Splitting a business or setting up an offshore company? - YouTube Income

TripleAce · 18-05-2021 03:27PM #1

Hi,

I have an LTD. company setup here in Ireland - the income comes from different YouTube channels that I own and at the moment my income is just about under the 37.5k/year (rolling 12 months) threshold for not having to pay VAT, however this will be changing soon as earnings are growing fast, and so if I want to continue I would need to apply for VAT. As Google is incorporated in Ireland, Ireland is the only EU country where VAT is charged on YouTube/Adsense revenus (FML) and 23% would be massive and would hardly even justify for me continuing this, considering that if one day I decide to pay myself (I am not taking money out of the company at the moment as I have a day job and other incomes) I would need to also pay 52% taxes on it (40% income tax + 8% USC + 4% PRSI) - I would be basically working for free.
The business has also very little expenses, so claiming VAT on purchases back won't mean much.

I am looking into different options and would like to hear some opinions, maybe from somebody who went through the same issue.

1) I was thinking to split the company into 2 or more companies. The nature of my YouTube channels is Education, and basically I have replicated the original channel in different languages. Would it be legal to split the business? I would then have different Adsense accounts for different channels and I should be able to stay under the 37.5k threshold for longer.

2) Setting up an offshore company. I have looked into different options and it seems very easy and straight forward to setup a business in Estonia. Corporate Tax would be paid only on distributed profits and if goes between 14-20% and I won't need to charge VAT on YouTube income.
I wonder if anybody here has setup a company in Estonia? When I check this website I read "the corporate income tax rate on regular profit distributions was lowered from 20% to 14%, but only in cases where dividends are paid to legal persons" - what do they mean exactly with "legal persons"? As a company director, would I be a legal person? It is quite a difference between 14% and 20% so I would be curious to know.

Thanks in advance to anyone who can help.

DmanDmythDledge · 18-05-2021 09:13PM

Regarding the offshore company point, I think the company will still be Irish tax resident if deemed to be managed and controlled from Ireland. It would depend on Estonia rules also and DTA but I'd be surprised if not considered Irish tax resident.

TripleAce · 19-05-2021 05:05PM

DmanDmythDledge wrote: »

Regarding the offshore company point, I think the company will still be Irish tax resident if deemed to be managed and controlled from Ireland. It would depend on Estonia rules also and DTA but I'd be surprised if not considered Irish tax resident.

I would still be Irish resident and pay income tax, USC and PRSI on my personal income here in Ireland, however as the company would be registered in Estonia and there is a treaty in place with Ireland, I would only pay corporate tax in Estonia.
Estonia is a bit of a tax haven (as Ireland is for corporations) as it is very digitalized and apparently is very easy to open a company there and a lot of companies are getting opened every year by non-residents who want to have a company based in EU.
Other good locations in Europe would be Cyprus, Isle Of Man, Georgia, etc. but it looks more complicated (and in some cases much more expensive) to setup a company there.
I am currently looking into all different options, found a bunch of good info on YouTube.

DmanDmythDledge · 25-05-2021 08:52PM

Fair enough. Just be wary, the Ireland Estonia DTA says both countries have to agree on the residency status of the company if deemed to be resident in both countries, which it will be in this case. So its possible it will be Irish corporation tax resident.

Furthermore, its probable/possible the company, if not Irish tax resident, will be deemed to be operating through a branch in Ireland - so subject to Irish taxes irrespective of residency. There's way way way more to applicable corporation tax than where a company is incorporated. Based on a high level overview of the facts I think the company will be subject to Irish CT one way or another.

Also, if you're suggesting at the end of your post you're using YouTube for tax advice you're mental!

Cilldara_2000 · 27-05-2021 04:48PM

On the VAT issue. If google are a VAT registered Irish business, why wouldn't they pay you your normal "fee" plus VAT? They can claim it all back from Revenue, and all you'd be doing as a VAT registered business is passing it onto Revenue. You get the small benefit of claiming VAT on your inputs, even if they're small.

Regarding the income taxes, Irish citizens living and working in Ireland have to pay those taxes.

Offshore companies and/or multiple companies. The further you go from home, and the more companies you have at home, the more all this will cost you. Is it wise to potentially pay out thousands in to agents in other countries to possibly not save a cent of tax? Estonian CT rate appears to be 20%. Here is 12.5%.

27-05-2021 04:52PM

TripleAce wrote: »

Hi,

I have an LTD. company setup here in Ireland - the income comes from different YouTube channels that I own and at the moment my income is just about under the 37.5k/year (rolling 12 months) threshold for not having to pay VAT, however this will be changing soon as earnings are growing fast, and so if I want to continue I would need to apply for VAT. As Google is incorporated in Ireland, Ireland is the only EU country where VAT is charged on YouTube/Adsense revenus (FML) and 23% would be massive and would hardly even justify for me continuing this, considering that if one day I decide to pay myself (I am not taking money out of the company at the moment as I have a day job and other incomes) I would need to also pay 52% taxes on it (40% income tax + 8% USC + 4% PRSI) - I would be basically working for free.
The business has also very little expenses, so claiming VAT on purchases back won't mean much.

Is VAT something passed onto the consumer? Your clients in this case ( advertisers I suppose). They pay more, you get the same.

( also you wont pay 40% income tax unless you really overpay yourself).

CIARAN_BOYLE · 27-05-2021 06:52PM

fvp4 wrote: »

Is VAT something passed onto the consumer? Your clients in this case ( advertisers I suppose). They pay more, you get the same.

( also you wont pay 40% income tax unless you really overpay yourself).

If the advertisers are European businesses they will have the vat zero rated. If they are Irish businesses they will claim the vat back. Its only non businesses that pay vat.

Splitting a business or setting up an offshore company? - YouTube Income

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