This is a question I get a lot from people wondering how to receive money from their customers anonymously. The first thing I ask them is:
From whom to want to hide your identity?
There two categories here:
- Hiding from the customer.
- Hiding from the authorities.
Let’s go through them both.
1. Accepting Payments Anonymously to your Customers
This one is quite easy. If all you want to do is to accept payments from customers anonymously, you have two options:
- Use anonymous payment methods
- Incorporate (offshore or onshore)
1.1 Anonymous Payment Methods
To receive money anonymously without incorporating, your options come down to e-wallets, Ukash, and BitCoin. Person to person transfers with the mainstream e-wallets – Neteller, Moneybookers/Skrill, EcoCard, ClickandBuy, Click2Pay – are usually anonymous, but the recipient sees your email address or account number.
There are other e-wallets that follow a far stricter privacy legislation, based in offshore jurisdictions like Panama and Costa Rica. Examples include Liberty Reserve, Perfect Money, Pecunix, and Webmoney. Unlike mainstream e-wallets, these e-wallets rely on exchangers for depositing and withdrawing money. This adds additional layers of time and cost, but at the advantage of increased privacy.
Ukash is an interesting option in that it’s essentially an online cash transfer. The customer purchases a voucher (a code) which he can hand to you and you can then redeem this voucher either into your Ukash account or use it as a deposit (top-up) method in your e-wallet. Neteller, for example, supports Ukash.
Lastly is BitCoin. It is similar to Liberty Reserve and the other offshore non-mainstream e-wallets, except it is decentralized. Once hailed as the next big thing in ecommerce, BitCoin has now become an obscure and largely clandestine digital currency. It is notoriously used on the Tor website SilkRoad, where drugs are sold openly, anonymously.
However, there is no denying that BitCoin is unbeatable for anonymous payments between persons and even businesses. Just keep in mind that it can be difficult and expensive to convert your BitCoin into real money.
1.2 Incorporate (Offshore or Onshore)
As a company, your options increase significantly. You can receive payments into your company account, where your name is not publicly displayed, and even apply for a merchant account to accept cards through a gateway/API (more about this in a future post).
This has more costs surrounding it, which is why I suggest that people calculate the costs of starting and running a company vs. the cost of having to rely on exchangers or e-wallets which charge fees of their own. A company will often look much more respectable than a private individual. It depends on your clientele and their expectations.
You can choose to incorporate offshore, where your name will not in public records or onshore, where your name will be on public records. The latter can be avoided by using nominees.
2. Accepting Payments Anonymously to the Authorities
This also comes down to two groups:
- Use anonymous payment methods
- Incorporate (offshore or onshore)
2.1 Anonymous Payment Methods
This is nearly the same as 1.1 Anonymous Payment Methods, with the difference that you cannot use mainstream e-wallets, since they will comply with requests for disclosure of information.
Note that no e-wallet reports anything automatically to any authorities unless requested to do so or unless you trigger a red flag, if suspicion of money laundering appears. I know it is fairly common among people, who sell online but do not declare their income, that use for example Ukash to accept payment from customer and then deposit the Ukash voucher into Neteller. From Neteller, they can then withdraw by bank or the Neteller prepaid plastic MasterCard.
2.2 Incorporate (Offshore or Onshore)
Practically, onshore incorporation is not suitable, not even with nominees.
Most commonly, an offshore company is set up in a jurisdiction like Belize, Seychelles, BVI, or wherever the UBO‘s country of tax residence does not have a tax information exchange agreement (TIEA). This company then usually opens a merchant account with an offshore acquiring bank, to accept card payments, or receives its payments by bankwire.
3. Conclusion
Whatever your reason for wanting to receive payments anonymously online, I hope this has given you some useful information.
I have essentially the same question, but would rephrase it — I don’t want to be paid anonymously, just directly if I have something that You want to buy from Me, yet the barriers to doing so appear insurmountable (see below).
