Most incorporation advice for online sellers opens with a tax rate. For ecommerce that is close to useless, because your marketplace, your payment processor and your VAT position all overrule whatever the registry charges. An offshore company that Stripe will not onboard has cost you the business no matter how low its rate. The best country to incorporate for ecommerce is decided by where your customers are, and everything else is downstream of that.
Start from where you sell
| You sell mainly on | Usual answer | What actually decides it |
|---|---|---|
| Amazon US, with FBA stock | US LLC | Banking, the tax interview, state sales tax |
| Amazon UK or an EU marketplace | UK Ltd or an EU company | VAT registration and who accounts for it |
| Your own store, customers everywhere | EU company or US LLC | Which processor will onboard you |
| Dropshipping, no stock anywhere | Wherever you can bank | You create no warehouse and no nexus |
| Selling into Asia, or buying from it | Hong Kong or Singapore | Supplier payments and the banking relationship |
The pattern repeats in every row. The company exists to satisfy a marketplace, a payment processor and a tax authority, in that order. Get those three right and the tax question mostly answers itself. Get them wrong and no rate saves you.
Selling into the US
A Delaware LLC is the reflex answer, at $110 to file and $400 a year in annual tax due by 1 June, with a $200 penalty and 1.5% monthly interest if you miss it. The Wyoming Secretary of State charges $100 to form and a $60 minimum annual report, which does the same job for a seller with no plans to raise investment. Neither reduces anybody's tax bill. Both open the payment infrastructure that US marketplaces and processors expect to see.
The obstacle is never the formation. It is the EIN.
The IRS requires the responsible party's Social Security number, individual taxpayer ID or entity EIN on the application, and a founder living abroad has none of the first two. The online tool is open only where the principal place of business sits in the United States. For those applicants the IRS publishes about four business days by fax and roughly four weeks by post. For applicants outside the United States it lists a phone line, a fax number and a mailing address, and publishes no turnaround at all. Plan for weeks rather than days, and note that you can apply only once per day.
Nothing works without it. No US bank account, no Stripe onboarding, no completed Amazon tax interview. Any agent quoting you a US formation should be quoting the EIN as part of the work rather than as a PDF explaining how to do it yourself.
Holding US inventory creates two problems, not one
The first is state sales tax. New Jersey defines physical presence to include the storage of inventory in the state, regardless of who owns the facility, and it is not an outlier in doing so. FBA moves your stock between fulfilment centres on Amazon's schedule, so you do not choose the states you land in.
Two details catch sellers out. Economic nexus has a second trigger alongside the revenue one, at 200 separate transactions in New Jersey's case, which a seller of a $15 product reaches at around $3,000 of sales. And the marketplace facilitator is required to collect and remit on marketplace transactions, so your Amazon channel is handled while your own Shopify store is not. Running both means one obligation you can ignore and one you cannot.
The second problem is federal. Whether you are engaged in a US trade or business is a live question once your goods sit in American warehouses and American workers pick and pack them. It is not a formality, and the answer turns on facts that differ between sellers. Take advice on it before you scale, not after an assessment arrives.
Selling into the UK and EU
A UK limited company is the path of least resistance for British marketplaces and payment providers. Companies House charges GBP 100 to incorporate online and GBP 50 for the annual confirmation statement, with same-day incorporation at GBP 156 through a software filing.
For the EU, an Estonian company is the cheapest route to an entity with an EU VAT number, at EUR 265 in state fees plus EUR 150 for e-Residency, with monthly accounting running anywhere from EUR 10 to EUR 259 depending on transaction volume. Sellers who need visible substance in the EU, an audited set of accounts and a treaty network usually end up looking at a Cyprus company instead, at several times the running cost.
What none of this changes is the VAT itself. VAT is charged where the customer is, so the registry holding your company file does not move the liability by a single euro.
What sitting outside the EU actually costs
It costs more than most sellers expect, and the European Commission publishes the mechanics.
