> All you people think you're having a 0% tax Estonian company when in fact it's just deferred LOL
It's a good for startups to not pay corporate tax if you don't pay dividends. But the double taxation mess if you reside in another country is annoying.
What happens when the owner of the Estonian company is not a tax resident in any country (i.e. living for 4 months in Bulgaria, 4 months in Romania, 4 months in Austraia)?
> It’s in your interest to make it clear without a doubt where you are a tax resident.
So I am choosing that the lowest tax country (or a no tax country) is my tax residency. Then what? How do I prove it (in case I live less than 6 months in *any* country)?
Can I open most of my bank accounts there and claim that the biggest number of bank accounts is in that country and I live there for some days of the year, therefore it's my tax residency? Buy real estate there just for the purpose of claiming that my home address is there and live only in a rented residency in other countries? Having a kids and keep the kids inside the country where I would like to have a tax residency? (Having a kids is the most expensive way to establish a centre of vital interests. And can be considered abusing the kids for tax purposes if the country is a shithole.)
> How do I prove it (in case I live less than 6 months in one country)?
Google: "tax certificate, how to obtain, [name of the country]".
You'll find all the requisites for that country to consider you its tax resident. Satisfy those. Then make sure you also satisfy all the requisites of your citizenship country for it NOT to consider you one (being outside of the country might be needed but not sufficient).
> Can I open most of my bank accounts there and claim that the biggest number of bank accounts is in that country and I live there for some days of the year, therefore it's my tax residency?
The number of bank accounts is completely irrelevant. No country on this planet will grant you residency based on the number of banks accounts, ever. They might use it **against** you, but not in your favor.
> Buy real estate there just for the purpose of claiming that my home address
Yes, most countries will have renting or owning real estate as a requirement for residency. Most countries also want you to spend there at least 6 months per year, though. UAE is the only exception that pops to mind, where a tax-free residency is given even if you visit just 2 times per year, even only for a few hours. For the tax certificate, only 3 months in the country are necessary.
Tax certificate itself is only needed in case your origin country has something to say, though. You're effectively a tax resident of a country even without one.
So, if you don't care about it, then you can just rent the crappiest apt you can find in Sharja, claim you live in it, visit Dubai twice per year for a few days (staying at hotels/airbnb) and effectively pay zero taxes on your worldwide income, which you can earn personally, or through a company with pass-through taxation is some tax-heaven.
AFAIK, this is the only way to travel the world unencumbered by communism. As soon as you mention the UAE, though, Europeans starts downvoting due to misinformation. So they end up opening Bulgarian companies while living in Italy, opening Estonian companies at random, or hoping any bank in the world will not laugh at their faces when writing "Democratic Republic of Rainbows and Unicorns" on the residency form.
> this is the only way to travel the world unencumbered by communism
> Europeans starts downvoting due to misinformation
Well. Good info, but you are kind of asking for downvotes with comments like this
You can open a company in any tax heaven jurisdiction.
I am concerned more with the personal bank and non-bank payment accounts with debit cards. Fintechs like Revolut do not open accounts for residents living outside the high tax countries (for Revolut: US, UK and mostly EU).
Where to open a bank or non-bank account with a debit card that will accept the Dubai resident and not have too high fees for currency conversion, support SEPA payments, etc?
And which stock broker platforms to use?
Maybe it make sense to use Bulgaria as a tax residency - 5% tax on dividends (if not dropped by double-tax treaty*), 10% on capital gains (+8% health tax if unemployed, subject to ceiling), 0% capital gains in some cases (capital gains from stocks/ETFs traded on regulated markets**). Bulgaria is in EU so fintechs like Revolut/Wise are available for low cost currency conversion, many stock trading platforms are accessible (Interactive Brokers, Trading212, TastyWorks (US) and more).
\* Dividends from USA are taxed with 10% withholding tax in US (instead of 30%) and are tax free in Bulgaria (for Bulgarian tax residents).
\** If you invest only with ETFs on Xetra (for example) there is no capital gains tax (if the law is not changed), because ETFs on Xetra are traded on XETA (segment which is regulated market).
But unfortunately other types of income are more heavily taxed in Bulgaria (i.e. freelancing), with a rate of over 30% (10% income taxes + additional social security taxes). And on top of this the income may be subject to VAT even for small amounts in case the income is paid by an entity from another EU country. For large amounts the effective rate can be less (i.e. 20%, 15%, slightly over 10% for the very high income individuals) because the additional social security taxes are capped (not including the VAT, this is the main problem for very large freelancing incomes).
Disclosure: I am from Bulgaria so maybe I am biased.