I have an idea that I want to exploit (selling a tangible-goods item online) and am at my wits end with the inability to accept card payments without a merchant account (requiring business registrtion / incorporation in some exotic, expensive locale), a payment gateway (requiring a merchant account), and so-on. Those that don’t make such requirements are either limited to the US (Dwolla), restrict you to earning pennies before they close you down (Paypal, for, hey, not being a registered business), have ridiculous lists of excluded business types (Stripe) or are just simply scammers (enumbered). This is the nature of the compact between govt. and banks — the former bail the banks out with private citizens savings when the banks do something stupid, and the banks facilitate govt. theft from individuals by making sure that no-one can generate any income without jumping through all these hoops.
Really — ut’s enough to make me think of going Bitcoin (i.e., killing my idea stone-dead). Seriously, have I missed something here, or is this simple thing simply impossible?
Accepting payments as an unincorporated individual is difficult (and sole proprietorships aren’t much better), especially if what you sell is unattractive to the likes of Square, Bluesnap, 2CheckOut, and other aggregate MID solutions. You are left with cash, bank and shady payment methods like Perfect Money and their ilk.
A shaky structure I have seen used is accepting payment by taking Ukash vouchers and then depositing the Ukash vouchers into one’s personal Neteller account. The funds can then be withdrawn with a Neteller prepaid card. Ukash itself also has a similar service available but it’s a bit more restricted than Neteller. This requires that your customers have or are willing to get Ukash vouchers.
Other e-wallets (Skrill, EcoPayz, ClickandBuy) might also work but if they detect business like activity on your account, they may require that you open a business account instead which of course requires forming a company. It’s also a burden for your customers to have to open an account with that e-wallet and pay you.
Thanks for swift reply!
The EU Bank Accounts you say are the weakest point. Which countries within EU/SEPA would be the least likely to hand out information?
Well, the EU countries with traditionally strictest banking secrecy has been Luxembourg, Austria, Belgium, Cyprus, Latvia, and Estonia. But it’s being increasingly harmonized across the entire union. Cyprus and Latvia have the most incentive to keep fighting for it, I’d say, after Luxembourg caved a few weeks ago.
Hey
First off, Thanks for a great blog!
What would be the potential pitfalls be if Company A(owned by Person A)in Country A sends money to Company B(owned by Person B)in Country B, and Company B sends money to Company C(owned by Person A) in Country C?
This assumes
– Country A is a high-tax EU country
– Company B & C are registered in two different offshore jurisdictions with corporate bank accounts in two other EU countries
Thanks for the feedback!
The risks are, generally, very low. Tax authorities across the globe are overloaded with work, incompetent, and/or lack the power to do anything. You have to be quite high up the ladder to even register on these people’s radar.
Moving money from A (EU) to B (EU bank, non-EU company) to C (EU bank, non-EU company) is a quite diluted structure already. As long as you take reasonable precaution, it is unlikely you will ever face any issues.
Problems may occur if you try to spend Company C’s money in Jurisdiction A. If the funds haven’t been declared and taxed by then, it could constitute money laundering, which is a crime far worse than tax evasion.
Your weakest point – as it were – would be your EU bank accounts. Your tax authority can likely extract information from them very easily. But, of course, they can’t extract information from a bank account they don’t know about.
Just be clever about how you spend the money and how the companies interact.
Interesting…
Looked up CFC Rules for the country concerned, and as far as I understand, it applies to company subsidiaries. The scenario above assumes that the transaction taking place between Company A and Company B is a genuine business deal, thus CFC rules does not apply, correct me if I’m mistaken?
When a TIEA is concluded, does it typically come into effect immediately? If one close down Company B, in e.g. RAK, can authorities still access the company B records afterwards?
How does anonymity Delaware stack up against this, if authorities file a request using the existing TIEA between Country A and US? Might forming a Holding Company in Delaware, which owns the RAK Company B, add a layer of protection?
