You may raise your eyebrows and scream: Its an offshore tax evasion!
No it's not, not according to my research.
I have been running under the AE scheme since 2 years now but need to change the legal form in order to be a fully registered VAT company with all its dis- and advantages.
I have discussed in past with an expert comptable about setting up a Microenterprise, SARL, SAS and it seems that the most recommended legal form is a SAS (Société par actions simplifiée)
Another option I have been researching would be to create a LTD in the UK (very easy and uncomplicated) and manage a subsidiary here from France. Setting up a LTD in UK literally can be done in less than 48 hours.
According to all information I have read this is COMPLETELY Legal and besides attracting likely more 'control' by the impots not a way to escape taxes.
You may have some advantages sure, but the primary is that the LTD is more uncomplicated in the setup and running, or closure, you have limited liability (just like any SARL, or SAS) and have less fees should you decide to attract investors (unlike a SARL where most fundamental changes in the statute have to be signed $$$ by a notaire (you get the 3 symbols?).
NOW I haven't talked to a professional to get proper advice, I'm posting it here first just to get a quick feedback and see if its a feasible option to begin with.
Being that so many in here are from UK someone must have thought about this before me?
Working under the MicroEnterprise or AE is not feasible option any longer for me. Keep note that also part of my business activities are done out of France (maybe half), ie. elsewhere in Europe. So this can have an advantage again if the LTD is registered in UK.
Your feedback is very, very welcome! ;)
Cheers - Ivan
Yes Ivan, I’ve a PLC in Ireland and spent a couple of years also registered here as an AE but decided not to use the AE route at all in the end. I can allocate all the expenses to the PLC but obviously can’t reclaim French VAT.
Ok John, I now get your original question. It sounded inquisitive threatening ;)
The main issue around AE and MicroEnterprise is not being able to 'charge off' expenses. As you say: some business are a created to declare personal expenses and not make a buck.
Substantially is there a difference between Micro and AE ?
As an AE you wouldn't be allowed to be employed working for one company only.
There are always loopholes around of course.
Oh sure, I agree. I wrote avoiding not evading. The transfer price will dictate where the tax (or bulk of it) is paid. One could even make a loss in one jurisdiction if it suited.
By the way while we are here I pose a question: there is no substantial difference between a Micro and an AE ?
I have browsed the web for an answer and there is some conflicting information as it appeared to be separate once and now just the same.
Appreciate if someone could correct me here.
I'm sure Carl hasn't setup this system in order to make a loss.
He clearly stated that both entities pay the right taxes.
And does the micro rent out your building at a commercial rate or are you tax avoiding?
Sarah,
I believe that UK Ltd. companies can now be formed with just a single shareholder. (Since the Companies Act 2006 came into force.)
Thanks John, yes there will be surely regulations that I have to deal on a local level.
The main advantage: its not going to affect my main business and kept to minimum.
If my business activities become very much focused on France I'd have to .... eventually opt to have a SAS (which is almost like the LTD) in France.
I don't think that for international trade a SAS is a necessary (and good) thing being that I sell also to other EU countries + I can open a market in UK then.
Thanks Brian, your confirming all points I had so far thought trough.
Sole trader = limited in setting up a subsidiary. I now understand that running a microenterprise as Carl suggested below would mean I can leave out the option of setting up a subsidiary in first place. This must be investigated, whether one is preferably to the other. Dealing with one enterprise and its daughter could mean less paperwork , perhaps.. I'm not sure if the French legal system allows a subsidiary when in fact there are no real people besides the directing manager and a virtual secretary in the mother company (LTD).
The Tax and VAT arrangments in UK are pretty straightforward. I'm not tax shy either (in the end we all have to pay that creepy dollar) I just want to avoid complicated setups and running costs and bad surprises (the redtape).
I will likely sign up as managing director and will be sole shareholder. I think I can do this as a LTD not as a SARL where you normally have to be 2 in order to make that 'society'.
I want to keep the option open for a investor or future partner, that's why the LTD would be better way to start. Also generally a LTD is seen better way for doing international business (maybe just the name).
Thanks for sharing. In Penang they make fantastic food, it was my perfect spot to feast on local delicacy. Just mentioning it (along with Bangkok) makes me salivate (I've got some boring cup of tea near me, with milk of course:)
Cheers! Ivan
Carl , that means your micro invoices the clients via UK LTD to your clients. And once a month the micro would file in a invoice to the LTD for 'its service'. Am I correct?
That's the way forward I think and completely legal (and as you say makes both tax man happy, I see the advantage mainly because the business is kept in UK where running a LTD means less bureaucracy )
Awesome, that's the info I needed to hear.
So the microenterprise is running the show while the LTD owns and builds assets.
As a microenterprise I'm not allowed to declare expenses (just like AE) correct?
That would not be a problem since the main company can take care of that (the LTD).
I could not do this by having a AE because I cannot work for myself and only myself.
My understanding would be Ivan that your French subsidiary would need to be a French registered company of some description or other. I doubt that the fact that it is owned by a UK PLC would exonerate it from any French regulations if it is trading in France.
If you register with Companies House as either a company or sole trader you have a similar status, but a limited liability company is probably best. Ltd means a limited company, the liability of members or subscribers of the company is always limited to what they have invested or guaranteed to the company. It does not really matter whether you are a single director, thus managing director or one of a board of two or more, but it helps when registering because they have more than a single signatory. If you look at the register of companies you will see how many companies start with two but one resigns after a while. I am not business oriented so am not sure why it is that way but there has to be a reason. I did not really look at the rules, simply signed. I am still director of two non profit making companies, basically charities allowed to sell things, but then there are several directors in both cases. A sole trader is the exclusive owner of a business, there are no other directors, entitled to keep all profits after tax has been paid but also personally liable for all losses. When my ex-wife and I set up a research group and a small publishing company we registered them as a company ltd, with the same idea as you, to trade in another country as well. She continued to own the company when she lived in Bangkok, later Penang, up until she died when it folded. Fortunately it had no debts. However, had it ever been set up under her name only as a sole trader she would never have been able to have a subsidiary in the other countries because UK registration does not allow for it. Both are better than the French systems for sure but having only been on company boards in the UK I don't know what the tax and possibly VAT arrangements are. You certainly have to bookkeep in both countries and submit accounts annually to Companies House, doing that twice would not suit me - I am a world record bad bookkeeper :-(
Hi Sarah, Thank you.
I would prefer to registered as a LTD company because having a subsidiary in France would allow me to be 'legally' working from here.
I'm not sure if I can setup a subsidiary being registered as a sole trader in the UK ?
(So yes living in France may likely make a difference)
Also in order to attract potential investors or have a partner hooked up in later instance running under a LTD is more advantageous.
My main concern is that I don't want to run into problems on a legal basis while living and operating in France.
My residence is in France and I will continue to pay taxes here (and VAT likely there in UK).
Cheers - Ivan
Hi Ivan, You don't need to be a Ltd company in the UK to be VAT registered. You can register as a Sole Trader and still apply for VAT registration. Unless you need to go the Ltd company route thereby needing an additional shareholder etc you might want to consider Sole Trader status too.
Though I am not sure if living in France makes a difference?
Hi Ivan
we find ourselves in a similar situation and was just wondering how you got on with this?