OnlyFans business abroad: Opportunities & Risks | IT-Medienrecht

Setting up a Business Abroad for OnlyFans Business: Opportunities & Risks

Running your own OnlyFans business often raises a crucial question for creators and agencies based in Germany: Is it truly worthwhile to set up a company abroad? Many hope to save taxes or to operate their erotic business model more freely, away from strict German regulations. You’ll find buzzwords like “OnlyFans Steuer Ausland” or “Steuern sparen OnlyFans” frequently online.

However, this subject matter is highly complex. This blog post examines the opportunities and risks of establishing an OnlyFans business abroad from a legal perspective. We will cover tax consequences, the choice of legal form, compliance, and reputation, providing decision-making aids with illustrative examples.

The goal is to offer a sober and well-founded explanation of what German OnlyFans creators and agencies need to consider. This assessment should take place before rashly forming an LLC for their OnlyFans or setting up an agency for creators abroad.

Tax Implications of an OnlyFans Business Abroad

A foreign company does not automatically guarantee tax-free OnlyFans income. Especially if you are resident in Germany, fundamental tax principles must be observed.

Global Income Principle and Unlimited Tax Liability

• Anyone who is resident or ordinarily resident in Germany is subject to unlimited income tax liability here (Section 1 (1) EStG). Germany then taxes worldwide income, including profits from an OnlyFans business abroad.
• In simpler terms: as long as a creator lives in Germany, the tax office will claim a share of OnlyFans earnings. This applies regardless of whether the company is based in Delaware, Dubai, or anywhere else.

Myth of Deregistration from the Residents' Registration Office

• A common misconception is that you can simply deregister your residence in Germany to end your tax liability. In reality, it depends on the actual housing and living situation, not just the registration address.
• If you still have a home available in Germany (e.g., with family or as property), or regularly stay here for more than 183 days a year, you are still considered a resident. This applies even without formal registration.
• Deregistration with authorities is merely an indication; it does not replace giving up your actual place of residence. Creators should not believe they can escape German tax authorities through a formal act if their de facto center of life remains in Germany.

Extended Limited Tax Liability (§ 2 AStG)

• Caution is advised even in the case of a complete move to classic tax havens (such as Dubai). The German Foreign Tax Act has a ten-year subsequent taxation rule for former German residents.
• Anyone who has been subject to unlimited tax liability in Germany for at least five years in the last ten years before moving away, and then moves to a low-tax country, remains subject to tax in Germany for certain income under specific circumstances. This extended limited tax liability aims to discourage purely tax-motivated relocations.
• It applies particularly if the expatriate retains significant economic interests in Germany. This includes income or assets in Germany above certain thresholds (e.g., more than 30% of total income). In many cases, this means a portion of the income still has to be taxed in Germany despite residing in Dubai. German OnlyFans creators who move abroad with low taxation but retain income or a company in Germany are not immediately free from obligations to the German tax office.

Double Taxation Agreements (Example UAE)

• Double taxation agreements (DTAs) between countries normally regulate which country has the right of taxation in the event of a departure, aiming to avoid double taxation. However, the DTA between Germany and the United Arab Emirates expired at the end of 2021.
• This means that a move to Dubai requires more careful tax planning. Without a DTA, Germany can apply its full national rules if there is doubt. Specifically, residency in Germany should be completely abandoned, and the strict residency criteria in the UAE must be met to fully utilize the 0% income tax there.
• Otherwise, there is a risk of a tax impasse: Germany could continue to treat you as taxable, while Dubai may levy nothing due to a lack of tax liability – an unfavorable constellation. The same applies to other countries with DTAs: a DTA can offer protection, but only if its requirements (residency, center of vital interests, etc.) are properly fulfilled.

Interim Conclusion on Tax Effects

From a tax perspective, a foreign company is not a simple "save taxes OnlyFans" solution. Anyone living in Germany remains subject to German tax authorities due to the worldwide income principle. A move abroad must be truly consistent to be recognized; simply deregistering is insufficient. Furthermore, attempts at tax evasion to tax havens are made more difficult by laws like § 2 AStG and the absence of some DTAs. Expert tax advice is essential before taking such steps, to avoid unintentionally falling into a tax trap.