In the Union scheme, an online marketplace becomes the deemed supplier where the underlying seller is established outside the EU. Amazon then accounts for the VAT on those sales instead of you. That is not a saving. It is the EU telling you it already has a rule for companies in your position, and it removes your control over pricing and reclaims at the same time.
Three more consequences follow from being established outside the EU. The EUR 10,000 place-of-supply threshold applies only to a supplier established in a single member state, so a non-EU company carries exposure from its first sale rather than its ten thousandth. The import scheme, which covers consignments up to EUR 150, requires a non-EU taxable person to appoint an EU intermediary, and that intermediary charges a fee every year forever. And goods already stored in an EU warehouse do not qualify as distance sales of imported goods at all, so stock sitting in a German fulfilment centre is a domestic or intra-Community supply with its own registration.
Registering in Seychelles does not make EU VAT go away. It makes complying with it slower, more expensive and more dependent on third parties.
Selling into Asia, or buying from it
Sellers whose suppliers are in China and whose customers are increasingly in the region have a different problem, and the answer to it is usually a Hong Kong company. Profits tax runs at 8.25% on the first HKD 2 million and 16.5% above that, it is charged on a territorial basis, and supplier payments to the mainland are routine rather than a compliance event. The weakness is banking. Opening an account for a Hong Kong company with no local presence has become genuinely difficult, and merchant accounts more so.
A Singapore company costs more to run and taxes profits at 17%, but it opens doors in banking that Hong Kong now closes. For a sourcing operation with real volume, that trade is usually worth making. For a first-year seller it is an expensive way to buy credibility you do not yet need.
Where offshore actively hurts
We rank Seychelles formation agents and BVI company providers because those jurisdictions solve real problems. Ecommerce is close to the worst use of either.
Payment processors decline offshore entities more often than they accept them, marketplaces ask more questions during verification, and opening a bank account is the hardest part of the exercise before a marketplace is even involved. The tax benefit is usually illusory, because VAT and sales tax follow the customer rather than the company, and the EU's intermediary requirement adds a permanent cost that an EU-established seller never pays. Comparing banking options for non-residents across jurisdictions makes the gap obvious before you pay a formation fee.
If an agent recommends an offshore company for an FBA business, ask which processor will onboard it and which marketplace has confirmed acceptance in writing. Vague answers are the answer.
The Dubai case
Dubai free zone companies are genuinely used by larger ecommerce operators, for a specific reason: the founder relocates and pays no personal income tax on what they extract.
The costs are real. Free zone licences run from AED 5,750 to AED 12,900 a year depending on the zone and activity, each residence visa adds roughly AED 4,000 to AED 5,000, and the establishment card and immigration card cost around AED 1,500 each. On top of that the Federal Tax Authority charges corporate tax at 9% on taxable income above AED 375,000, with a 0% free zone rate available only to a qualifying free zone person. Those conditions are narrow, so a consumer-facing seller should budget for the 9% until an adviser confirms otherwise in writing.
That arithmetic works for a seller doing serious volume who is willing to move. A licence held by somebody still living in Manchester is an expensive filing cabinet with a weak residency claim attached.
What a low headline rate does not buy
Georgia's 1% turnover regime is the lowest rate we cover, and it is close to irrelevant for a product business. The status goes to registered individuals rather than to companies, Government Resolution No 415 excludes consulting and several professional services from it by name, and it taxes turnover rather than profit. A reseller on a 15% gross margin pays that 1% on the whole invoice, which is nearly 7% of the margin, before anything goes on ads or freight. That is the arithmetic to run before registering in Georgia on the strength of the headline number.
None of it touches the obligations that cost real money. US inventory still creates state nexus. EU customers still generate EU VAT. A low corporate rate optimises the one line on your tax return that was never the problem.
Check the figures before you pay for them
Government fees move, and the versions circulating in agent quotes and budget spreadsheets lag behind by years. Delaware's LLC annual tax is $400. Wyoming forms at $100. Companies House charges GBP 100. Anything quoted below those numbers is a reason to ask when the quote was last updated, because the gap lands on your invoice rather than theirs.