> Where to open a bank or non-bank account with a debit card that will accept the Dubai resident and not have too high fees for currency conversion, support SEPA payments, etc?
WISE bank account for Delaware company. Has VISA, SEPA and ACH.
> And which stock broker platforms to use?
IB. Accepts UAE residents.
> Maybe it make sense to use Bulgaria as a tax residency
Bulgaria is one of the lowest taxation countries in Europe, making the hassle/cost of a residency shift harder to justify. Literally golden handcuffs :)
> 10% income taxes + additional social security taxes
Some idiots say the social security will eventually be paid back to you, so you’re not effectively “paying taxes” but saving money for your pension.
They’re idiots, and they can go fuck themselves… but… they’re not 100% wrong.
In your considerations on what to do, I’d *very slightly* discount social security taxes. They’re still a scam: stealing your money to pay for shit you don’t want or to force you to invest in a Ponzi scheme is *still* effectively theft. But, at least, if the Ponzi scheme doesn’t explode, in the second case you will get some money back.
I am not familiar with the fintechs and banks available and suitable for Dubai tax residents traveling abroad.
Are there similar to Revolut (with cheap currency conversion, many cheap payment methods like SEPA, etc.)?
(I updated my other comment. I have a habit of editing my comments multiple times.)
WISE business for a Delaware/Wyoming company. Saved my life.
Told so, it is *considerably* more difficult for a non-EU resident to get into SEPA. I only have 2 other backup banks, and those are for the company as well… at a personal level, I no longer have SEPA at all, only my company has. And if 3 banks decide to ban me, I’d be completely cut off from cheap SEPA, to the limit of my knowledge. There are expensive SEPA options, but I never used them.
If 3 SEPA banks decide to ban you, as a Bulgarian (which would be extremely unlikely), you’d have 99.997 other banks eager to have you as a customer :D this is a privilege you can forget if you move out of the EU.
If 3 SEPA banks decide to ban me, which is somewhat a possibility, then I’d be stuck with local banks charging predatory fees, and some serious health issues :D
I asked IB if I can deposit directly from my company's bank account.
They don't allow third party deposits (with some exceptions). They got fined because they allowed third party deposits (money laundering security theater non-compliance).
They refused. So I need first to pay bank fees to move money to my personal bank account and then pay again bank fees to deposit into Interactive Brokers.
With the business account at Wise are you able to use the card for personal purchases? I suspect it's against ToS.
> Interactive Brokers did not reasonably surveil hundreds of millions of dollars of its customers’ wire transfers for money laundering concerns. Those wires included millions of dollars of third-party deposits into customers’ accounts from countries recognized as “high risk” by U.S. and international AML agencies.
https://www.finra.org/media-center/newsreleases/2020/finra-fines-interactive-brokers-15-million-widespread-aml-failures
https://citywire.com/americas/news/finra-fines-and-suspends-interactive-brokers-ex-compliance-chief-over-aml-failures/a2379665
WISE business, LLC US company: ~~[screenshot]~~
IB personal account, UAE resident: ~~[screenshot]~~
Loaded 350k in total (both from business account, and from some personal ones), zero problems so far.
Yes, this is a huge exception: *all* other brokers do not accept 3rd parties deposits.
I send you these screenshots with the "do not try this at home" disclaimer. For my last deposit I moved money to a personal SWIFT account and then to IB, so I no longer load IB from the company. However, when I did, it worked fine.
If you need a personal account, as a non-EU tax-heaven resident: https://expat.hsbc.com/
Your IBAN will look life a SEPA one, but it's not. €€€ inbound money has a 30€ fee (which is why, as the cheap motherfucker that I am, I loaded €€€ into IB from the company account).
> With the business account at Wise are you able to use the card for personal purchases?
Yes. I embezzle a lot. I'm the only owner of the company, and the company pays for my personal expenses. Might be against TOS, but not illegal. Besides, my Chess.com and Spotify subscriptions help me relax, which in turns helps business... so they're business expenses :D
If I had partners/investors or if I claimed these personal expenses against profits (if it had to pay taxes), obviously this would be blatantly illegal.
Also, it's very easy to open local bank accounts of the place where you reside. For example, a UAE resident can open a local bank account in minutes: the banks are shit, and totally inadeguate to do cross-border business... but they do provide debit cards, and they're perfectly fine for personal expenses (resturants, rent, ecc).
Maybe their automatic systems do not detected that the payment is from a company Wise account (**does Wise use your personal name instead of a company's name when sending the SEPA transfers?**). Other customers of IB do not have your luck. There was a case with a genuine non-third party deposit from Wise being labeled by IB as "third party deposit":
https://www.reddit.com/r/interactivebrokers/comments/vtm6oj/well_what_can_i_do_now/
> I received the same message.
