Recently I learned of the tremendous tax treat the country of Luxembourg offers companies involved in domain names.
I figured If I didn’t know about it, a lot of you may not know about it as well.
Its one of the few countries that have a special tax incentive program for Intellectual Property and specifically domains.
Its starts with a tax rate of a ridiculously low 5.7% .
Moreover you the law provides an exemption of 80% of the net positive income from the use or the right to use certain IP right, an Exemption of 80% of the net capital gain realised upon disposal of qualifying IP and 100% exemption from net wealth (estate tax) tax on qualifying IP rights
Finally domain names themselves are amortizable over 5 years instead of 15 years in the US.
You should note that some countries such as Germany do not allow domains to be amortized over any period.
Needless to say anyone considering a move need to talk to excellent counsel, accountants and the rest.
Recently NameDrive relocated to Luxembourg and another Key Systems opened an office there.
With such great tax treatment I wouldn’t be surprised to see other companies in the space located around the globe to move to Luxembourg to take advantage or even some new gTLD operators.
they have an active volcano and aliens have been known to land there…no thanks!
And also the most boring place on earth…
would rather pay higher tax and enjoy the fruits of my domain winnings…
and also the .LU TLD sounds interesting (but, unfortunately, Honolu.lu is already taken 🙂 )
Are you saying that domain name acquisitions are amortizable over 15 years in the us? My accountant has been writing them down over three…what is your number based on?
Please help!
Sam
In the US according to the best accounting advice I have been able to get domains are intangible assets amortized over 15 years for tax purposes.
Registration fees and renewal fees are deductible.
Please don’t take my word for it get your own accounting or attorney advice.
“I figured If I didn’t know about it, a lot of you may not know about it as well.”
You got that right, Pako!!!
There are many things you don’t know or not aware of….because ALL of you live in “BullS” world.
@MB “Finally domain names themselves are amortizable over 5 years instead of 15 years in the US.”
Where did you come up with the idea that domain names are ammortizable over 15 years in the US. Since they can only be registered for ten year periods I find it hard to believe they can be ammortized over longer periods of time than that. Can you point me to the source of this information please and thanks.
Yep, move all your business offshore and pay Uncle Sam nothing. That should really help restimulate the US economy and help it pay off its debts! Enjoying freedom and liberty without having to pay for it is the cats ass I suppose. Meanwhile America will continue to crumble so you may want to consider moving yourself, your family and kids to lux along with your business. Prolly no walmart or dennys there tho!
Seychelles IBC, zero taxes for me, cheap to set up a business there, 100 bucks to the government every year, and you dont even have to file accounts with anyone (if you dont want to!!).
I got a T-shirt that says “Legally Untaxable” and I love wearing it!!!
Keep it simple. Spend the money…..
Laughing???? All the way to the bank!!!!
Sorry this is a long reply, I hope it helps someone, but definitely take better advice than I can give before taking the leap!!
SEYCHELLES INTERNATIONAL BUSINESS COMPANY (IBC)
Seychelles IBC – an International Business Company – is the most popular and versatile type of offshore corporation available in Seychelles. As most other classic offshore companies, Seychelles IBC is a tax-free corporation designed for engagement into all forms of international business, with no reporting and minimum record-keeping requirements, and comprehensive confidentiality features.
Seychelles IBC is similar to the most popular international business company, the BVI IBC, and in some respects even exceeds that benchmark model of offshore corporation. Since the introduction of the Seychelles International Business Companies Act in 1994, over 30`000 Seychelles IBC`s have been registered, with more than 600 new offshore companies being registered every month.
The formation, tax benefits and general structure of a Seychelles IBC is regulated by the Seychelles International Business Companies Act 1994. A full text of the Seychelles IBC Act 1994 is available from our Downloads section.
Following is a synopsis of the most important advantages and features of the Seychelles International Business Company.
Zero tax
A Seychelles IBC, by the definition of the law, is not subject to any tax or duty on income or profits. A shareholder of a Seychelles IBC is also not subject to any tax on his income derived from the IBC. These provisions are enshrined into Article 109.(1) of the Seychelles IBC Act, stated as follows:
109.(1) A company incorporated under this Act or a shareholder thereof shall not be subject to any tax or duty on income or profits accruing to or deriving from such company or in connection with any transaction to which that company or shareholder, as the case may be, is a party.
In a similar fashion, a Seychelles IBC is also also exempt from any stamp duties on all transactions relating to its business, in particular on any transfers of property to or by the company, and on any transactions in respect of the shares, debt obligations or other securities of the IBC.