Ultimately, it’s up to your local tax authority to decide whether the dealings between Company A and Company B are subsidiary or regular B2B relations. You may still need to perform enhanced due diligence, the purpose of which is to disclose the true owner behind the offshore company. If that person turns out to be you, it will be difficult to convince the tax man that it’s B2B.
TIEAs are typically immediate from when they enter into force (which can be anywhere from a few weeks to years; usually a few weeks) but not retroactive.
As for Delaware, I do not touch the US. FATCA and other legislation make it an extremely hostile and unattractive jurisdiction to deal with. Fewer and fewer banks will accept a US person or entity, even if it’s just a holding company.
Hi Streber!
Thank you for sharing your knowledge, appreciated!
Would the following structure allow anonymity from authorities? Its a recommended package sold through Kaizen: http://www.bycpa.com/html/news/201010/1518.html
1. Company A in a high-tax European country invoices Company B from Hong Kong. TIEA does not yet exist between the two.
2. Company B is owned by Company C from Belize. TIEA exist been Company A’s European country and Belize.
3. The Belize Company C incorporated Company B and opened its bank account in Hong Kong, thus the UBO is not shown in HK public companies registry
– Would you say this structure is safe, if the European authorities comes sniffing?
– Lets assume a TIEA is struck between the European country and Hong Kong, would this setup still be considered safe from the authorities?
– Would nominees for both Company B and its bank account in HK add another layer of protection? Would you add this service from scratch?
– Would nominees for Company C add yet another layer of protection? Again, would you add this service from scratch?
Would you do differently? To hedge yourself in a cost-effective manner…
Any guidance is welcome!
Hi there, Bob!
This will probably not work the way you want. Here’s a couple of brief points why:
– Hong Kong requires a natural person (a human) to appear on all public records of all companies as of 2014. It is becoming increasingly difficult and expensive to find nominees to fill this position.
– Even if Hong Kong did not have the natural person requirement (or you use a nominee), all an authority in Country A would have to do is look up the company in Hong Kong company registry, see that it is owned by a Belize company, and then file a request for information under the TIEA with Belize.
– Offshore invoicing, while popular, is under increased scrutiny by tax authorities. You may want to read up on something called CFC rules and see if your country has such rules. It basically means that invoices to or from offshore companies require enhanced due diligence.
– Nominees do not give you any protection under TIEAs, since most of them specifically state that it is the true ultimate beneficial owner whose identity is to be disclosed and failure to do so may lead to penalties or – worse – raise suspicion of money-laundering.
Oh ok, thanks for straighten things out.
Given those news for 2014, Hong Kong new company registrations will fall out a cliff, wouldn’t you think?
That leaves three other jurisdictions, where this European country hasn’t struck TIEA’s yet, Dubai, Qatar and Singapore.
Would a similar structure as above be suitable? I know the authorities are negotiating right now with those countries, and two have apparently a better chance of agreeing. Authorities havent said which. Nothing is agreed yet though.
Would a UK Agency model be a better alternative?
Hong Kong incorporations may decrease with the new regulations, but it is in line with Hong Kong’s strategy to compete with Singapore as a transparent, internationally reputable, low-tax jurisdiction. Singapore publishes company details on public records (making your offshore company easy to find) and requires a human director, who must also be resident in Singapore. The two jurisdictions want less to do with tax evasion and more to do with tax planning, innovation, and wealth management.
Dubai and – perhaps even more interesting – Ras al-Khaimah (RAK) may work, in that they offer low/zero tax and company details are not public. You may still find issues with CFC rules, if applicable.
Whether a UK company is suitable is something I cannot answer. Your situation is ultimately unique and something for which you should seek professional advice (something I do not and cannot give in this blog). There is more to it than forming the different companies. In some cases, you may require resident management to prove that the company isn’t yours and is operated from within the offshore jurisdiction and not your house.
That said, I would add Malta, Cyprus, Gibraltar, and Isle of Man to the list of candidates to research. Mauritius and Labuan may also be interesting.