- OnlyFans business creators should be aware of their tax liability in Germany, even when setting up abroad.
- The global income principle states that persons resident in Germany are subject to taxation worldwide.
- Deregistration at the residents' registration office is not sufficient to escape the German tax authorities.
- Double taxation agreement between Germany and the UAE has expired, which makes tax planning more difficult.
- The choice of legal form has a significant impact on tax and administrative requirements.
- Permanent establishment in Germany can lead to unexpected tax liability, even for foreign companies.
- Compliance and reputational risks are important as banks often avoid adult content.
Running your own OnlyFans business often raises the question for creators and agencies based in Germany: Is it worth setting up a company abroad? The hope is to save taxes or to liberalize the erotic business model outside of strict German regulations. Buzzwords such as “OnlyFans Steuer Ausland” or “Steuern sparen OnlyFans” can be found on the Internet. But the subject matter is complex. This blog post examines the opportunities and risks of setting up an OnlyFans business abroad from a legal perspective – from tax consequences and the choice of legal form to compliance and reputation – and provides decision-making aids with examples. The aim is to provide a sober and well-founded explanation of what German OnlyFans creators and agencies need to consider before rashly founding an LLC for their OnlyFans or setting up an agency for creators abroad.
Tax effects
A foreign company does not automatically mean tax-free OnlyFans income. Particularly if you are resident in Germany, there are important basic tax principles that 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 other words, as long as the creator lives in Germany, the tax office wants to earn money from OnlyFans earnings, regardless of whether the company is based in Delaware, Dubai or anywhere else.
- Myth of deregistration at the residents’ registration office: A common misconception is that you can simply deregister your residence in Germany and thus end your tax liability. In reality, however, it depends on the actual housing and living situation, not just the registration address. Anyone who still has a home available in Germany (e.g. with family or as property) or regularly stays here for more than 183 days a year is still considered a resident – even without formal registration. Deregistration with the authorities is at best an indication, but does not replace giving up your actual place of residence. Creators should therefore not believe that they can escape the German tax authorities through a formal act if the de facto center of their life is still 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 certain circumstances. This extended limited tax liability is intended to make purely tax-motivated relocations less attractive. It applies in particular if the expatriate retains significant economic interests in Germany – such as income or assets in Germany above certain thresholds (e.g. more than 30% of total income). In many cases, this means that a portion of the income (still) has to be taxed in Germany despite residing in Dubai. In plain language: German OnlyFans creators who move abroad with low taxation but still have income or a company in Germany, for example, are not immediately released from their obligation by the German tax office.
- Double taxation agreements (example UAE): Double taxation agreements (DTAs) between countries normally regulate who has the right of taxation in the event of a departure in order 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 must be better planned from a tax perspective. Without a DTA, Germany can apply the full German rules in case of doubt. Specifically, the residence in Germany should really be given up completely and the strict residency criteria in the UAE should be met in order to take full advantage of 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 not levy anything at all due to a lack of tax liability – an unfavorable constellation. The same applies to other countries with DTAs: The DTA can offer protection, but only if the requirements (residency, center of vital interests, etc.) are properly met.
👉 Interim conclusion: From a tax perspective, a foreign company is not a simple “save taxes only fans” solution. Anyone who lives in Germany is subject to the German tax authorities (world income principle). A move abroad must be really consistent in order to be recognized – simply deregistering is not enough. And tax evasion to oases is made more difficult by laws such as § 2 AStG and the absence of some DTAs. Tax advice is essential before taking such steps to avoid unintentionally ending up in a tax trap.
