How to Structure Offshore Companies for E-Commerce

Building an offshore company the right way can turn an e‑commerce business into a smoother, more resilient operation. Done poorly, it can lock you out of payment processors, trigger unexpected taxes, and create headaches with customs and VAT. I’ve helped founders structure everything from lean dropshipping outfits to investor‑backed brands, and the best setups always start with the same principle: design for operations first, then tax efficiency, and finally asset protection. When those priorities are flipped, costs and risk go up fast.

What “offshore” actually means for e‑commerce

“Offshore” doesn’t automatically mean zero tax. In practice, it means locating parts of your business in jurisdictions outside your home country to improve one or more of the following:

Operational efficiency: access to global banking, multicurrency accounts, and reliable payment processors.

Market access: easier VAT/GST compliance in the EU, UK, Australia, or Canada; simpler customs procedures.

Tax efficiency: legitimate reduction of corporate tax by operating in jurisdictions with favorable regimes and tax treaties.

Asset protection: ring‑fencing intellectual property (IP) and cash.

Two key guardrails:

Compliance over cleverness. If a structure only works on paper and collapses when a bank or tax authority asks basic questions, it’s not a structure—it’s a risk.

Substance matters. Most modern rules (OECD BEPS, economic substance laws, and marketplace compliance) look for where decisions are made and where operations occur, not just where a company is registered.

Start with strategy: your product, markets, and cash flow

Before you open a single company, answer these with your team and advisors:

1) Where are your customers, and where is your stock?

Example: US consumers with Amazon FBA in Texas plus a 3PL in New Jersey are different from EU consumers with stock in Poland or Germany.

If you sell digital goods, you’ll structure differently than if you sell physical products.

2) How do you get paid?

If you need Stripe, PayPal, Apple Pay, or Adyen, your jurisdiction choices narrow. PSPs have strong opinions about risk and KYC.

3) What’s the VAT/sales tax footprint?

EU consumer sales often require OSS/IOSS or local VAT registrations; US states have economic nexus rules; Australia/NZ and Canada require GST/HST registration for certain sellers.

4) Where does your margin live?

If you have tight margins, avoid structures that add recurring friction: extra audits, high PSP reserves, or additional intercompany compliance.

5) What’s your exit plan?

Potential acquirers prefer clean books, clear IP ownership, bankable jurisdiction choices, and minimal perceived risk.

Answering these will roughly sketch your entity map and prevent the “incorporate-first-figure-it-out-later” trap.

The building blocks of an offshore e‑commerce structure

1) The principal (selling) company

This is the entity that signs with PSPs, invoices customers, owns the customer relationship, and holds inventory risk. It’s the keystone. It should be in a jurisdiction that:

Your PSP accepts

Allows multicurrency banking

Is not blacklisted and has predictable compliance

Matches where you manage the business (substance risk)

Common choices: Hong Kong, Singapore, UAE free zones, UK, Ireland, Estonia, Cyprus, Delaware (for US‑focused brands).

2) Fulfillment and logistics

Using Amazon FBA, a pan‑EU 3PL, UK fulfillment centers, or US warehouses all create tax and legal footprints.

Storing stock in a country often triggers VAT registration there. In the US, inventory creates nexus for sales tax in that state.

3) VAT/GST and sales tax

EU: the OSS system lets EU‑based sellers report cross‑border B2C sales in one return once you exceed €10,000 EU‑wide. If you store goods in multiple EU countries, you’ll still need local VAT numbers for each storage location.

IOSS: for non‑EU sellers shipping goods ≤ €150 into the EU; simplifies collection/remittance at checkout.

UK: post‑Brexit, separate VAT rules. For goods ≤ £135, marketplaces often collect VAT.

US: most states set economic nexus at $100,000 revenue; marketplaces collect for marketplace sales, but your own store still triggers your own obligations.

AU/NZ/CA: low‑value goods and digital services have GST/HST rules with relatively low thresholds.

4) Banking and payment processing

Even the best legal structure fails if you can’t accept cards or hold funds. Start from the end: which PSP will onboard you given your industry and jurisdiction?