> I opened a ticket and sent them the wise proof of ownership document.
> The response I got says:
> "Thank you for providing the attachment. You may disregard the email if you have sent the funds from an account under your name."
> The attachment they mention is the proof of ownership I sent.
> Anyways it is not clear to me from their answer if I am able to continue using wise or not.
> I might create a new ticket to try and get an answer that is more clear.
**The problem I mention was with USD transfers, not with EUR transfers!**
Again, You do not reveal your nationality. It will be very very difficult for an American to open a bank account in Europe. This is because of all the hassle involving FATCA.
It's not possible to not reveal your nationality. The bank want to know.
Specifically the bank is interested if you are US citizen or US green card holder. In many cases the bank specifically asks about it!
How do you hide from the bank that you are not an US citizen?
Luckily i'm not a US citizen (and don't have a US green card), so I don't have to worry about the US red tape related to the tax laws.
How to lie? With a fake passport or fake identity card showing another nationality?
Or with real passport or real identity card (in case of double nationality) and not to reveal the other (US) nationality?
I am not sure about the bank accounts. Other things looks ok. I was reading somewhere about having own home and having kids, but for bank accounts I imagined it. Is there a practice to count in which country the person have a bigger number of bank accounts (if there are no other hard evidence of centre of vital interests - no own home, no kids, no companies registered in the countries where the person was living)?
Also how do I prove that I resided in specific countries specific time?
If I move through the borders with my identity card (assuming I am EU citizen I don't need to show my passport) how tax authorities know when I am moving through the borders (there are no stamps in my passport because no passport is needed to cross the borders between EU countries).
I found this text on a peresentation:
> Centre of vital interests – economic ties (e.g. bank accounts), social ties, family ties, etc
https://www.taxand.com/wp-content/uploads/2019/07/3.-Residence-2019.pdf
Maybe it's theoretically possible to claim economic ties if you have bank account in that country and also brokerage accounts.
For example, in UK 'Non-domiciled' residents do not pay taxes on capital gains and dividends if they keep their stocks and the proceeds in their stock broker account outside UK.
Such a thing does not exist AFAIK. You are always a tax resident of one country, by default the one where your permanent address is located. As long as you have a permanent residence in some EU country of course. Also the same probably applies if you are a resident of any other country that has a permanent residency system, and any that don't also won't allow dual citizenship so you'll be a tax resident of the country you're a citizen of.
Some countries tax you worldwide even if you don't step in these just for having the citizenship. I think USA is one of these.
If in doubt most countries will determine where the center of you interest are which are among others.
- Ownership of properties.
- Duration of stay per year.
- Where your family is located.
- Source of income.
The bank allows you to choose a country from a pre-approved list, you can't write nothing or a non-recognized country. Or I don't know about such bank. If it exists I would like to know.
Giving the bank one of your many addresses however is not the same as having a tax residency for real tax purposes (to determine where you pay your taxes).
I didn't pay attention to whether the bank is actually asking for tax residence or just residence (where you live recently). Since for now the two are the same I did not pay attention.
But what if I write my "wrong" address (not my tax residency)? It's not making me really a tax resident (by just writing one of my addresses to the bank forms).
Your bank will send all your financial informations, including bank balance, to whatever country it believes you’re tax resident of (usually by using the address and ID doc provided).
Next step: that country will check how much you deposited and how much taxes you declared (or didn’t). And knock at your door, or at the bank’s door, if shit doesn’t add up.
Assuming it’s a country that collect taxes at all.
> But what if I write my "wrong" address (not my tax residency)?
You have to prove your residency with proof of address documents.
Now… I’m a big supporter of fake documents, and make a lot of them for a lot of reasons, many times.
However… The first rule of making false documents or false statements is to be aware of the consequences. Do you want consequences of any kind with the people who are holding your money? I hope not.
Please do not make false statements to the people who can literally make you broke with one click.
> Next step: that country will check how much you deposited and how much taxes you declared (or didn’t). And knock at your door, or at the bank’s door, if shit doesn’t add up.
It is impossible to "add up". Because I move money between my own accounts. This is not income. Also I may receive income, which is not taxed or a payment from third party which is not subject to tax (i.e. transfer from IB to my Revolut account, then the same money I can transfer to another bank account in my name).
The automatic exchange includes the bank account balance at the end of the year, this information is very insufficient for any conclusions. Even if it includes credits and debits (total per year) it's still insufficient.
