As your Amazon business scales, you might stumble upon the idea of setting up an offshore company to save taxes, simplify international payments with better privacy. If yes, you’re not alone. But is an offshore company a smart move for your company, or a complex web of trouble? It depends. Let’s break it down with LNT Consulting. The below guide will explore the compelling “yes” arguments and the crucial “no” warnings, helping you understand if it’s right for your Amazon FBA or e-commerce venture.
What is an offshore company for Amazon Seller?
For an Amazon seller, an offshore company typically means incorporating your business in a jurisdiction outside of your country of residence. The goal is often to leverage various advantages offered by that foreign country, such as tax benefits, asset protection frameworks, or privacy regulations.
Popular offshore jurisdictions for Amazon sellers include: Hong Kong, Singapore, British Virgin Islands (BVI), Cayman Islands, Seychelles or even US states like Delaware or Wyoming.
If you would like to know what is an offshore company and how it works, visit this article for more information: 4 steps to open an offshore company.
YES: Offshore Company Benefits for Amazon Sellers
Why do Amazon sellers even consider going offshore? Here are the primary advantages:
– Potential Tax Optimization: Some jurisdictions have low or no corporate income tax, especially if no income is earned within that country. VAT-free jurisdictions like Hong Kong provide a significant edge for international sellers. Kindly note that you should always consult a tax advisor to ensure compliance with your country’s tax laws.
– Asset Protection & Liability Limitation: An offshore company can create a legal separation between your own personal assets and business liabilities. If your Amazon business faces lawsuits or debts, your personal wealth might be better protected. Moreover, some jurisdictions offer greater anonymity for business owners, which means that the information of shareholders and ultimate beneficial owners will not be disclosed publicly.
– Access to International Banking & Payment Gateways: For sellers operating across multiple Amazon marketplaces, a central offshore hub could streamline administration and might provide access to banking services or payment processors not easily available in your home country. These accounts can be connected to Amazon Seller Central, Payoneer, Stripe, etc., facilitating smoother international transactions.
NO: Offshore Company Drawbacks & Risks for Amazon Sellers
Before you jump on the offshore company formation, understand the serious downsides below:
– Compliance and Tax Reporting: Using an offshore company doesn’t exempt you from personal tax obligations in your home country. Most developed countries (like the US, UK, Canada, Australia) have Controlled Foreign Corporation rules. It often mean that even if your offshore company pays tax locally, you as the owner might still be liable for tax on its profits in your country of residence. Furthermore, global agreements like FATCA (Foreign Account Tax Compliance Act), Amazon and CRS (Common Reporting Standard) also require financial institutions to report information about foreign account holders to tax authorities.
– Banking Challenges: Offshore companies often face stricter scrutiny when opening bank accounts, primarily due to stringent anti-money laundering (AML) and know-your-customer (KYC) regulations. Complex offshore structures can trigger additional scrutiny and may even lead to account suspension if not handled transparently and correctly.
– Market-Specific Requirements Still Apply: Regardless of where your company is incorporated, you’ll still need to comply with VAT/GST rules in the countries where your customers are located (e.g., EU VAT, UK VAT, US withholding tax for foreign businesses). Amazon often collects and remits these as a marketplace facilitator, but you remain responsible for compliance.
Key Factors to Consider Before Deciding
Ask yourself these questions:
- What is your primary motivation? Tax benefits? Asset protection? Privacy? Be honest.
- What is your business nature, current revenue and profit?
- Where are you a tax resident?
- Which Amazon marketplaces are you selling on or targeting?
- Have you consulted with qualified international tax advisors and legal professionals in both your home country and the potential offshore jurisdiction? This is non-negotiable!
Say yes, IF:
- You are a non-US resident selling primarily on Amazon USA. A US LLC (e.g., Wyoming or Delaware) might be considered “offshore” from your perspective and offer tax efficiencies as well as liability protection.
- You have a very large, multi-national Amazon business with significant profits, and these are substantial enough to outweigh the costs and complexity.
- You are an “digital nomad” or expat with no clear single tax residency, and an offshore structure offers a way to centralize your business.
- Specific asset protection needs are paramount, but your home country’s laws are insufficient.
Say no, IF:
- You’re a small to medium-sized seller. The costs and complexity will likely outweigh any benefits that you can receive from an offshore company.
- You’re primarily selling products or services in your country of residence. A domestic company is usually simpler and more cost-effective.
- You’re not ready to invest heavily in expert legal and tax advice, as well as cannot afford compliance and reporting requirements.
The decision to form an offshore company is one of the most complex financial and legal choices an Amazon seller can make. The answer can be “No” or “Not Yet” with starter or moderate success, but “Yes” with a smaller subset of high-revenue or internationally-focused sellers. It’s essential to consult with an international tax advisor specializing in e-commerce and your specific residency. They can analyze your specific situation, explain the implications under your home country’s laws and help you build a tailored plan that meets your business goals.