Consider resilience: one main PSP and one backup. PSP outages, account freezes, or rolling reserves can cripple cash flow.

5) IP and brand

Trademarks and domains should be held where enforceability is strong and due diligence is easy. Many brands house IP in a holding company (UK, Ireland, Singapore, or Delaware) and license to the principal. This helps with asset protection and exit clarity.

For large groups, transfer pricing and DEMPE (development, enhancement, maintenance, protection, exploitation) analysis matter. For SMEs, avoid aggressive royalty games that create withholding tax or treaty problems.

6) Substance and governance

Board meetings where the company is resident

Local officers or directors with genuine decision‑making

An office or shared office service if required

Employees or contractors on local contracts where it makes commercial sense

7) Accounting and reporting

Choose a jurisdiction with reliable accountants experienced in e‑commerce and VAT.

Automate: use a modern ledger, connect to your PSPs and marketplaces, and run monthly reconciliations. Messy books cost you dearly at exit.

Jurisdiction playbook: where offshore structures actually work

No jurisdiction is perfect; it’s about trade‑offs. Here’s how I think about common options for an e‑commerce principal and/or holding company.

Hong Kong

Pros: Low tax on profits sourced in HK; strong banking if you have substance; excellent for Asia supply chains; no VAT/GST.

Cons: Banks demand substance (local director, office, proof of operations); PSP coverage is better than before but still mixed; offshore claims require careful documentation.

Use case: Asia procurement hub, selling globally; strong local team; willing to build substance.

Singapore

Pros: Excellent banking and reputation; 17% headline tax but effective rates can be much lower via partial exemptions; strong treaties; startup incentives.

Cons: Higher cost base; serious about substance; strict compliance.

Use case: Investor‑friendly principal or holding; IP company with real R&D; regional HQ for APAC.

UAE (Free zones)

Pros: 9% corporate tax with potential 0% for qualifying free zone income if conditions are met; no personal tax; good banking if substance present; many free zones familiar with e‑commerce.

Cons: Substance and real presence expected; rules are evolving; PSP coverage has improved but still check first.

Use case: Founders relocating to the Gulf; regional trading hub; asset‑protection friendly with legitimate operations.

Estonia

Pros: 20% tax on distributed profits only; digital administration; affordable; EU environment helps with VAT.

Cons: Perception issues with some PSPs if there’s no EU presence beyond e‑Residency; need substance for clean tax residency.

Use case: Lean EU principal for digital goods; tech‑savvy founders who can add substance.

Ireland

Pros: 12.5% corporate tax on trading income; great PSP access; strong IP rules; EU market access.

Cons: Higher costs; scrutiny on transfer pricing for larger groups.

Use case: EU principal; IP holding; investor‑friendly structure.

Netherlands

Pros: Logistics powerhouse; bonded warehouses; strong customs solutions; good reputation.

Cons: Higher costs; substance needed; Dutch payroll adds complexity.

Use case: EU fulfillment hub with customs optimization; brands planning to scale across the EU.

United Kingdom

Pros: Strong PSP and banking; familiar to investors; competitive corporate tax with reliefs; simple company law.

Cons: Separate VAT regime from EU; more scrutiny post‑Brexit; corporate tax up to 25% for larger profits but reliefs help SMEs.

Use case: UK‑centric sales; Amazon UK; principal that needs fast PSP onboarding.

Cyprus

Pros: 12.5% corporate tax; EU VAT regime; IP box regime; English common law flavor.

Cons: Banking used to be tough; better now but still variable; ensure good local advisors.

Use case: Cost‑effective EU principal; IP company with cautious implementation.

Mauritius

Pros: 15% headline with partial exemptions (effective rates around 3–8% possible with conditions); investor‑friendly; good for holding.

Cons: PSP acceptance varies; needs substance; limited e‑commerce PSPs.

Use case: Holding company or regional principal when PSPs and banks are pre‑cleared.

Delaware (US)

Pros: Investor‑friendly; easiest for US PSPs; predictable courts.

Cons: Sales tax complexity; federal and state tax if ECI; non‑US owners need careful planning.

Use case: US market focus; brand planning to raise US capital; marketplace facilitator model.

