The recent rise of services like Stripe and PayPal Pro have empowered online businesses of all sizes by allowing them to accept credit card payments for a reasonable cost and without the need for a complex technical installation. Sounds great? Well only if your business is registered in the United States, the United Kingdom, Canada and a few other select countries. If it is registered elsewhere, you are pretty much out of luck. Or are you? In this post I analyse a very interesting strategy that enables those companies to signup for Stripe and PayPal Pro accounts even if they are registered in unsupported countries.


The problem

Accepting credit card payments can be a major headache for those who own businesses registered outside of the major English-speaking countries and the more developed EU members. The popular services, such as Stripe and PayPal Pro, are not usually an option and even the more global “regular” PayPal comes with lots of restrictions. Even if Stripe or a similar service is an option, the rates will be much higher than in the aforementioned countries (Hong Kong and Singapore being good examples). There are, of course, local alternatives but they are difficult to use and are rarely compatible with the popular services, shopping carts and WordPress plugins. Even in popular countries such as Estonia and Bulgaria, the number of options available is remarkably small.

Things get even worse when it comes to the high-risk countries and the island tax havens. For example, a Samoa company will really struggle to get a good payment processing deal. It is also likely to pay a significantly higher rate.

Another problem is that payments processed in those high risk countries or tax havens tend to be declined more often due to fraud concerns. For example, a bank in the US is more likely to decline a transaction in Cyprus than one in the UK or US. Not to mention the fact that many potential customers will be turned off at the idea of doing business with a company registered somewhere they do not know or trust.

All this results in a competitive disadvantage for those companies versus their counterparts registered in countries like the US, UK and Canada.


The solution

In short, you register and use a payment processing subsidiary in the UK or US to process all payments instead of having your main company do it.

In practice, it works like this:
Customer -> UK or US payment processing subsidiary -> Main company

This allows you to use Stripe (and get the best rates), PayPal Pro and any other services available in those two countries. This also ensures that your decline rate stays low and that your customers have no trust issues (as far as they can tell, you are a UK or US company).

Because the payment processing subsidiary is a tax neutral entity (an LLP or LLC), using this strategy does not create an additional tax burden. Any profits generated by the payment processing subsidiary simply flows to its parent company where it is taxed as usual.

In effect, this levels the playing field and removes the competitive disadvantage that companies registered in lesser known as well as high risk countries have historically faced.


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