Choosing the Right Legal Form and Location for Your OnlyFans Business

The choice of legal form and country for a foreign incorporation needs careful consideration. OnlyFans creators and agencies should compare popular models such as the US LLC, UK Limited, or a German GmbH. This comparison should include formation costs and ongoing obligations. There are also potential pitfalls if the foreign company is actually managed or operated from Germany.

Comparison of Common Legal Forms (GmbH, Limited, LLC)

To highlight the differences, the following table compares some key aspects of a German GmbH with a British Limited and an American LLC (using Delaware as an example), which are often considered for online businesses:

Note: A GmbH is based in Germany and is fully taxable here. Since Brexit, a UK Limited no longer enjoys an EU bonus; it is treated as a third-country company. The US LLC is not a recognized legal form in Germany, but is classified for tax purposes either as a partnership or a corporation, depending on its structure.

Permanent Establishment in Germany – A Hidden Tax Trap

While low start-up costs and lower tax rates abroad might sound attractive, many overlook the risk of a permanent establishment in Germany. A permanent establishment means that if the foreign company has a fixed place of business in Germany, or operates here, it is subject to German tax on the resulting profits.

For an OnlyFans business, a permanent establishment can be assumed if, for example, offices are maintained in Germany, or content is predominantly produced and managed from here. Even without an official office, the shareholder-managing director’s place of residence can sometimes be sufficient. For corporations, either the registered office or the place of management determines tax liability. If the actual management is located in Germany, the foreign company is treated as having unlimited tax liability here, with taxation of its worldwide income in Germany (like a GmbH).

This can occur if a German creator manages their US LLC entirely from their home. The tax office would then consider the management to be domestic. Consequently, the hoped-for tax advantages of the offshore company disappear, as the company becomes subject to German tax. Double taxation agreements can resolve conflicts in such cases, but they do not always prevent German taxation, especially if no DTA exists.

Bogus Foreign Company and Social Security: Unseen Pitfalls

The term “bogus foreign company” describes a company registered abroad but whose economic focus is in Germany. Such a structure can cause problems not only in terms of tax but also social security law. Social security obligations depend on the place of work, not the company's registered office.

If a person in Germany works for a foreign company—even if it is “their own” LLC—this individual is generally subject to German social security. EU law stipulates that employees must be covered by social security in the country where they actually work, regardless of where the employer is based. For an OnlyFans creator who sets up an offshore structure and sees themselves as an “employee” of their foreign company, this means they must maintain health insurance in Germany and pay contributions to pension and long-term care insurance like everyone else. This can be via official registration with the German social security system by the foreign employer or, if necessary, voluntarily/privately.

This further reduces the hoped-for savings from the foreign solution. Additionally, you risk investigations for bogus self-employment or undeclared employment if social security is circumvented. In short: a foreign company does not exempt you from paying German social security contributions as long as the work is carried out in Germany.

Compliance, Banking, and Reputation

Beyond taxes and legal form, there are tangible practical hurdles. Payment service providers, banks, and public reputation play a significant role in the erotic business sector, especially with an offshore company. Creators and agencies should never underestimate these aspects.

Challenges with Payment Processors and Adult Content

• The experience of recent years – recalling the near-porn ban debate at OnlyFans in 2021 – demonstrates that banks and payment providers are very cautious about sex work content. OnlyFans itself was forced to temporarily ban erotic content because major banks (Bank of New York Mellon, JPMorgan Chase, and others) blocked transfers and terminated accounts due to “reputational risk.”
• MasterCard and Visa also have strict requirements for adult offers. Consequently, it can be challenging for individual creators or smaller agencies to find payment providers if their business is officially categorized as “adult,” especially if the company is based in an offshore country. Many common payment services (PayPal, Stripe, etc.) explicitly exclude erotic offers from their terms and conditions.
• Specialized high-risk payment solutions do exist but often come with high fees and stringent compliance checks. If you plan to channel your OnlyFans revenue through a foreign company, you must ensure that this company can secure a business bank account and payment processor. This can be a significant challenge in the adult entertainment business.