Essentially, a Seychelles IBC is a completely tax-free offshore corporation, insofar as it complies with a few simple rules of operation. The main requirement is that a Seychelles IBC should not pursue business within the territory of the Seychelles (except, of course, it may enter into business with any other Seychelles IBC`s). The law provides that all exemptions for a Seychelles IBC shall remain in force for a period of twenty years from the date of incorporation of the IBC.
In order to qualify as an IBC, a Seychelles company must satisfy the following criteria:
It may not carry on business in Seychelles.
It may not own real estate in Seychelles.
It may not do banking, insurance and registered agent business without special license.
However, a Seychelles IBC may still engage into any of the following:
It may maintain Seychelles-based bank accounts and deposits.
It may maintain books and records within Seychelles.
A Seychelles IBC may maintain professional relationship in Seychelles with attorneys, accountants, trust and management companies, investment advisers or other similar persons.
It may hold meetings of its directors in Seychelles.
It may lease a property in Seychelles to use as office from which to communicate with members and where books and records can be kept.
It may hold shares, debt obligations or other securities in another Seychelles IBC or in a Seychelles domestic company.
A Seychelles IBC may also own a vessel or and aircraft registered in Seychelles.
Shares in a Seychelles IBC may also be held by a person resident in Seychelles.
Secrecy
Confidentiality is one of the key features of the Seychelles International Business Company as details of the company beneficial owners, directors and shareholders are NOT part of public record. At registration of a new IBC, the Registrar of Companies does not require any data whatsoever on who is the actual beneficial owner of the new company. This information is only known to the licensed Registered Agent of the company and is kept in complete confidentiality. The internal corporate files of the IBC, like the Register of Members, Register of Directors and all Minutes and Resolutions, are kept at the offices of the Registered Agent and are also confidential.
The only documents of a Seychelles IBC that are held on public record are the Memorandum of Association and the Articles of Association. These documents do not contain any indication as to the actual shareholders or the beneficial owners of the company.
The Republic of Seychelles is an independent country. As such, it is not sharing or reporting information to any overseas “principal”, or organization. Seychelles is not subject to the EU Savings Tax Directive, unlike some other offshore financial centres, which are related to the EU member states (primarily, to the UK and its overseas territories).
Seychelles has avoided entering any information-sharing agreements with foreign countries or organizations for exchange of financial aid. Client confidentiality is robustly enshrined in the Seychelles corporate and business legislation. Offshore financial services sector contributes significantly to the country`s GDP. There is an inherent interest with the government and with the general public to maintain and develop the country`s status as a competitive offshore financial centre.
Provisions against confiscation
Where any foreign governmental authority, by way of nationalisation, expropriation, confiscation, force or duress, or by imposition of any confiscatory tax, assessment or other governmental charge, takes or seizes any shares or other interest in a Seychelles IBC, a Seychelles court decision may be obtained ordering the company to disregard the attempted seizure and continue to respect the rights of the shareholder of the Seychelles IBC.
Fast incorporation
Seychelles has one of the fastest Registries of International Business Companies in the world. New IBC`s are usually incorporated within 24 hours.
Competitive Government license fees
A Seychelles IBC pays a government fee of $100 at registration, and per annum thereafter. Quite uniquely, however, this government fee applies to all International Business Companies regardless of the amount of their authorized capital, paid up capital, number of shares or other corporate variables.
This effectively outcompetes most other offshore jurisdictions!
Why?
Because most other offshore jurisdictions require substantially higher Government registration fees if the authorized capital of the IBC exceeds a certain amount – usually the capital threshold is $50’000 or $100’000. There is no such restriction in Seychelles! This means that you can have your IBC registered in Seychelles with an authorized capital of a hundred million dollars and still pay the same government fee of $100.
Here is a quick comparison of this feature with some other offshore jurisdictions:
COUNTRY APPLICABLE LICENCE FEE AT MAXIMUM AUTHORIZED CAPITAL
Seychelles $ 100 No limitation
Samoa $ 300 $ 1’000’000
St.Vincent $ 100 $ 100’000
Dominica $ 150 $ 100’000
Nevis $ 220 $ 100’000
Belize $ 100 $ 50’000
Anguilla $ 230 $ 50’000
Bahamas $ 350 $ 50’000
Cayman Islands $ 600 $ 50’000
Panama $ 300 $ 10’000
Cook Islands $ 300 $ 5’000
Apart from Seychelles, there is just one major offshore business jurisdiction where the minimum applicable licence fee is not pegged to a limitation on authorized capital – it’s the British Virgin Islands. However, even in the BVI the capitalisation is restricted differently – to a minimum number of shares (50’000), regardless of the face value of share.The BVI Government licence fee is higher, too, at $ 350.