BVI/Cayman (for holding)

Pros: No corporate tax; widely used for holding; strong legal frameworks for funds.

Cons: Economic substance requirements; blacklisting risk in some contexts; not ideal for a selling entity using mainstream PSPs.

Use case: Pure holding or investment vehicle above operating companies.

If a jurisdiction is on an EU or OECD blacklist, expect problems with PSPs, banking, and tax authorities. Saving a few points of tax can cost you 10x in payment friction and lost sales.

Structure archetypes that work

A) One principal company with local VAT/GST registrations

Who this fits: Digital sellers, DTC brands with one main fulfillment hub, lean teams.

Example: A Singapore company selling digital courses globally; registers for EU non‑Union OSS for electronically supplied services, UK VAT for digital services, AU/NZ GST for digital supplies as thresholds require. Keeps banking in Singapore, uses Stripe and PayPal via Singapore accounts.

Why it works: One ledger, one PSP contract, clear reporting. You register for consumption taxes where needed, but you avoid multiple operational entities.

B) Principal company with regional subsidiaries

Who this fits: Brands with US and EU stock, separate marketing teams, and local customer support.

Setup: An Irish principal owns IP and runs global strategy. A Delaware subsidiary sells to US customers (and holds US inventory). A German or Dutch BV handles EU warehousing and VAT.

How money flows: Intercompany service and cost‑sharing agreements; transfer pricing aligned with functions. Principal retains strategic and IP returns; local subs earn routine margins.

Why it works: Clean for PSPs; VAT and sales tax handled where stock is; investors like it; operationally robust.

C) IP holding company + operating principal

Who this fits: Brands investing heavily in product design or software.

Setup: UK or Irish IP company owns trademarks and proprietary content. It licenses IP to a UAE free zone principal or Singapore operating company at an arm’s‑length royalty.

Caveats: Withholding tax on royalties can bite. DEMPE analysis and documentation are key. For SMEs, keep the royalty modest and commercially explainable.

D) Amazon FBA Europe

Who this fits: Amazon sellers using PAN‑EU or multiple EU fulfillment centers.

Setup: A UK or Irish company (or a German GmbH) as the principal; local VAT registrations in countries where stock is stored; OSS for cross‑border B2C where applicable.

Notes: Dedicated EU VAT compliance provider is a must. Don’t underestimate EPR (packaging, battery, WEEE) obligations in Germany and France.

E) Dropshipping from Asia

Who this fits: Test‑and‑scale stores validating products before investing in stock.

Setup: Hong Kong principal with real substance (local director/accountant, modest office), Asian supplier ships directly. Register for IOSS for ≤ €150 EU consignments; for higher values, use DAP with customer‑paid duties or work with a DDP broker.

Risk: PSPs are sensitive to chargebacks and delivery delays. Keep a second processor live. Factor rolling reserves into cash flow.

Taxes in practice: how to stay on the right side of the line

Corporate tax and residency

Many countries tax on residency, which often means “place of effective management.” If you manage a “foreign” company from your home country, that home country may claim the company is resident there. Use real directors and board governance in the company’s jurisdiction.

Permanent establishment (PE)

Warehouses, fixed offices, and dependent agents can create a PE and local tax exposure. Stock stored long‑term in a country often triggers VAT and may indicate a PE depending on activities.

CFC rules

If you live in a high‑tax country, Controlled Foreign Corporation rules can attribute the profits of your low‑tax offshore company to you personally. Plan with a local tax advisor before you incorporate.

Withholding tax

Royalty, service, and interest payments may suffer withholding at source. Treaties can reduce rates, but treaty access requires substance and local residence certificates.

Transfer pricing

Intercompany prices must reflect functions, assets, and risks. Keep a simple, defensible model: routine returns in local subs (e.g., 3–5% operating margin for limited‑risk distributors), entrepreneurial returns in the principal. For SMEs, maintain basic benchmarking and agreements.

VAT/GST specifics you’ll actually face

EU OSS: EU‑established sellers can use it once EU‑wide B2C sales exceed €10,000/year; simplifies reporting of cross‑border sales. If you store stock in multiple EU countries, you still need local VAT numbers for each storage country.