Opening an Account for an Erotic Business Abroad

• Banks worldwide are obligated to meticulously check customers and cash flows (Know Your Customer, anti-money laundering). A newly founded offshore company with no local substance, whose business is “online adult content,” raises red flags at many banks.
• German banks will generally be reluctant to pay OnlyFans income to the private account of a domestic private customer if a foreign company structure is purportedly behind it; this would need disclosure. Foreign banks, in turn, often require a local connection. A Delaware LLC without a US bank account is impractical, and opening a US bank account from abroad is difficult without a personal presence.
• In Dubai, a company account may be subject to local visa and residency requirements. Additionally, adult entertainment companies face increased scrutiny there. In the worst-case scenario, you might not be able to obtain a reliable account at all, or only through payment providers of questionable reliability. E-wallet solutions such as Paxum, ePayments, or cryptocurrencies are sometimes considered, but they can be expensive, insecure, or unsuitable for large amounts. The compliance hurdles are therefore high: a foreign company might be established, but the money must also be able to flow effectively. Without proper banking and payment transactions, even the best tax planning is useless.

Customer Perception and Reputational Risks

• Finally, reputation plays a significant role. Both paying fans and business partners (advertisers, platforms, authorities) may distrust an offshore structure. Many consumers pay little attention to where a company is based as long as the service functions well. However, if it becomes public that a well-known creator is channeling their income through, for example, a letterbox company in Cyprus or Delaware, this can be exploited by the media.
• In an era where tax avoidance is viewed critically, this could lead to "shitstorms" or a loss of image, especially since OnlyFans creators often focus on authenticity. Cooperation partners (e.g., a German advertising agency working with a creator agency) could also have concerns if the contractual partner is a foreign company that is difficult to access.
• An erotic business abroad is quickly associated with terms such as “offshore,” “tax haven,” or “letterbox company” – terms that carry negative connotations. Lastly, if a legal dispute arises (for example, with a customer or a dismissed employee), jurisdiction becomes more complicated. Enforcing claims against an LLC in the USA is more complex than against a German GmbH. These soft factors – trust, image, legal tangibility – should therefore be thoroughly considered in the decision-making process.

Decision Support with Examples

In view of all these aspects, the question arises: For whom (and under what circumstances) is it worthwhile to set up abroad – and for whom not? Below are two hypothetical scenarios for German OnlyFans players to make the opportunities and risks more tangible.

Scenario 1: Individual Creator in Germany – GmbH vs. LLC in Delaware

Lisa is a successful OnlyFans creator from Germany with high monthly profits. She is considering using a company instead of a sole proprietorship. Her options are a German GmbH or a US LLC in Delaware. What are the consequences?

• GmbH in Germany: Lisa establishes a "Lisa Lust GmbH" in Berlin. The advantage is that everything is on a solid legal and operational footing. She pays corporation tax and trade tax on the GmbH's profits (around 30% in total) in Germany. If she withdraws money, 25% withholding tax is added on dividends. Overall, the tax burden on all distributed profits could effectively reach 40-45%. However, Lisa can also retain part of the profits in the GmbH for reinvestment, in which case only the initial 30% corporation/trade tax applies. Under social security law, she is not employed as the managing director of her GmbH (if she is the majority shareholder, she is considered self-employed), but she must continue to pay her health insurance and, if necessary, make voluntary pension provisions via the artists' social security fund. She faces hardly any compliance problems: German banks serve the GmbH without issues, and payment providers like OnlyFans transfer money to the German company account. Customers and fans don't notice any of this – the GmbH hardly appears externally, except perhaps in the imprint. The disadvantages of a GmbH include high formal requirements, ongoing bookkeeping, IHK contributions, and relatively high taxes. But legally, Lisa is on safe ground.
• LLC in the USA: Alternatively, Lisa founds a "Lusty LLC" in Delaware. Formation is quick and inexpensive. Because Lisa is neither a US citizen nor conducts business in the USA, the LLC presumably does not pay corporation tax in the USA (Delaware only charges an annual flat-rate franchise tax). At first glance, the entire profit would accrue untaxed in the LLC. This is precisely the motivation for many considering forming an LLC for OnlyFans. In practice, however, there are several risks. First, Germany will scrutinize this LLC for tax purposes. A US LLC is often regarded as transparent, i.e., like a partnership – in which case Lisa would have to pay tax on her share of the profits directly in Germany as income from business operations. Even if one argues that the LLC is a corporation, the tax office could classify the LLC as a domestic resident due to de facto management (Lisa controls everything from Germany). The profit would then also be taxed in Germany as if it were a German company. Tax savings: minimal to zero, unless venturing into grey areas. Additionally, Lisa must either pay out dividends (again subject to withholding tax) or pay herself a salary to receive her money. A salary from the US LLC to her in Germany would be taxable in Germany (as wages), and the LLC may have to recognize it in Germany as an operating expense of a permanent establishment. Under social security law, Lisa would also have to report her work for the LLC in Germany, which is complicated as the LLC is not seeking German permanent establishment status. Banking: Lisa would need a company account for the LLC. Without a US presence, this is difficult; she could rely on FinTech solutions or have money paid out directly to her privately via OnlyFans – but this contradicts the idea of a company and creates problems with tax returns for larger sums. The advantage of the LLC solution is that it could theoretically retain profits in the LLC and defer distribution until later for tax deferral. However, German add-back taxation could prevent this, at least for passive income. As her income from OnlyFans is actively earned (content creation is an active activity), add-back taxation may not directly apply here – but the de facto management in Germany remains a problem. For Lisa, the opportunities of an LLC lie in slightly less bureaucracy and possibly tax deferral. The risks (German taxation despite everything, problems with banks, high compliance complexity) outweigh the benefits in her case, as she intends to stay in Germany. For Lisa, the GmbH would likely be the legally sound and peaceful option, despite the tax burden.