No paid-up capital required
A Seychelles IBC is not required to have any minimum paid-up capital in order to start its business operations. Any amount of authorized capital can be stated in the IBC formation documents, as required by the owners. (Authorized capital is a notional amount of capital that the company is allowed to draw from its shareholders in consideration for the company shares.) The amount of the authorized capital can be freely determined at incorporation by the owners of the IBC and there are no mandatory timeframes as to when such capital must be paid up by the shareholders. All in all, the capital structure of a Seychelles IBC can be extremely flexible and can accommodate all variety of business circumstances and needs.
No financial reporting
Seychelles International Business Companies are not required prepare or file any financial accounts. The IBC is free to arrange its accounts in any manner that is most fit for the company owners, so as to enable them to establish the financial position of the Company with reasonable accuracy.
Flexible corporate structure
A Seychelles International Business Company has an independent legal personality and possesses the same powers as a natural person.
A Seychelles IBC requires a minimum of only one shareholder, and one director, both of whom may be the same person. There is no requirement to have any local directors or shareholders and foreign individuals or corporate bodies can be shareholders or directors of a Seychelles IBC. Apart from the director, the company does not have to appoint any other officers.
The shareholders, directors and officers of a Seychelles Business Company may be individuals or corporations and of any nationality. The shareholder’s or director’s meetings need not be held in the Seychelles and there is no requirement for a regular Annual General Meeting.
Meetings can be held by telephone or other electronic means; alternatively, directors as well as shareholders may vote by proxy.
The corporate structure of the Seychelles International Business Company can be designed in accordance with the widest variety of requirements.
A large variety of the type and form of shares
A Seychelles IBC may issue registered shares or bearer shares, and any of these may be designated as voting shares, non-voting shares, shares having more or less than one vote per share, shares that may be voted only on certain matters or upon the occurrence of certain events, shares that may be voted only when held by persons who meet specified requirements, no par value shares, unnumbered shares, common shares, preferred shares, redeemable shares and shares that entitle participation only in certain assets.
Bearer shares
A Seychelles International Business Company may issue bearer shares, however there are legal restrictions to their issue and transfer. Under the Seychelles IBC Act, in case any shares are issued to bearer, the Registered Agent of the company (us), must still keep a record (a Register of Bearer Shares) where the names and addresses of all individuals, to whom the bearer shares have been issued, are recorded. A subsequent transfer of a bearer share will not be effective until the name of the new holder of a bearer share is recorded in that Register. Thus the issue or transfer of bearer shares in a Seychelles IBC can not be carried out anonymously, which largely negates the necessity to have bearer shares in the first place. A further argument against using bearer shares is the fact that most banks are extremely reluctant to open bank accounts for bearer-share companies.
Name requirements for Seychelles IBC`s
A Seychelles IBC may not be registered under a name that is identical to the name of an existing Seychelles company. The registration of a new IBC may also be refused if its name so nearly resembles the name of another company as to be calculated to deceive, except where the (other) company gives its consent.
The “restricted names” for a Seychelles IBC are those that contain the words “Assurance”, “Bank”, “Building Society”, “Chamber of Commerce”, “Chartered, “Cooperative”, “Imperial”, Insurance”, “Municipal”, “Trust”, “Foundation”, or a word conveying a similar meaning, or any other word that, in the opinion of the Registrar, suggests or is calculated to suggest the patronage of or any connection with Seychelles or the Government of Seychelles or with any other country or the Government of that country. The Registrar may permit the incorporation of a company under a name that includes the word “Seychelles” if the Registrar thinks there is a good reason for doing so.
The Registrar may also refuse the registration of any particular name if, in the opinion of the Registrar, such name is indecent, offensive or, in the opinion of the Registrar is otherwise objectionable or misleading.