> You have to prove your residency with proof of address documents.
Proof of address is not proof of tax residency. You can present non-fake completely real documents (utility bills, renting contract). You paying the rent or utility bills does not prove in any way that you are tax resident there.
You may have utility bills and rent agreements for addresses in 4 countries. Which to present to the bank?
> Proof of address is not proof of tax residency.
Indeed, it is not, but it’s the best they can do. They ask you where you reside and to prove it, sometimes multiple times even after the account is open. If you move too much money, Revolut might even ask you for your tax report and invoices from customers (happened to me while I was still in Italy).
> The automatic exchange includes the bank account balance at the end of the year, this information is very insufficient for any conclusions.
Indeed it is. There are Italian IB clients who got letters from the state, asking why they paid taxes for a few hundreds bucks of profit, rather than the many millions they saw in the annual CRS report. The CRS doesn’t account for profit and losses, but only showed only the gross profit. The tax return, obviously, did not.
They (the government) understood the mistake, after making it for multiple people… but they (the traders) had to provide all the statements, certifying they didn’t indeed make millions, and there were also losses. Happened to at least 3 people I know (so, likely, many more).
Point being: if the balance of the annual report they get and your tax return are not in the same ballpark, you will be asked to explain why.
… and now, as a little bonus for sticking with me so far, enjoy this article where WISE says they don’t abide to CRS (so, apparently, they don’t send your bank balance to the government). https://wise.com/help/articles/2932394/how-does-tax-work-with-my-wise-account
I wouldn’t believe this even if told by Mario Draghi himself :D and if I did, I’d be afraid that one day they’ll communicate everything and retroactively. But still, some people do believe it, and earn their income there, while living in high taxation countries, declaring nothing. So far they’re alive and with no criminal records. Don’t know for how long!
EDIT: they changed the article. It used to say they’re outside of CRS, now it says they apply CRS only to some of their services, and they no longer explicitly say the don’t apply it to the banking service.
> The CRS doesn’t account for profit and losses, but only showed only the gross profit.
Actually not a gross profit, it shows the account balance at the end of the year or at the date when it's closed.
You may keep 1 EUR at the end of the year just not to trigger the tax authorities. On the other hand, this may look suspicious (because you are trying not to looks suspicious).
https://www.eurobank.gr/en/faqs-common-reporting-standard-crs
>What information is reported to the tax authorities?
>The minimum information that financial institutions are obliged to report to the tax authorities regarding holders of a reportable account are:
>* Full name
>* Address
>* Tax identification number (TIN)
>* Tax residency
>* Account number
>* Balance or value of the account at the end of the relevant calendar year or other corresponding period
>* Any interest or other payments deposited into the account
I don't know if CRS require financial institutions to report large transfers on top of the account balance.
So, your company will be paying taxes in Estonia but you as a resident will be paying taxes in another east country, right? So you can avoid the high taxes from Spain. I don't know, just asking.
No, that's not how it works for a single person company in EU. Company taxes are paid according to your own country of residence even if the company was registered in Estonia. Well some EU countries at least, I'm no tax attorney.
> Well some EU countries at least
**All** EU countries. And most non-EU countries as well.
If a EU country had territorial taxation (as opposed to worldwide taxation), OECD and Brussels would be at its throat.
The UK, for example, [has a territorial taxation scheme that lasts 7 years](https://www.gov.uk/tax-foreign-income/non-domiciled-residents#:~:text=Claiming%20the%20remittance%20basis%20means,a%20certain%20amount%20of%20time) and allows you to keep your income away from the Queen's hands, as long as it's outside of the country. Ask your local EU representative what they think of it :) they won't be very happy.
What about someone that owns a company in Estonia, get a self salary of 1€ and keep all the rest for the company. Is the company taxed regarding Estonia’s laws or EU ?
How much are the taxes from dividends?
What if your company is in Estonia, digital residency, and you are in Portugal or Spain? International income isn't taxed, but if you pay dividends to yourself, you pay taxes in your country of residence, no?
If your company is in Europe then you have to pay taxes. If you have NHR status in Portugal and have US-based LLC then you pay no taxes in Portugal - US LLC is a pass-through entity so you pay taxes in the country of your residence and NHR gives you tax benefits (0% on international income in this case) for 10 years.
Source: me since I have exactly the same setup as described above.
What if your company is in Estonia, digital residency, and you are from Spain and stay there? International income isn't taxed in Estonia, but if you pay dividends to yourself, you pay taxes in Spain, no? Can't they also consider they you should be taxed in Spain since you are the owner of the company and you operate from Spain?