Scenario 2: Agency Moves Abroad – Germany vs. Dubai

"CreAgency GmbH" is a small agency in Munich that manages several OnlyFans creators, handling management, content planning, and marketing. The two shareholders are considering relocating their company headquarters to Dubai. Reasons include Dubai's 0% income tax for most companies and a perception of more liberal attitudes toward the adult content business model compared to Germany. What factors should be considered?

• Status quo Germany: As a German GmbH, the agency pays approximately 30% tax on its profits (corporation tax + trade tax). Additionally, salaries are paid to managing directors/partners, on which wage tax and social security contributions are due, as well as any dividend distributions with withholding tax. The regulation of adult content in Germany also requires youth protection checks and clear labeling, which adds to the agency's workload. On the other hand, they benefit from full legal certainty and access to German/European payment service providers. Clients (the creators) appreciate the transparent structure. Disadvantages: High tax burden and certain restrictions, e.g., regarding advertising (in Germany, advertising for “erotic services” is regulated).
• Foundation in Dubai upon Departure: The shareholders are considering emigrating to Dubai and setting up a free zone company for the agency there. Dubai attracts with 0% income tax for natural persons and, until recently, no corporate taxes (from 2023, there will be 9% corporate tax for profits above approximately 250,000 AED, or ~€250k, though many smaller companies remain effectively tax-free). Opportunities: In Dubai, there would initially be no income tax for the agency, neither at a personal nor company level, provided the requirements are met. This could mean massive tax savings that could be invested. They might also feel freer regarding erotic content in Dubai, though the UAE has strict moral rules, online activities for international platforms are usually tolerated. Risks and conditions: First, the entrepreneurs must genuinely relocate to Dubai, completely. This means giving up their home in Germany, relocating their center of life, observing minimum residence days in the UAE, etc. A "half-life" in Germany would immediately reintroduce German tax liability. Furthermore, since the abolition of the DTA UAE-DE, there is no agreement protecting them from German taxation. Germany could still tax partial income for up to 10 years after departure via extended limited tax liability, especially if “substantial domestic interests” remain – for example, if the agency still has German clients or assets. The shareholders would therefore have to sell their German property, for instance, and ensure that they no longer generate more than 30% of their turnover with Germany to avoid this trap. There is also the exit tax (§ 6 AStG) to consider: if German shareholders move abroad, they are treated as if they were selling their company shares – the hidden reserves are taxed. In plain language: the two would have to pay tax on the increase in value of their GmbH shares if they move to Dubai, a non-EU country (deferral and installment payments exist, but it is a financial burden). Operational issues: The agency would have to be restarted in Dubai. Do the owners easily obtain visas and licenses? Dubai often requires a certain office presence to be maintained in a free zone, which is a cost factor. Banking: Dubai banks have recently introduced more restrictive KYC rules; an erotic-related business could arouse suspicion, but it is not prohibited per se. Payments from OnlyFans to a Dubai company could work, as OnlyFans itself operates internationally – however, without a DTA, there could be deductions, or the payments could be considered foreign income of the creator, which is a complicated issue. Client perspective: For the agency’s creator clients, it might not matter where the agency is based as long as the service is good. However, contracts would need to be adapted to UAE law. Some German creators might hesitate regarding whether their management contract with a Dubai company is still subject to German labor law or social security law. Conclusion of this scenario: A relocation and start-up strategy in Dubai can offer enormous tax advantages (0% instead of ~40% tax burden). However, it requires radical changes, such as completely moving residence and severing German connections. The risks are exit tax (one-off) and the extended tax liability (a 10-year latent risk), as well as the challenge of setting up a sensitive business in a foreign legal and banking system. If successful and consistently executed, operators can potentially operate almost tax-free – a loophole, so to speak, in the German tax net. But this path is only viable for those genuinely prepared to move their lives abroad. A “fake emigration” does not work; sooner or later it would be discovered and could potentially be punishable by law.