The name-endings denoting the type of company
The name of a limited company, shall end with a word or abbreviation denoting a corporate body or limited liability. The most popular name-endings include any of words like “Limited”, “Corporation” or “Incorporated”; the words “Societe Anonyme” or “Sociedad Anonima”; the abbreviation “Ltd”, “Corp”, “Inc”, “GmbH”, “AG”, “OY” or “S.A.”; or several other word or words, or abbreviations thereof. The actual choice of available corporate endings of the name of a Seychelles IBC is very wide, including abbreviations in many European languages. The full list of those endings and abbreviations can be found in Part III, Section 11(1) of the Seychelles International Business Companies Act – available in the Downloads section of our website
Main characteristics of the Seychelles International Business Company
FACTOR DESCRIPTION
Income tax and business tax in Seychelles None
Conduct business internationally Yes
Conduct business within Seychelles No
Formally considered as resident in Seychelles No
Official language / language of documents English
Operational objects General clause, may be specified as required
Minimum paid-up capital No minimum requirements
Optimum amount of authorized capital (maximum amount at minimum Government fee) No limitation
Government license fee USD 100
Considerations to the capital In any currency or in kind
Bearer shares Allowed
Minimum number of directors One
Minimum number of Members (shareholders) One
Non-resident directors Allowed
Corporate directors Allowed
Registered Agent and Address in Seychelles Required
Register of Directors To be kept by the Registered Agent
Register of Members To be kept by the Registered Agent
Register of Members filed for public record No
Disclosure of beneficial owners to Registrar No
Disclosure of beneficial owners to Registered Agent Yes (confidential due diligence)
Holding of Annual General Meeting Not required
Convention of Meetings of Directors / Members Anywhere in the world, also by proxy
Corporate Minutes and Resolutions To be kept by the Registered Agent
Corporate Seal Not required
Keeping of accounts Not required
Auditing of accounts Not required
Filing of accounts Not required
Access to double-tax avoidance treaties Not available to IBC’s
Subject to currency controls / restrictions No
Redomicile a foreign company into Seychelles Yes
Redomicile a Seychelles company abroad Yes
Net time to incorporate 1-2 business days
Ready-made (shelf) companies Available
I purchased an off the shelf company in Luxembourg for various tax reasons and you are quite right, for many the tax advantages to serious domain investors is very appealing.
Taxed
Again this comes from my accountant and you need to get your own advice.
But unlike Luxembourg the words “domain name” do not appear in our tax code which as you know is as thick as a phone book
So the tax code doesn’t speak to domains at all, specifically.
But they seem to fall into the definition of an intangibly asset which the code provides for amortization over 15 years.
Can you point me to the section of the code which says you can deduct it over a shorter period?
Another way to go about domain names is to treat them as exotic securities.
@Tim
Regarding the Seychelles IBC, is a registered office not required for this ?. Any chance can say what total costs are per year ?. Thanks anyway for the pointer.
Mike
These people offer a great service for setting up Seychelles companies and other offshore structures.
http://www.portlandservices.com
@Mike
Paying for a Registered Office vs Paying “The Man”
No Brainer, but you got to do your research.
Good luck!!
Nic post. Have a doubt.
Okay, you pay less tax in Luxembourg or Seychelles. But how do you get the money in your bank account back home?
Wire Transfer? Won’t you be required to pay tax when the money comes back?
I dont know the ins and outs of it all, but did I earn any money in the country I am living in?? am I liable for tax if I didnt earn anything in that country?? all I know is if I got a bill, I pay it. If I want cash, I put the plastic in the wall. Just spending my money 🙂
As a US citizen (and I suspect most of you are) you have to declare all income from ANY source.
This includes income received from outside the US, as well as income if you work overseas (the latter is called “foreign earned income”).
A significant amount of “foreign earned income” (the first approx. $90k) is not taxable under the tax code (so if you work as a private contractor in Iraq this is quite lucrative), but you also have to physically live and work in the foreign country for >180 days of the tax year.
Otherwise, ANY income (including money you RECEIVE from an offshore IBC) needs to be declared on your tax return.
So as long as you leave the income with the IBC you are o.k., but if you try to take money out for yourself or bring it back into the US you are subject to US tax laws (with all potential consequences if you try to evade them and get caught)…
Chris is correct. Unless you are planning on paying yourself nothing, or moving out of the U.S., this is not a great tax advantage.
@ S Try The advantages over a conventional company is that dont have to pay for audtiors/accounts to prepare accounts for a Company, can hide the real owners of the company more easily (especially if have some UDRP decisions against you already) and IF ,and I say IF, you gamble on getting away without declaring income then can help there (I am not advocating that at all and myself wouldnt). It can also be helpful in other ways im sure.
just FYI, mchx did amortization over 3 years for the UltSearch portfolio.
There case studies dealing with domains as far back as year 2000 that suggest 2.5 to 3.5 years amortization and NOT 15 years.
The case examined drugs.com purchase for $800k and how to treat such asset sales.
Thanks FX, that is good to know that my accountant had some basis for their decision.