IOSS: Non‑EU sellers for consignments ≤ €150 into the EU; reduces customs friction and customer surprises at delivery.

UK: For goods ≤ £135 sold via marketplaces, the marketplace often collects VAT. Direct sellers must register for VAT and collect at checkout.

US: Marketplace facilitator laws mean Amazon, Etsy, eBay often collect on your marketplace sales. Your own store is your problem. Many states set nexus at $100,000 revenue. Use a sales tax automation tool and file on time.

AU/NZ/Canada: Low‑value goods and digital services require registration for non‑resident sellers at relatively low thresholds. The cost of non‑compliance is reputational and operational, not just financial.

Customs and duties

Use accurate HS codes; duty misclassification is a common audit trigger.

US de minimis is $800 per shipment; EU is €150 for duty (not VAT) de minimis.

DDP vs DAP: DDP smooths the customer experience but requires a broker and IOSS (for ≤ €150) or a customs strategy above that. DAP means the customer pays duties/taxes on delivery—expect higher returns and chargebacks.

Payment processing and banking: approvals first, structure second

I’ve seen excellent tax structures fail because Stripe wouldn’t underwrite the jurisdiction or business model. Start with PSP feasibility.

PSP compatibility by jurisdiction

Strong acceptance: UK, Ireland, Singapore, US, most EU countries.

Conditional: UAE free zones, Hong Kong (improving), Cyprus, Malta.

Weak: Seychelles, Belize, some Caribbean jurisdictions for operating entities.

What PSPs look for

Clear ownership and KYC documents (UBO verification).

Real website, privacy policy, refund policy, T&Cs, and support channels.

Delivery timelines and fulfillment methods.

History of processing (migrate with previous statements if possible).

Low chargeback ratios (<0.6% is a good target).

Banking realities

Traditional banks favor substance and local directors. Expect to show contracts, invoices, and a business plan.

EMIs (e‑money institutions) like Wise and Revolut Business help for multicurrency accounts but have jurisdiction limits.

Keep at least two banking rails. A compliance review or frozen account is not hypothetical—it happens.

Managing currency risk

If your costs are in USD (suppliers) and revenue is in EUR/GBP, hedge with forward contracts or at least maintain natural hedges in multicurrency wallets.

PSP FX markups can be 1–3%; negotiate at scale.

Substance, governance, and compliance that stand up to scrutiny

Economic substance

Zero‑tax jurisdictions (BVI, Cayman, Bermuda, Jersey, Guernsey) have economic substance laws. Pure holding companies may meet lighter requirements; distribution and service companies require people and premises.

Keep minutes of board meetings, evidence of strategic decisions made locally, and employment/contractor agreements.

Directors and decision‑making

Appoint directors who actually understand the business.

Avoid rubber‑stamp nominee arrangements. Banks and auditors can smell them a mile away.

Accounting and audit

Choose a jurisdiction where you can find e‑commerce‑literate accountants: reconciling Amazon statements, PSP fees, chargebacks, VAT reports, and COGS.

Monthly closes; quarterly management accounts; annual audit where required (e.g., many EU countries, Singapore above thresholds, Cyprus above thresholds).

Documentation

Intercompany agreements (services, distribution, royalty).

Transfer pricing documentation proportionate to your size.

VAT registrations, OSS/IOSS numbers, EPR registrations (Germany/France), and customs binders.

Step‑by‑step implementation plan (12–16 weeks)

Week 1–2: Strategy and feasibility

Define markets, fulfillment model, and PSP targets.

Tax scoping: VAT/GST footprint, US sales tax, PE risk.

Pick your principal jurisdiction and any regional subsidiaries.

Pre‑check with PSPs and a bank/EMI.

Week 3–4: Incorporation and governance

Incorporate the principal company; appoint directors; draft board resolutions.

Apply for tax numbers and VAT registrations where needed.

Begin IP registration (trademarks) and domain transfers into the holding or principal.

Week 5–6: Banking and PSP onboarding

Open bank/EMI accounts (start with the one most likely to approve).

Apply to 2 PSPs (primary + backup). Prepare thorough KYC packs: corporate docs, utility bills, supplier contracts, refund policy, sample invoices.