Choice of legal form and location
The choice of legal form and country for a foreign incorporation needs to be carefully considered. OnlyFans creators and agencies should compare popular models such as the US LLC, UK Limited or a German GmbH – both in terms of formation costs and ongoing obligations. There are also pitfalls if the foreign company is actually managed or operated from Germany. An overview:
Comparison of common legal forms (GmbH, Limited, LLC)
In order to make the differences tangible, the following table compares some key points of a German GmbH with a British Limited and an American LLC (Delaware as an example), which are often considered for online businesses:
| Criterion | German GmbH | UK Limited | US LLC (Delaware) |
|---|---|---|---|
| Minimum capital | 25,000 € share capital (at least €12,500 on formation) | £1 (mostly nominal, no high capital) | No prescribed minimum capital |
| Formation costs | Notarization, entry in the commercial register, approx. 1-2 weeks until registration; formation costs several hundred € | Online registration at Companies House, usually in 1-2 days; very low costs (double-digit £ range) | Online incorporation via registered agent possible, usually in a few days; costs approx. 200-300 $ per year (agent & state of Delaware) |
| Tax treatment | Corporation tax 15% + solidarity surcharge, plus trade tax approx. 14% (depending on municipality) on profits; distributions (dividends) with 25% capital gains tax (+ solidarity surcharge/company income tax) for the recipient | Corporation tax in the UK (19%, from 2023 up to 25% for higher profits); dividends to German shareholders are subject to German taxation (DTA protects against double taxation) | Taxed as pass-through (transparent) in the USA, i.e. no US corporation tax for foreign-owned LLCs without US income. In Germany, however, an LLC can be considered a corporation depending on its structure – profits are therefore taxable here. |
| Administrative expenses | Ongoing bookkeeping according to German standards; annual financial statements with the Federal Gazette; compulsory membership of the Chamber of Industry and Commerce; strict formalities (shareholders’ meetings etc.) | Annual accounts (possibly micro-accounts) at Companies House; simple bookkeeping sufficient; fewer formal hurdles than a GmbH | Annual report to Delaware (franchise tax report); no obligation to publish the books; simple administration, but US compliance (e.g. FATCA reporting) required |
| Liability | Limited to company assets (share capital); managing director liable for breaches of duty | Limited to company assets; directors have duties, liability can be enforced in the event of misuse | Limited to company assets; flexible internal structure (member agreement instead of strict form) |
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 the structure).
Permanent establishment in Germany – hidden tax trap
As attractive as low start-up costs and lower tax rates abroad sound, many people forget 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. In the case of an OnlyFans business, a permanent establishment can be assumed, for example, if offices are maintained in Germany or the content is predominantly produced and managed from here. Even without an official office, the shareholder-managing director’s place of residence is sometimes sufficient: for corporations, either the registered office or the place of management determines the 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 happen, for example, if a German creator manages his US LLC entirely from his home: the tax office then considers the management to be domestic. As a result, the hoped-for tax advantages of the offshore company disappear because the company is recorded for tax purposes in Germany after all. Double taxation agreements can resolve a conflict in such cases, but they do not always prevent German taxation, especially if there is no DTA.
Bogus foreign company and social security: The term “bogus foreign company” describes a company that is 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 employee is generally subject to German social security. EU law stipulates that employees must be covered by social security in the country in which they actually work, regardless of where the employer is based. For an OnlyFans creator who, for example, sets up an offshore structure and sees himself as an “employee” of his foreign company, this means that he must take out health insurance in Germany and pay contributions to pension and long-term care insurance like everyone else – either via official registration with the German social security system by the foreign employer or, in case of doubt, voluntarily/privately. This further reduces the hoped-for savings from the foreign solution. In addition, 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
In addition to taxes and legal form, there are tangible practical hurdles: Payment service providers, banks and public reputation play an important role in erotic business with an offshore company. Creators and agencies should never underestimate these aspects:
- Payment processors and adult content: The experience of recent years – think of the near-porn ban debate at OnlyFans 2021 – shows 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 – for “reputational risk” reasons. MasterCard and Visa also have strict requirements for adult offers. It can therefore be difficult for individual creators or smaller agencies to find payment providers if the business is officially in the “adult” category, especially if the company is based in an offshore country. Many common payment services (PayPal, Stripe, etc.) exclude erotic offers from their terms and conditions. Specialized high-risk payment solutions do exist, but often come with high fees and strict compliance checks. If you want to channel your OnlyFans revenue through a foreign company, you have to make sure that this company has a business bank account and payment processor – which can be a real challenge in the adult entertainment business.
- Opening an account for an erotic business abroad: Banks worldwide are obliged to check customers and cash flows carefully(Know Your Customer, anti-money laundering). A newly founded offshore company with no local substance whose business is “online adult content” sets off alarm bells at many banks. German banks will generally be reluctant to pay out OnlyFans income to the private account of a domestic private customer if there should actually be a foreign company construct behind it – this would have to be disclosed. Foreign banks, in turn, often require a local connection: a Delaware LLC without a US bank account is impractical; but opening a US bank account from abroad is difficult without a personal presence. In Dubai, on the other hand, a company account may be subject to local visa and residency requirements. In addition, adult entertainment companies are also under increased scrutiny there. In the worst case scenario, you may not be able to get a reliable account at all, or only with payment providers of questionable reliability. E-wallet solutions such as Paxum, ePayments or cryptocurrencies are also sometimes considered, but are either expensive, insecure or unsuitable for large amounts. The compliance hurdles are therefore high: a foreign company may be established, but the money must also be able to flow. Without banks and payment transactions, the best tax planning is useless.
