a place where the tax code also doesn't care about the place of effective management.

However, if the income is US-source, aren't you always taxed on that income in the US anyway? "A foreign corporation engaged in a US trade or business is taxed at regular US corporate tax rates, but only on income from US sources that is effectively connected with that business, and at 30% on US-source income not effectively connected with that business. By contrast, US-resident corporations are taxed based on their worldwide income."

https://www.pwc.com/us/en/tax-services/publications/assets/d...

Re: Ask HN: Are there better countries to start my SaaS company for tax reasons?

#22

Post by [deleted] »

zerr wrote: post #14
kxyvr wrote: post #8

Note, I am not an accountant, but these are my experiences running a business in the U.S. If you are a passthrough entity like a sole-propietorship, partnership, or S-corp, probably not. Note, this doesn't matter if you're an LLC or not because the IRS doesn't care. Basically, passthrough entities calculate all business income minus deductible expenses as personal income. Therefore, the amount is subject to federal a…

Wow 45%? What is this, the socialist state without any benefits of it? In Germany you pay less taxes (30%-42%) but you get free healthcare, education, 1 year maternity and paternity leave and tons of other similar benefits...

[deleted]

Re: Ask HN: Are there better countries to start my SaaS company for tax reasons?

#23

Post by [deleted] »

zerr wrote: post #14
kxyvr wrote: post #8

Note, I am not an accountant, but these are my experiences running a business in the U.S. If you are a passthrough entity like a sole-propietorship, partnership, or S-corp, probably not. Note, this doesn't matter if you're an LLC or not because the IRS doesn't care. Basically, passthrough entities calculate all business income minus deductible expenses as personal income. Therefore, the amount is subject to federal a…

Wow 45%? What is this, the socialist state without any benefits of it? In Germany you pay less taxes (30%-42%) but you get free healthcare, education, 1 year maternity and paternity leave and tons of other similar benefits...

[deleted]

Re: Ask HN: Are there better countries to start my SaaS company for tax reasons?

#24

Post by usiegj00 »

tomcam wrote: post #15
kxyvr wrote: post #8

Note, I am not an accountant, but these are my experiences running a business in the U.S. If you are a passthrough entity like a sole-propietorship, partnership, or S-corp, probably not. Note, this doesn't matter if you're an LLC or not because the IRS doesn't care. Basically, passthrough entities calculate all business income minus deductible expenses as personal income. Therefore, the amount is subject to federal a…

This answer is comprehensive and correct, especially the second half. You cannot game the IRS, period. Google and Apple have billions of dollars in the bank in Ireland they can't spend because they have tried to game the IRS.

Actually--they borrow their own money from their foreign subsidiaries to have full use of the cash in the US. Expect the incoming US president to suggest changes that allow Apple, Facebook, et al to allow this openly rather than through construction.

Re: Ask HN: Are there better countries to start my SaaS company for tax reasons?

#25

Post by [deleted] »

tomcam wrote: post #15
kxyvr wrote: post #8

Note, I am not an accountant, but these are my experiences running a business in the U.S. If you are a passthrough entity like a sole-propietorship, partnership, or S-corp, probably not. Note, this doesn't matter if you're an LLC or not because the IRS doesn't care. Basically, passthrough entities calculate all business income minus deductible expenses as personal income. Therefore, the amount is subject to federal a…

This answer is comprehensive and correct, especially the second half. You cannot game the IRS, period. Google and Apple have billions of dollars in the bank in Ireland they can't spend because they have tried to game the IRS.

[deleted]

Re: Ask HN: Are there better countries to start my SaaS company for tax reasons?

#26

Post by [deleted] »

tomcam wrote: post #15
kxyvr wrote: post #8

Note, I am not an accountant, but these are my experiences running a business in the U.S. If you are a passthrough entity like a sole-propietorship, partnership, or S-corp, probably not. Note, this doesn't matter if you're an LLC or not because the IRS doesn't care. Basically, passthrough entities calculate all business income minus deductible expenses as personal income. Therefore, the amount is subject to federal a…

This answer is comprehensive and correct, especially the second half. You cannot game the IRS, period. Google and Apple have billions of dollars in the bank in Ireland they can't spend because they have tried to game the IRS.

[deleted]

Re: Ask HN: Are there better countries to start my SaaS company for tax reasons?

#27

Post by [deleted] »

tomcam wrote: post #15
kxyvr wrote: post #8

Note, I am not an accountant, but these are my experiences running a business in the U.S. If you are a passthrough entity like a sole-propietorship, partnership, or S-corp, probably not. Note, this doesn't matter if you're an LLC or not because the IRS doesn't care. Basically, passthrough entities calculate all business income minus deductible expenses as personal income. Therefore, the amount is subject to federal a…

This answer is comprehensive and correct, especially the second half. You cannot game the IRS, period. Google and Apple have billions of dollars in the bank in Ireland they can't spend because they have tried to game the IRS.

[deleted]

Re: Ask HN: Are there better countries to start my SaaS company for tax reasons?

#28

Post by golergka »

codehotter wrote: post #21

Many countries, and I think most countries in Europe, have language related to "place of effective management" in their tax code. Even a corporation incorporated in Cyprus (say), it could be considered resident in Germany (say), if the tax authorities feel the place of effective management is in Germany. Interestingly, this link says that in the US: "Generally a corporation is treated as a domestic corporation if it…

What if the team is made of digital nomads working remotely from different areas?

Re: Ask HN: Are there better countries to start my SaaS company for tax reasons?

#29

Post by pieterhg »

If you work in the US, and most of your clients will be in the US, most tax agencies (and probably IRS, but I'm not sure) will effectively presume you're a US-based company. It doesn't matter if your company is registered somewhere else, they'll presume it as a US company. The same laws apply in most European countries.

Why? Because otherwise all freelancers would simply register in the country with the lowest tax to dodge their national taxes. Obviously governments don't want that.

If you have the opportunity to physically relocate to another country though, then it becomes interesting to find places with lower tax rates. Countries like Singapore won't care if you're a foreigner opening a company and are never there. It's mostly about your personal tax residency what matters.

An increasingly common construction with people working remotely is a Hong Kong or Singapore company, and either no personal residency anywhere (e.g. traveling around perpetually), or a personal residency in a place with lower personal tax. Think Bulgaria or Panama.

If you're a US citizen, there's extra difficulties here. You'll be taxed for any income above $100K/y, even if you're not a US resident anymore. If you don't want to be taxed in the US, you'll have to forego your citizenship (!).

P.S. IANAL.

Re: Ask HN: Are there better countries to start my SaaS company for tax reasons?

#30

Post by matt4077 »

yummyfajitas wrote: post #13

Possibly Singapore. They have very rational and simple tax laws, legal stability and are generally a good place to do business. I'd be worried about the EU, even the more corporate friendly places (Ireland, Estonia) - the recent retroactive ruling on Apple's Irish taxes make the EU seem potentially third world-like unstable. Of course, if you eventually plan to bring the money back to the US, probably incorporating i…

Yeah, well. technically all tax rulings are retroactive. And while we're disparaging other nations: I'd also be weary of doing business outside the US. There's some 3rd world president-impersonator on twitter who's talking an awful lot about punitive tariffs. (When he's not preoccupied with the size of his wall/hands/genitalia)
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