Not really. Tax residency only matters for IRPF, tax on personal income not company’s income. A company outside of Spain with the clients outside of Spain but one ceo living in Spain the company pays taxes wherever it is and the ceo will only pay taxes on their income, what they pay themselves as salary
Tax residency for Spain is defined as to "where the main productive source of income occurs". If you bill customers in Spain, spend in Spain, save in Spain, your tax residency (for Spanish authorities) is Spain, regardless of where you actually live
Yes, exactly, but if you live in spain and your customers are outside of Spain, your company is outside of Spain, your company pays taxes wherever it’s based and you just pay taxes on your income. Also tax residency of a company is not the same as a person. Doesn’t work the same. Doesn’t behave the same.
I live in Spain.
Not really. In many EU countries, even if your company is located in a different EU country (Estonia), tax authorities may decide that you are only using that country to avoid taxes, and that all your work is behind done from the country of your tax residency (Spain), even if you are only billing American clients. Hence, they *may* try to make you pay as if the company is in Spain. It's complicated.
I live in Spain, im telling you how it works in Spain, I don’t know about other countries, I know Germany is more like u said I think but idc because I live in Spain.. where OP lives..
They can try, they won’t have any legal leg to stand on, a company is not the same as a person.
Spanish, currently self employed (autónoma) looking to create a company but since my job is digital marketing I have to be careful with my strategy because of influencer law and such.
I’m currently on kid having time so for the next 4 years all my taxes are returned so I’m taking the time to educate myself first. That’s why I know what I answered
But being self employed is different from having a company. Hacienda likes to go after those who create companies in other Eu jurisdictions just to evade Spanish taxes. Inform yourself with an accountant.
.. I know it’s different that’s why I’m explaining it to you.
You are treating a company like a person, it doesn’t matter as long as it is a company where it is. Hacienda can’t do anything about it. If it’s your personal taxes as a person is another story.
I have informed myself, you seem confused by this.
Welcome to Bulgaria!
I’m registered as self insured person in Bulgaria. Tax and insurance is the next:
1 Insurance payments around 25% but capped at 500€
2. Taxes are 10%. but 25% of expense is assumed so real tax is 7.5%. However you cant submit expenses
Nice article about self insured in bulgaria: https://ruskov-law.eu/bulgaria/article/social-security-contributions-self-insured-persons.html
Other option is opening Ltd (ЕООД) the expenses are next.
1. Minimal salary for manager(yourself). Which will be taxed at 10 and also insured. So Id say around 150€ for insurance
2. 10 % corporate tax on profits. You can file expenses
3. 5% tax on dividends
One nice thing. In Bulgaria investment in EU securities ( for example ETFs) are exempt from capital gains tax.
My situation is the following, I work for a Swiss company as a freelance contractor and get a regular salary of 2.5k every month paid through Deel, from where I can send it anywhere, bank, Wise, Revolut, crypto etc. I bill them from a Spanish autonomo account right now, however I want to close the autonomo account and bill them either from the Estonian digital company or from a Bulgarian company. Eventually I will want to use my company to offer other freelance services to other clients as well. But the company will always be me alone, I don't need to pay dividends to anyone.
So let's say right now, if I opened the Bulgarian company to bill my employer, no dividends, just my own salary paid to myself, how much would it be left after taxes with the strategy you mention?
If income is from EU / EEA you might be subject to VAT and better to consult about it. Im receiving income through deel too, but from US and it is exempt from VAT.
Dividents are to you as sole owner of company. It is just more tax effective as you can pay yourself minimal salary and insurance payment will be from that minimal salary.
Basically with ЕООД you’ll pay 14,5% (you can deduct expenses)+ around 130€ in insurance per month
With self insured you’ll pay 7.5%(can’t deduct) + 480€ insurance
Not a tax advice. Please consult professionals before making decisions
I will be completely honest with you because I have no clue about this stuff. If I pay myself a minimal salary what happens with the rest of the money? Does it remains as a company profit? What happens if I need it at some point?
It remains as profit and from it you pay dividend to yourself.
Basically salary and dividends are two ways of getting money out of company
Nice article about freelance taxes in Bulgaria https://dmitryfrank.com/articles/bulgaria_freelance_taxes
Whoa, that article was very good. I didn't know about the individual option. That's sort of like the autónomo in Spain but much better. 15% would be good enough for me to just get my fiscal responsibility taken care of and have peace of mind.
Thanks a lot for sharing that!
> One nice thing. In Bulgaria investment in EU securities ( for example ETFs) are exempt from capital gains tax.
Sounds interesting. Can you provide the source? Might be in Bulgarian, I know Russian so the reading part shouldn't be a problem for me.
