HACKER Q&A
📣 rmbyrro

Is it immoral to off-shore my startup to a low-tax country?


I have a small, bootstrap startup registered in South America and considering moving off-shore (reasons below).

Since I'm moving off-shore, I'm asking: should I go for the lowest tax possible jurisdiction? (I consulted a Lawyer to stay within legal boundaries)

I'd still continue to live in my country and pay taxes on personal income.

Since I benefit from living here, would it be immoral to off-shore my business to a low-tax jurisdiction? Or off-shore at all?

--- Reasons to move away from my country ---

Stripe doesn't work here. Paypal does but provides worse service and charges +12% to bill international customers.

Local regulations don't let me keep revenue in foreign currency. I have to exchange back and forth to pay suppliers in USD and lose +5% to spreads.

Local government charges +30% withholding taxes on international supplier payments.

Registering a foreign branch of my local company is prohibitively expensive in terms of local red tape compliance.

The country doesn't really help me be an entrepreneur. Everything is more expensive, riskier, bureaucratic, and/or slow. From a family and personal standpoint, I like to live here, though.

  👤 numair Accepted Answer ✓
If your business is currently generating revenue and profitable, your best bet is to move to a low-hassle, low-tax jurisdiction. The United States isn’t a particularly low-hassle, low-tax environment, and the rules of the game are increasingly uncertain (especially in terms of future tax increases needed to pay for today’s crises), but you’ll have to deal with it if you are considering foreign investment into your company. Otherwise, look around and do your homework.

To overcome the moral dilemma, you should take the amount you’ll save in taxes in a lower-tax environment and reinvest it into your country. The irony is, since that money is now considered a foreign direct investment into the country’s economy, you’ll be celebrated as a hero. It makes no sense, but that’s pretty much how it works all over the world.

👤 tannerbrockwell
I have looked at the Stripe Atlas service and although as a US resident I was considering an LLC I think that a C Corp makes the most sense. What components of what you do as an employee require hardware or services? If you are currently paying for ANY of that out of pocket you should consider that a Corporation declares those as expenses and they are all deductible. As for the morality, it seems you have an interest in improving things in the country where you live. Building an enterprise that could reinvest is a net positive. Your first resource, is of course yourself. By improving your situation, you are empowered to help others.
👤 chippy
You might want to think instead about your country (as in, tax, red tape, government) about your neighbourhood and people you live with and your family. Do you want to improve the life of the people around you and how could you do that? For some, off-shoring improves the lives of their immediate family, for others, it might detract to the community.

I guess it depends on how much your startup interacts (hires, sells to etc) where you are.

👤 uberman
You need to do what is right for you and the economic security of your family. Small businesses are notoriously difficult to sustain.

That said, if you consider a huge multi-national company I think many would say that this type of behavior would be unsavory if not unethical.

👤 bfoks
Check if Paddle or Gumroad is available in your country. They work as Merchant of Record, so THEY ARE selling your product for you and you get only one invoice (minus the commission) for every month.
👤 mikece
It's no more immoral to avoid taxes (legally) than it is to make money. I wish you much success!