Week 7–8: Logistics and tax registrations

Set up 3PL/Amazon FBA and warehouse agreements.

Arrange customs broker and HS code validation.

Week 9–10: Intercompany and accounting stack

Draft intercompany agreements and pricing policies.

Implement ledger, connect PSPs/marketplaces, and set up workflows for reconciling payouts and fees.

Build a simple dashboard for gross margin, ad spend, CAC/LTV.

Week 11–12: Dry run and go‑live

Test purchase flows in all markets; verify tax treatment at checkout.

Run a VAT return mock cycle.

Hold a board meeting, record operational decisions, and lock governance processes.

Ongoing (monthly/quarterly)

Close books monthly; review chargebacks and PSP reserves.

File VAT/OSS/IOSS/Sales tax returns on time.

Reassess substance and staffing annually.

Realistic costs and timelines

These are ballpark figures from recent projects; they vary by provider and complexity.

Incorporation and first‑year fees

UK/Ireland: $1,000–$4,000

Singapore: $3,000–$8,000

UAE free zone: $6,000–$15,000

Cyprus/Netherlands: $3,000–$8,000

Delaware: $800–$2,000

Banking/EMI: Typically free to $1,000 setup; expect 2–6 weeks for full onboarding.

PSP fees:

Standard online: 2.5–3.2% + fixed fee per transaction

Cross‑border/FX: add 1–3%

Rolling reserves for higher‑risk models: 5–10% held for 3–6 months

VAT/GST compliance:

EU VAT registration: $500–$1,500 per country

OSS/IOSS: $500–$1,000 setup; $100–$300/month filing

US sales tax software: $50–$300/month; filings $20–$50/state/filing

Accounting:

Lean DTC brand: $500–$2,000/month

Multi‑entity group: $2,000–$6,000/month

Annual audit where required: $3,000–$15,000+

Expect 8–16 weeks from idea to fully live structure, depending on banking and VAT timelines.

Common mistakes (and how to dodge them)

Chasing 0% tax and getting banned by PSPs

Fix: Choose jurisdictions PSPs love. Lower fees and fewer reserves often beat small tax differences.

Ignoring your home country’s CFC rules

Fix: Get a local tax opinion early. Sometimes the best path is to move your personal tax residency before restructuring.

Using blacklisted jurisdictions

Fix: Avoid them for operating companies. Blacklists cause banking and withholding tax problems.

Assuming Stripe/PayPal will accept your entity

Fix: Pre‑screen with a human at the PSP. Provide a complete KYC pack and proof of operations.

No VAT plan

Fix: Map where stock is stored, where customers are, and which schemes (OSS/IOSS) apply. Put a provider on retainer.

Sloppy intercompany arrangements

Fix: Sign service and distribution agreements. Keep transfer pricing simple and defendable.

Overcomplicating too early

Fix: Start with a single principal. Add subsidiaries when operationally necessary.

Forgetting EPR and product compliance

Fix: For EU, register for packaging/EPR; keep technical files, CE/UKCA markings where needed.

Not protecting IP properly

Fix: File trademarks in key markets early; centralize IP ownership for clean due diligence.

Case studies from the field

1) Digital course creator selling globally

Profile: Solo founder in Spain selling digital content to EU/US/AU customers.

Structure: Irish company as principal for PSP access and EU VAT; non‑Union OSS for services to EU consumers isn’t needed because the company is EU‑established—use Union OSS for cross‑border services. Register UK VAT for digital services; AU/NZ GST once thresholds hit.

Why it worked: One entity, clean banking, strong PSP rates, straightforward VAT filings. The founder moved management and board routines to Ireland and hired a part‑time local director to align substance.

Result: Processing fees down from 3.4% to 2.7%; VAT filings simplified; audit‑ready books improved valuation when licensing content.

2) Amazon FBA brand in Europe

Profile: Two founders in Germany scaling across EU with PAN‑EU FBA.

Structure: Dutch BV as principal for logistics and customs; VAT registrations in DE/PL/CZ/FR/IT/ES; OSS for cross‑border sales. IP held by the BV for simplicity; transfer pricing minimal since the BV is the operating entity.