Ask any prospective agent three things: what the total first-year cost is including the EIN or the VAT registration, who is legally responsible for the filings, and what happens in year two. Comparing what formation actually costs across jurisdictions and knowing the questions worth asking an agent turns a sales conversation into a specification. Our rankings exist so you can do that comparison without taking any single agent's word for it.
Key takeaways
- Your marketplace, your processor and your VAT position decide the jurisdiction. The tax rate is the last input, not the first.
- US LLC for FBA in the United States, and the EIN is the real obstacle. The IRS publishes no turnaround for applicants based outside the country.
- Holding US inventory creates state sales tax nexus regardless of who owns the warehouse, and raises a genuine federal question about being engaged in a US trade or business.
- UK Ltd or an EU company for UK and EU selling. VAT follows the customer, so incorporating elsewhere saves nothing and makes registering harder.
- A company established outside the EU makes the marketplace the deemed supplier, loses the EUR 10,000 threshold, and needs a paid EU intermediary for the import scheme.
- Offshore is the worst fit for ecommerce: worse processor acceptance, worse banking, and no VAT benefit at all.
Frequently asked questions
What company do I need for Amazon FBA in the US?
A US LLC in practice, most often Delaware or Wyoming, because the marketplace, the banking and the payment stack all expect one. You need an EIN before you can complete Amazon's tax interview or open a US business account. The formation itself takes days; budget weeks for the EIN.
Can I sell on Amazon with an offshore company?
Sometimes, but payment processors and banks decline offshore entities often enough that it is a poor plan. Get processor and marketplace acceptance confirmed in writing before you incorporate anywhere offshore, not after. The saving rarely covers the friction.
Do I pay US tax as a foreign FBA seller?
It depends on whether you are engaged in a US trade or business, and holding inventory in American warehouses makes that a live question rather than a theoretical one. Separately, that inventory creates state sales tax nexus in the states it sits in. Both need professional advice before you scale.
Does incorporating outside the EU avoid EU VAT?
No. VAT is charged where your customer is, not where your company is registered. A company established outside the EU also loses the EUR 10,000 threshold, needs an EU intermediary to use the import scheme, and hands VAT accounting on marketplace sales to the marketplace itself.
What is the cheapest company for an ecommerce business?
A Wyoming LLC at $100 to form and $60 a year, or an Estonian company at EUR 265 in state fees plus EUR 150 for e-Residency. Cheapest only matters once the marketplace, the processor and the VAT position are satisfied, and it never outweighs any of them.
Do I need a UK company to sell on Amazon UK?
Not strictly, but it removes friction with UK VAT registration, banking and payment providers. Companies House charges GBP 100 to incorporate online and GBP 50 a year for the confirmation statement, with a same-day option at GBP 156 if you file through software.
Which country is best for dropshipping?
Wherever you can bank and process payments easily, because you hold no inventory and create no warehouse nexus anywhere. Estonia and a US LLC both work. Your VAT and sales tax position still follows your customers, so the registry choice is genuinely a payments decision.
How long does an EIN take for a non-resident?
The IRS publishes no timeframe for applicants whose principal place of business is outside the United States. The figures it does publish, about four business days by fax and roughly four weeks by post, apply to applicants based in the US. Plan for several weeks and apply as soon as the company exists.
Should I use Dubai for ecommerce?
Only if you are genuinely relocating. The benefit is no personal income tax on what you extract, which requires you to actually live there. The company still faces 9% corporate tax above AED 375,000 unless it qualifies for the free zone 0% rate, and licences start around AED 5,750 a year.
What is the most expensive mistake sellers make?
Choosing a jurisdiction on its tax rate and then discovering the processor will not onboard it. Confirm payments and marketplace acceptance first, work out your VAT and sales tax registrations second, and treat the incorporation as the last step rather than the first.