- Customer perception and reputational risks: Finally, reputation plays a role. Both paying fans and business partners (advertisers, platforms, authorities) may distrust an offshore structure. Many consumers pay little attention to where exactly a company is based as long as the service works. But if it becomes public that a well-known creator is channeling its income through, say, a letterbox company in Cyprus or Delaware, this can be exploited by the media. In times when tax avoidance is viewed critically, this could lead to shitstorms or a loss of image – precisely because 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 have negative connotations. And last but not least: Should a legal dispute arise (for example with a customer or a dismissed employee), the jurisdiction is 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 factored into the decision.
Decision support with examples
In view of all these aspects, the question arises: For whom (and under what circumstances) is it worth setting 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. The options are a German GmbH or a US LLC in Delaware. What are the consequences?
- GmbH in Germany: Lisa founds a “Lisa Lust GmbH” in Berlin. Advantage: 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 it takes money out, 25% withholding tax is added on dividends. Overall, the tax burden on all the profits she distributes to herself could effectively reach 40-45%. However, Lisa can also leave part of the profits in the GmbH and retain them, for example to reinvest, in which case only the 30% corporation/trade tax is initially payable. Under social security law, she is not employed as the managing director of her GmbH (if she is the majority shareholder, she is considered to be self-employed), but she must of course continue to pay her health insurance and, if necessary, make voluntary provision for her pension via the artists’ social security fund. She has hardly any compliance problems: German banks serve the GmbH without any problems, payment providers such as 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 disadvantage of the GmbH: high formal requirements, ongoing bookkeeping, IHK contributions, and taxes remain high. But legally, Lisa is on safe ground.
- LLC in the USA: Alternatively, Lisa founds a “Lusty LLC” in Delaware. The formation is quick and inexpensive. Because Lisa is neither a US citizen nor does 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, therefore, the entire profit would accrue untaxed in the LLC. This is precisely the motivation of many who are considering forming an LLC for OnlyFans. In practice, however, there are a number of risks: First, Germany will look at 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 you argue 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 you go into gray areas. In addition, Lisa must either pay out dividends (in which case withholding tax applies again) or pay herself a salary in order 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 make do with FinTech solutions or have the money paid out directly to her privately via OnlyFans – but this contradicts the idea of the company and causes problems with tax returns for larger sums. The advantage of the LLC solution is that it could theoretically leave profits in the LLC and defer the distribution until later in order to achieve tax deferral. However, German add-back taxation could put a stop to this, at least for passive income. However, as her income from OnlyFans is actively earned (content creation is an active activity), the add-back taxation may not apply directly here – but the de facto management in Germany remains a problem. The bottom line for Lisa is that the opportunities of an LLC lie in slightly less bureaucracy and possibly a tax deferral. The risks (German taxation despite everything, problems with banks, high compliance complexity) outweigh the benefits in her case, as she wants to stay in Germany. For Lisa, the GmbH would probably be the legally clean and quiet option – despite the tax burden.
Scenario 2: Agency moves abroad – Germany vs. Dubai
“CreAgency GmbH” is a small agency in Munich that looks after several OnlyFans creators (management, content planning, marketing). The two shareholders are considering whether to relocate their company headquarters to Dubai. Reasons: In Dubai, companies pay 0% tax on income in most cases, and the adult content business model is not subject to the moral scrutiny there as it sometimes is in Germany. What should be considered?
- Status quo Germany: As a German GmbH, the agency pays approx. 30% tax on its profits (corporation tax + trade tax). In addition, salaries are paid to the managing directors/partners, on which wage tax and social security contributions are paid, 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 means a little extra work for the agency. On the other hand, they enjoy full legal security and access to German/European payment service providers. Customers (the creators) appreciate the transparent structure. Disadvantages: High tax burden and certain restrictions, e.g. regarding advertising (in DE, advertising for “erotic services” is regulated).