Why it worked: Netherlands offered bonded warehouse options and efficient customs. Clean Amazon account health and consistent VAT compliance built a stable base.

Result: Reduced customs delays, better cash flow from predictable VAT claims in the Netherlands, and smoother expansion to non‑Amazon DTC channels.

3) DTC brand expanding to the US

Profile: Singapore principal, EU sales via 3PL in Poland, planning US launch.

Structure: Delaware C‑Corp subsidiary for US sales; inventory in New Jersey and Texas; marketplace facilitator coverage for Amazon sales; sales tax automation for Shopify store.

Intercompany: Delaware buys from Singapore principal with a routine distributor margin; Singapore retains IP.

Why it worked: PSP acceptance was immediate; investors comfortable with Delaware; sales tax handled cleanly.

Result: 4‑month go‑live; US revenue ramped without tax surprises; later opened an Irish subsidiary as an EU operating company when scale justified it.

Playbook by founder profile

If you’re a US citizen/resident

CFC and GILTI rules can claw back “offshore” benefits. Often the best approach is a US entity for US sales and a foreign sub for non‑US sales with real substance abroad.

Keep IP either in the US or in a treaty jurisdiction with robust documentation. Avoid royalty structures that create high withholding tax.

If you’re an EU resident

CFC rules vary by country; substance is key. EU entities (Ireland, Netherlands, Cyprus, Estonia) make VAT and PSP easier.

If relocating, align personal tax residence with the new company’s jurisdiction to avoid management‑and‑control challenges.

If you’re in Latin America

Banking and PSPs often favor a foreign principal (US, UK, or EU). Keep a compliant personal tax plan at home; some countries tax worldwide income aggressively.

Use Payoneer/Wise/Revolut bridges carefully; verify your PSP’s stance on your home country of residence.

If you’re in India or Southeast Asia

Singapore or UAE often provide the best banking and PSP experience. Build substance to avoid management‑and‑control pullbacks to your home jurisdiction.

Keep supplier relationships formal and documented; banks care about real invoices and contracts.

Exit planning from day one

Buyers pay premiums for clean, de‑risked structures. Here’s what they expect:

IP clarity: Trademarks and domains in the company they’re buying, not in the founder’s name or a random holding with messy licensing.

Tax compliance: VAT returns filed; no hidden sales tax liabilities; no creative transfer pricing that won’t survive diligence.

PSP portability: Contracts that can be transitioned and good standing with processors.

Financials: At least two years of monthly accrual financials, reconciled to PSP and marketplace payouts, with clear COGS and ad spend.

If you plan to sell to a US buyer, a Delaware topco or a clean US subsidiary helps. For EU buyers, an EU principal with tidy VAT history is gold.

Practical checklist

Strategy

Markets, products, logistics mapped

PSPs shortlisted and pre‑vetted

VAT/GST and sales tax footprint identified

Structure

Principal jurisdiction chosen for PSP/banking fit

Holding/IP plan drafted (only if it adds real value)

Intercompany agreements prepared

Compliance

VAT/OSS/IOSS/UK VAT and US sales tax registrations scheduled

EPR (DE/FR) and product compliance checked

Customs broker and HS codes validated

Substance

Directors appointed; board process in place

Office/registered address and local support confirmed

Employment/contractor contracts aligned with reality

Operations

Bank + EMI accounts opened

PSP primary and backup live

Accounting stack connected to PSPs/marketplaces

Monthly close and filing calendar set

Risk management

Chargeback monitoring and refund policy tested

FX management plan defined

Data protection and customer support SLAs established

Final thoughts from the trenches

The best offshore e‑commerce structures are boring in the best way: banks say yes, PSPs approve, VAT filings go out on time, and the team knows who does what. If you’re choosing between a few extra percentage points of tax savings and frictionless operations, pick frictionless. Your customers, investors, and future self will thank you.

Start lean: one strong principal company, clean banking, and a responsible VAT plan. Add subsidiaries only when operations demand them. Document everything. And build real substance where you say your company lives. That’s how you create a structure that scales—and survives scrutiny.