I am slowly going forward with a plan to move my business to an offshore location. I've done a lot of research on the tax planning side of things (organizational structure, etc.)... but that is only one of the issues.. and is not something I want to discuss in this thread. (If you have offshore tax planning or company structure questions, please start your own thread.)

What I want to discuss and ask your opinion/suggestions about are the "logistical" and "practical" aspects of moving my company offshore.

I have some fears and concerns about the "other" issues, and perhaps you can help me to resolve them:

** NOTE -- this is not a request to provide recommendations for companyxyz. That is not what I'm interested. A simple google search reveals many companies offering all kinds of offshore services.. so having you refer a bank, merchant account provider, or whatever is not the purpose of this thread.

The purpose of this thread is to try and address the fears I have, regardless of what bank, merchant processor, incorporation company I select.

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1. If the offshore bank fails.. poof.. my money is gone.

One of the big advantages of banking in a 1st world country (Canada, USA, Europe, etc..) is they all offer both FDIC-style deposit insurance. This has recently saved the money of many US banking customers as dozens of US banks collapse. The deposits/savings are insured, so the customer doesn't lose their money even if their bank disappears.

Do any offshore banks offer deposit insurance? (http://www.webhostingtalk.com/showthread.php?t=890463)

2. What is to stop the offshore bank from simply walking away with my money? Or the country from "nationalizing" any foreign bank accounts or businesses? How do I protect my money from that kind of risk?

(For example, like what Cuba did many years ago when they basically "took over" all US owned businesses, including the businesses assets.)


3. Without actually going to the offshore country, how can I find a reputable bank or merchant processor? Or how to find a reputable company to handle the company incorporation tasks?

Look at google (or the ads & offers forums here) and you will find a hundred different company's advertising "offshore bank introduction", "offshore company incorporation" services and offshore merchant accounts. All of them are the same sort of website, and claim to be the best, cheapest, most trustworthy, etc... Yet we hear over and over various stories from upset customers who were suckered into wasting their money (ie: outright theft by the advertising company), or worse.. losing their money after a year when they discover they've ended up with something they didn't need or want or understand. (ie: An offshore company that isn't properly incorporated or structured, etc...)

Is there a place where I can find reliable referrals to different companies that provide offshore services? (ie: Not just referrals from people who have "heard about" some website.. but actual trustworth referrals from actual happy business owners who are actually running their company offshore.

4. What if the offshore merchant account is not as reliable as what I am using now?

Please don't misunderstand this fear. I fully realize that offshore merchant accounts are more expensive then (for example) a high quality onshore solution offered by CDGCommerce.com (I use them now), etc... Cost isn't the issue here. (I already understand I will need to pay more for offshore processing.)

My fear is that the offshore network will be unreliable or that the processor will reject my customer's cards for no valid reason, or basically just end up being bad. It's a lot of work (not to mention expensive and very inconvenience) to change merchant accounts, and I don't want to risk losing business revenue if I wake up one day and the offshore merchant processor has canceled my account, disappeared, or simply unable to reliably charge my customer's card.

How can I find the "CDGCommerce equivalent" of offshore processing? (ie: Not necessarily the lowest pricing, but definately the best customer service, reliable network, etc.)

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I'm certain these are the same fears every business faces when considering to move offshore. So for those of you who have taken the leap... what advice or opinion or recommendations can you give?

Thanks!

:)

MrZippy

Welcome to the forum!
Wow, you have quite a list of questions and I can see you're taking your business seriously... congrats.
Although I can't answer all your questions, perhaps I can offer a bit of advice on a couple of them:

re: 1. If the offshore bank fails.. poof.. my money is gone.
One of the big advantages of banking in a 1st world country (Canada, USA, Europe, etc..) is they all offer both FDIC-style deposit insurance. This has recently saved the money of many US banking customers as dozens of US banks collapse. The deposits/savings are insured, so the customer doesn't lose their money even if their bank disappears.
Do any offshore banks offer deposit insurance?

I would say there is a huge difference in 'offshore' vs 'EU' etc. Many people categorize anything outside of the US or UK as being 'offshore' when in fact that is not the case. There are several EU banks that are older and more stable than some of the US banks! If you are looking into tax advantages then I'm sure you are familiar with how far reaching the EU is nowadays.

Secondly I'd add that it all depends on your business product. For example, a brick and mortar clothing store might be able to get a merchant account with an EU bank that provides insurance .. on the other hand, a pharma e-commerce selling controlled substances could not. As you can see there is no one full-encompassing answer for you. It comes down to what product/service you are selling. From there, a good independent merchant provider can decide which bank best suits your needs.

re: 2. What is to stop the offshore bank from simply walking away with my money? Or the country from "nationalizing" any foreign bank accounts or businesses? How do I protect my money from that kind of risk?

Again, that depends on the country who's bank/processor you establish a relationship with, and the reputation therein. As you pointed out, Cuba (as well as Venezuela and other S.American countries did) 'nationalized' and whomever was affected had no legal recourse. If you do NOT have a tremendously high risk product/service, I suggest you stick with more mainstream countries for merchant accounts and processing. It's not like you'll hear of Spain, Germany, UK or others 'nationalizing' anytime soon and many of their banks hold strong ethical standards for their clientele.

re: 4. What if the offshore merchant account is not as reliable as what I am using now?