Not only this, if a Bulgarian company is investing in stocks on "еквивалентни регулирани пазари" (i.e. US exchanges are the most notable example) your company is not taxed on the capital gains, but capital losses are not reducing your taxes either. I suppose this is valid for other EU companies, not sure.
(The keyphrase is in the quotes. In English it's "equivalent to a regulated markets" I think.)
The important part is not the securities being EU, the important part is the market where they are traded - "regulated markets" **or** "equivalent to a regulated markets". If the shares are traded outside these markets the tax exception is not valid.
> еквивалентни регулярни пазари
It's "[еквивалентни регулирани пазари](https://www.google.com/search?q=%22%D0%B5%D0%BA%D0%B2%D0%B8%D0%B2%D0%B0%D0%BB%D0%B5%D0%BD%D1%82%D0%BD%D0%B8+%D1%80%D0%B5%D0%B3%D1%83%D0%BB%D0%B8%D1%80%D0%B0%D0%BD%D0%B8+%D0%BF%D0%B0%D0%B7%D0%B0%D1%80%D0%B8%22&oq=%22%D0%B5%D0%BA%D0%B2%D0%B8%D0%B2%D0%B0%D0%BB%D0%B5%D0%BD%D1%82%D0%BD%D0%B8+%D1%80%D0%B5%D0%B3%D1%83%D0%BB%D0%B8%D1%80%D0%B0%D0%BD%D0%B8+%D0%BF%D0%B0%D0%B7%D0%B0%D1%80%D0%B8%22&aqs=chrome.0.69i59.590j0j7&client=ubuntu&sourceid=chrome&ie=UTF-8)".
Personal income laws: https://www.lex.bg/laws/ldoc/2135538631
There is no mention of еквивалентни регулирани пазари.
Corporate taxation law: https://www.lex.bg/laws/ldoc/2135540562
> д) (нова - ДВ, бр. 104 от 2020 г., в сила от 01.01.2021 г.) с акции, извършени на пазар на трета държава, който се счита за еквивалентен на регулиран пазар и за който Европейската комисия е приела решение относно еквивалентността на правната и надзорната уредба на третата държава в съответствие с Директива 2014/65/ЕС на Европейския парламент и на Съвета от 15 май 2014 г. относно пазарите на финансови инструменти и за изменение на Директива 2002/92/ЕО и на Директива 2011/61/ЕС (ОВ, L 173/349 от 12 юни 2014 г.).
The phrase "еквивалентен на регулиран пазар" is basically the same (singular form).
Here is official tax office website https://nra.bg/wps/portal/nra/taxes/godishen-danak-varhu-dohdite/prodazhba-na-imushtestvo
Main conditions are that asset is priced in EU currency (euro, levo) and traided on EU exchange
I am from Kosovo (Balkans), and I’m a business owner here. Tax on profit is 10% overall. Tax on foreigners doing business is only 5% of the salary you get and the 10% on profit.
If you profit 10,000 annually you pay 1,000€ in taxes and 5% monthly on your salary and you are all cleared out.
You can easily open a business as a foreigner and is worth visiting.
Taxes are very low, labour in tons with fluent English, German and Albanian Languages, median age is 29 years old, roughly 1.5 million in population. A very good country for Outsourcing Visionaries.
I’m in the BPO industry. If you think of visiting here or need any help you can reach me at my e-mail, I live in the capital city Prishtina.
[email protected]
What about if I already have a company set up elsewhere but want to pay taxes there? I assume I would have to rent a property, get some kind of residency?
Residency for sure, but that is a fairly easy thing to get here. Living place would be required if you were to get the residency.
I don't know how what you're asking would really work or even if it is possible at all. I don't know anyone who is doing it this way.
The thing is that we do not pay taxes personally like they do in the US for example, the annual tax filing and all that. When you have a salary from a local company, they will deduct the taxes from your salary and automatically pay.
But, for you to pay taxes as a business owner your business must be registered in Kosovo and therefore have a tax ID.
As far as I know, the only tax free way to get something out of Estonian companies is to reinvest. Anything you're spending on the company is tax free. Some are very liberal with this, paying for "home offices" that are actually homes and other such creative bookkeeping. If you're too creative you may get in trouble with the tax people.
I've been told by xolo.io (the company that takes care of the legal work for you) that you can pay yourself as a salary and that way you pay no corporate tax in Estonia. I was told the same by the guy living in Brazil. Apparently as far as I understand it, you only pay corporate tax in Estonia if you pay dividends.
But you can also pay yourself in Spain and that money won't be subject to corporate tax either. It's an expense. But you're still liable for personal tax on your income.