- Foundation in Dubai on departure: The shareholders are now 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 also without corporate taxes (from 2023 there will be 9% corporate tax from a profit of approx. 250,000 AED, ~€250k, whereby many smaller companies effectively remain tax-free). Opportunities: In Dubai, there would initially be no income tax for the agency – neither at personal nor company level – provided the requirements are met. This can mean massive tax savings that could be invested. They also feel freer in Dubai when it comes to erotic content (although it must be said that the UAE has some strict moral rules, but online activities for international platforms are usually tolerated). Risks and conditions: First of all, the entrepreneurs must actually relocate to Dubai, completely. This means giving up your home in Germany, relocating the center of your life, observing minimum residence days in the UAE, etc.. A half-life in Germany would immediately bring German tax back into play. In addition, since the abolition of the DTA UAE-DE, there is no agreement that protects you 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 example, and ensure that they no longer >30% of their turnover with Germany in order 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 (there are deferral and installment payments, but it is a financial burden). Operational issues: The agency would have to be restarted in Dubai. Do the owners get visas and licenses easily? Dubai often requires a certain office presence to be maintained in a free zone (cost issue). Banking: Dubai banks have recently introduced more restrictive KYC rules; an erotic-related business could arouse suspicion, but 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, 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 right. However, contracts would have to be adapted to UAE law. Some German creators might be hesitant as to whether their management contract with a Dubai company is still subject to German labor law/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 (moving residence completely, cutting German connections). The risks are exit tax (one-off) and the extended tax liability (10-year latent risk) as well as the challenge of setting up a sensitive business in a foreign legal and banking system. However, if it succeeds and is carried out consistently, the operators can operate almost tax-free – a hole in the German tax net, so to speak. But this path is only viable for those who are prepared to really move their lives abroad. A “fake emigration” does not work; sooner or later it would be discovered and would potentially be punishable by law.
Add-back taxation and criminal liability: Both examples also show the general danger: if the principal remains in Germany and only parks the profits abroad, add-back taxation applies from a certain point. This rule means that profits from low-taxed foreign companies are attributed to the domestic shareholders and taxed here – at least the passive income (e.g. capital investments). This may not immediately apply to an active OnlyFans business, but as soon as, for example, a foreign company only serves as a shell and collects income without any real substance, German authorities could treat this as passive income. And anyone who tries to smuggle income past the 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 should be clear to anyone who is thinking of evading taxes internationally.
Conclusion and legal recommendations
Summary – advantages and disadvantages: Setting up an OnlyFans business abroad can offer advantages, but only makes sense under certain conditions. The opportunities of a relocated company lie primarily in tax optimization (up to complete tax exemption if you actually emigrate) and sometimes in somewhat easier regulations (e.g. less strict regulations or more anonymity for the company). However, the risks and disadvantages often outweigh the advantages: if you don’t actually leave, you remain liable for tax in Germany (global income), you run the risk of a domestic permanent establishment or add-back taxation, you have to fight with banks to process payments and risk your reputation through an offshore structure. In addition, there is the bureaucracy abroad and possible language and legal hurdles – what use is a low-tax company if you have to translate every document at great expense and settle every contractual dispute abroad?
Warning against standard solutions: There is no one-size-fits-all solution for all creators or agencies. Every business model and every personal situation (place of residence, family status, income level, plans) is different. Blanket recommendations such as “set up an LLC in XY to save on taxes” are dangerous. Such standard models, often advertised in online forums or by dubious advisors, can in the worst case lead to a tax trap or even criminal liability. Offers such as “Save taxes OnlyFans – tax-free in 3 steps” should be viewed with the utmost skepticism. There is often no reference to the pitfalls described above. Fictitious foreign companies are increasingly being exposed by the authorities, especially since international financial data has been exchanged.
Recommendation: seek individual advice. Before making any major decisions – be it setting up a UK Limited for a creator agency or moving to Dubai completely – you should definitely seek expert advice. A consultant with international experience in tax law can analyze your personal situation and point out possible legal options. This could also reveal that there are optimizations within Germany (e.g. use of the small business regulation, formation of a German corporation, maximum use of operating expenses, etc.) that already reduce the tax burden without going abroad. Conclusion: Setting up abroad in the erotic business is a double-edged sword – it offers opportunities for those who are prepared to organize their lives accordingly, but harbours considerable risks for all those who believe that they can simply use an offshore company based in Germany. In any case, the following applies: no rash steps, no one-size-fits-all solutions. Instead, weigh things up carefully, inform yourself and, if in doubt, pay taxes in Germany in accordance with the law – this will save you sleepless nights and legal problems in the end. Ultimately, the OnlyFans business should bring joy and profit and not be jeopardized by ill-considered foreign adventures.