This is what most US based clients ask me. I always answer the same:
1. There are NEVER any guarantees - (EVEN in the US banks!)
2. If you have low or moderate risk products/services, stick with historically stable countries for processing.
3. If you have super, high risk products/services .. re-read number 1.
4. If you have enough processing volume, consider taking small steps and dividing your processing between a new solution and the US solution you already have - until such time as YOU feel comfortable to move it all out of the US. Obviously you'll have cross-border processing issues to sort out but those can be handled properly if you are as business conscious as you seem to be.
5. Deal with a provider that you feel comfortable with! If you are asked to fill out applications before they'll bother to answer your questions or address your concerns .. find another.
If you are asked for money up-front (before they provide a processing solution for you)... find another.
Find someone who takes the time to understand you, your concerns and your business model.


I hope these small insights help at least a bit. Good luck with your venture, I'm sure you'll do just fine! :D

Thanks very much for your response. This is good information. :)

I would say there is a huge difference in 'offshore' vs 'EU' etc. Many people categorize anything outside of the US or UK as being 'offshore' when in fact that is not the case.

My principle reason for wanting to move my business "offshore" is to lower my corporate tax requirements...

.. so my definition of "offshore" is any country that has low or no corporate tax charges.

It seems there is definately a trade-off between picking the offshore country, and the political stability of that country. The more "benefits" (low or no corporate taxes) appear to be with the countries that are the most risky.

Secondly I'd add that it all depends on your business product.

My business is selling web hosting service and software programming.

If you do NOT have a tremendously high risk product/service, I suggest you stick with more mainstream countries for merchant accounts and processing. It's not like you'll hear of Spain, Germany, UK or others 'nationalizing' anytime soon and many of their banks hold strong ethical standards for their clientele.

That's excellent advice. What do you think about something like this:


The company is registered in offshore Country A, which has low or no corporate tax requirements. (Panama, etc.)

The company cash/savings bank account is opened in offshore Country B, which is more "stable". (Cyprus, Singapore, etc.)

The company merchant account is opened in offshore Country C, which is more "stable". (Cyprus, Singapore, etc.) Cash is moved from the merchant processing 'operating' bank account to the company cash/savings bank account.


What do you think of that kind of setup?

Given today's costs of offshore setup, it's advisable to have multiple offshore bank accounts in various jurisdictions, either under the same offshore company or separate offshore companies. The costs are not prohibitive and provide you with protection against the whole "eggs in one basket" scenario.

The company is registered in offshore Country A, which has low or no corporate tax requirements. (Panama, etc.)

The company cash/savings bank account is opened in offshore Country B, which is more "stable". (Cyprus, Singapore, etc.)

The company merchant account is opened in offshore Country C, which is more "stable". (Cyprus, Singapore, etc.) Cash is moved from the merchant processing 'operating' bank account to the company cash/savings bank account.


What do you think of that kind of setup?
This would not work. You can open bank account anywhere as long as you find bank willing to open bank account for your offshore company. For getting merchant account it is more difficult. For Panama company you can get it only with Panama bank, for Belzie company only with Belize bank, so if you would like to get merchant account in EU for your Panama company you would need to set up EU company owned by Panama company.

Thanks very much for your response. This is good information. :)



My principle reason for wanting to move my business "offshore" is to lower my corporate tax requirements...
.. so my definition of "offshore" is any country that has low or no corporate tax charges.

My business is selling web hosting service and software programming.

What do you think about something like this:


The company is registered in offshore Country A, which has low or no corporate tax requirements. (Panama, etc.)

The company cash/savings bank account is opened in offshore Country B, which is more "stable". (Cyprus, Singapore, etc.)

The company merchant account is opened in offshore Country C, which is more "stable". (Cyprus, Singapore, etc.) Cash is moved from the merchant processing 'operating' bank account to the company cash/savings bank account.


What do you think of that kind of setup?


U4t is correct, you need to keep everything in the same jurisdiction. If you want an EU merchant account, then you need an EU corp with EU bank acct. EU is a different jurisdiction than Panama, US, etc...

If the reason is as you described, I suggest putting out a hundred bucks for a tax attorney that knows international regulations.
For example - if you incorporate in Cyprus (which is part of EU) but do not physically do biz in Cyprus, you are exempt from Cyprus taxes, etc etc.
There are several hidden hurdles yet just as many hidden havens so it's always best to have an international tax guy evaluate your individual needs - in my humble opinion. :)

hope this helps!

As already mentioned, then you will need to have your company formed where it also is possible to open a merchant account. Cyprus is a perfect place to incorporate also if you need a merchant account, since it is part of the European Union, most banks in Europe will accept you as a merchant if incorporated duly.

Have in mind, not all banks will accept you and it still depends very much on what type of business you are doing, and if your website comply with the Visa / MC regulations.

Further, you will need to have the right company structure in order to get excempted from tax... their are a few things to consider before you go ahead with this.