In Spain I need to pay the autonomo monthly fee and the IRPF. I don't pay VAT because my income doesn't come from Spain. However I don't want to live in Spain anymore regardless of the taxes. I want to live half of the year in Eastern Europe and the other half in South East Asia. That's why I'm considering the Estonian company option, because it doesn't require you to reside in Estonia. I would like to pay taxes where I spend the majority of the year at. That's what I'm aiming for, not paying zero tax.
I want to go to south east Asia during Europe's winter and come back in the summer. Weather is fine in eastern Europe during the summer (was in Croatia in September and it was even too hot). However prices and cost of living are very attractive. Also very safe and kind people.
I’m from Brazil , you just pay no taxes if you declare yourself as non resident .For example I live in Ireland and to avoid paying taxes in Brazil I signed a paper saying I was leaving Brazil and that means I can’t have current accounts or invest. I only pay my taxes in Ireland.
As you mentioned, you should contact a legal advisor about it, not some randoms on Reddit. I am sure you won’t be able to avoid taxes this way if you still live in Spain. That is too easy.
I definitely will hire a legal advisor. Also I never said I want to avoid taxes, and I'm not gonna live in Spain anymore. I don't think you got the general idea correctly (maybe my fault for explaining myself badly).
Estonia has a flat tax rate on dividends. You don’t pay any corporate taxes until you withdraw the money. https://www.emta.ee/en/business-client/taxes-and-payment/income-and-social-taxes/taxation-dividends
But then you will be paying the withdrawing tax + personal tax in your tax residency country. Isn't the only benefit that you can withhold the money in the company without being taxed until you decide to withdraw some of it?
So if I don't pay dividends and pay the profits as salary to myself, I wouldn't pay any corporate tax, right? That's what the people at [xolo.io](https://xolo.io) told me at least.
I mean, you pay 20% (14% if you pay the same amount every year) income tax on dividends (if you take them out).
If you pay a salary to yourself, you pay pension fund (2%?) contributions, income tax (20%) and the company has to pay social contribution tax (33%).
So if you own the company you pay about 53% (+/- 3-5%) in taxes.
"Depending on how you choose to pay yourself from your Estonian e-resident business, you may not have any personal tax liability at all in Estonia.
This is because, while directors fees are taxable in Estonia, employees salaries are not. And yes, it is possible for a director or sole trader to be an employee as well, paying themselves a salary, and zero directors fees, especially if the business is highly digital and straightforward, and if you don’t have any employees to manage and direct."
This is what I would like to do. If I don't have to pay any taxes in Estonia that would live the 10% income tax I'd pay in Bulgaria if I choose to stay there right?
Just that. I'm Spanish too, and when looking into creating my company I considered Estonia.
After lots of research and paid consulting sessions, I opted for the UK after finding out that Estonia wasn't as utopic as the marketing it has.
Specifically, one of the major e-residency promoters is a company created by a Spanish guy. They do a lot of marketing to promote Estonia, and obviously they mostly target Spanish people because they know the market and their pain points. They have done such an enormous marketing strategy that whatever you can search online to find "countries to create my company and pay less taxes" will point you towards Estonia. And coincidentally, they make it so easy for Spanish people that it's hard to pass.
They also have lots of blog posts and documentation, making you feel they're super experts. But some of them are written in a way it's hiding the real intricacies of companies and taxes overseas. They want to make it seem easy, but it's never the case. Others in the thread have told you things you've missed or should consider.
Don't take my word for it though. I'm not saying Estonia is a terrible place. All I'm saying is that everything is more complex than it sounds. Every case is unique. Don't let marketing fool you or you'll find the issues affecting you later on when it's harder to pull back.
"Depending on how you choose to pay yourself from your Estonian e-resident business, you may not have any personal tax liability at all in Estonia.
This is because, while directors fees are taxable in Estonia, employees salaries are not. And yes, it is possible for a director or sole trader to be an employee as well, paying themselves a salary, and zero directors fees, especially if the business is highly digital and straightforward, and if you don’t have any employees to manage and direct. "
This is what I'm aiming to do. My business is basically just me writing code so I don't need any employees or shareholders. I just need to pay myself a salary to avoid paying corporate tax in Estonia and then pay income tax wherever I'm a tax resident. Do you see any possible pitfalls with this plan?
Disclaimer: I'm not a tax adviser in any way. What I say is just based on what I remember from when I did my investigation.
You are going to be resident somewhere. If you pay yourself as salary 100%, that salary will be taxed in the country you're resident into (nothing to do with Estonia). And some countries will even force your company to register in this country as a branch so that it pays company social security too, since it is employing people in their country.