Add-Back Taxation and Criminal Liability: Legal Consequences

Both examples highlight a general danger: if the principal remains in Germany and merely parks profits abroad, add-back taxation can apply from a certain point. This rule dictates that profits from low-taxed foreign companies are attributed to domestic shareholders and taxed in Germany, particularly passive income (e.g., capital investments).

While this may not immediately apply to an active OnlyFans business, if a foreign company serves only as a shell and collects income without real substance, German authorities could treat this as passive income. Anyone attempting to funnel income past German tax authorities risks tax evasion – a criminal offense punishable by fines and, in serious cases, imprisonment (up to 5 or even 10 years). Today, international administrative assistance and reporting systems (CRS) ensure that offshore accounts are no longer invisible. This reality should be clear to anyone considering evading taxes internationally. For more insights into legal pitfalls for new businesses, consider reviewing common legal mistakes made by startups.

Conclusion: Key Takeaways and Legal Recommendations

Summary – Advantages and Disadvantages

Setting up an OnlyFans business abroad can offer advantages, but only under specific conditions. The opportunities of a relocated company primarily lie in tax optimization, potentially leading to complete tax exemption if you genuinely emigrate, and sometimes in slightly more flexible regulations or increased company anonymity.

However, the risks and disadvantages often outweigh these benefits if you do not truly leave Germany. You remain liable for tax in Germany (global income principle), face the risk of a domestic permanent establishment or add-back taxation, struggle with banks for payment processing, and risk your reputation through an offshore structure. Additionally, there is the foreign bureaucracy and potential language and legal hurdles; a low-tax company is of little use if every document needs costly translation and every contractual dispute must be settled abroad.

Warning Against Standard Solutions

There is no one-size-fits-all solution for all creators or agencies. Every business model and personal situation (residence, family status, income level, plans) is unique. Blanket recommendations like “set up an LLC in XY to save on taxes” are dangerous. Such standard models, often promoted in online forums or by dubious advisors, can, in the worst case, lead to a tax trap or even criminal liability. Offers like “Save taxes OnlyFans – tax-free in 3 steps” should be viewed with extreme skepticism. They often omit the pitfalls described above. Fictitious foreign companies are increasingly exposed by authorities, especially with the growing international exchange of financial data.

Recommendation: Seek Individual Advice

Before making any major decisions – whether setting up a UK Limited for a creator agency or completely moving to Dubai – you should definitely seek expert legal advice. A consultant with international experience in tax law can analyze your personal situation and outline possible legal options. This might also reveal opportunities for optimization within Germany, such as using the small business regulation, forming a German corporation, or maximizing operating expenses, which can reduce the tax burden without needing to go abroad.

Ultimately, establishing a business abroad in the erotic sector is a double-edged sword. It offers opportunities for those prepared to fundamentally reorganize their lives but harbors considerable risks for those who believe they can simply use an offshore company while based in Germany. In any case, avoid rash steps and "one-size-fits-all" solutions. Instead, carefully weigh your options, inform yourself thoroughly, and, if in doubt, pay taxes in Germany according to the law. This approach will save you sleepless nights and legal problems in the long run. The OnlyFans business should bring joy and profit, not be jeopardized by ill-considered foreign ventures.