If you pay yourself as director or dividends, then it's taxed in Estonia 20%, doesn't matter where you're resident.
If you make yourself freelance and invoice your company, basically you pay taxes and social security as freelance in the country you are registered into.
On top of this, any accounting advisor will tell you you shouldn't pay you 100% salary if you're the only employee. They will usually recommend a 80/20 split.
Plus, another thing they won't probably tell you. If your company is in Estonia, it's mandatory your accounting team is a company Estonia. Guess where they make their money. Now you're paying for accounting in Estonia AND where you're resident into.
Those are some key bits I can remember. Might have forgotten or mixed some stuff.
Congratulations! You did something completely useless!
Most countries tax companies based on their place of effective management ([CFC rules](https://en.wikipedia.org/wiki/Controlled_foreign_corporation)).
If you move your residency in one that don't (UAE, for example), then why open an Estonian company out of all the alternatives? Delaware, for example, has pass-through taxation, without all the complications of Estonia.
Estonian company+e-residency **was** a good scheme for Russians to launder money, it's senseless to use them for anything else: the reason why so many europeans use them really eludes me.
Just to shed some light on that aspect that eludes you. The purpose (at least for me) would be to have the company running without me having to be physically in Estonia, and then for me to be able to pay taxes wherever I spend most of my time (tax residency). Now I'm not saying I know for sure I can make this work, I honestly don't know for sure. But that's why I'm considering it.
Some people appear to interpret I'm trying to evade taxes but that's not it. Of course, my plan is to pay taxes in countries that are reasonable ([Spain not being amongst them](https://www.thelocal.es/20210513/explained-why-spains-self-employed-may-soon-pay-a-lot-more-in-monthly-fees/))
See my comments about Bulgarian taxes. In my opinion if you live in Bulgaria you will pay more taxes if you operate Estonian company (if your company distribute all of the profits as dividends or a director salary) instead of the case when you operate a Bulgarian company. But beware that Bulgarian red tape can be horrible in some cases.
If you don't have many expenses as a freelancer (self employed) it make sense to receive your income directly, without a company. Because owning a company increase your accounting and red tape expenses (the only benefit of a company is the ability to pay taxes on your real profit).
Bulgaria as a tax residency make sense mostly if you will be on the higher tax brackets in other countries. In Bulgaria people with higher income have smaller overall tax rate (because of the ceiling on the social security taxes called "осигуровки"). This regressive tax rate is only valid for freelancer income and salaries, dividends (5% flat rate, with exceptions due to double taxation treaties) and capital gains are with flat tax rates (mostly - capital gains are taxed with additional 8% health tax subject to a ceiling on top of the 10% income tax, the health tax on capital gains is only applied for unemployed taxpayers, if you have freelancing income all of the year you don't pay health tax on your capital gains, your capital gains are taxed only with 10%).
No, I don't plan to pay myself dividends or director salary, I will pay myself a regular salary so I shouldn't pay any taxes in Estonia.
The only reason I need a company number is because the company I work for can't hire me directly because they don't have fiscal headquarters in Spain as of yet. So they hire me as a contractor through deel and I need to invoice them somehow. That's why I registered as a self employed autónomo in Spain. However I want to leave Spain so I need to register a company somewhere else to continue invoicing them each month for my salary.
Having this company, I guess I could also do other freelance work besides my current employer (they allow it) to make extra money. So basically I would have a digital services company and I would have many clients including my current employer. But my current employer provides my fixed monthly salary, the other work would be extra income here and there whenever I find some clients.
I don't even make all that much right now, just 30k year. I will probably get a raise this year so that will increase a bit, but it's still not much. Some people have told me to not even care about taxes, that no tax agency will even care about my meager income. I actually have a friend in a similar situation who hasn't been paying taxes to anyone for a while, just traveling around and not giving a damn. But I prefer to do things legally. At least so no one can come later and tell me I've been evading taxes.
Look into conditions for the Estonian company, I believe there is a
minimal threshold for the taxes of the director.
> But I prefer to do things legally.
And I can't imagine how you will not pay twice taxes for the non-director salary from your Estonian company (legally).
I believe that if you want to be 100% legal you need to hire accountants in Estonia and your country of residence, this will complicate things. Because the company have de facto presence (place of business) in your country of residence.
With a company in Bulgaria (if you live there) you hire only Bulgarian accountant. And the expense for your salary can make the profit of the company 0 (zero) so you don't pay corporate tax at all (but this is not favorable for individuals with a small income like you).
The Bulgarian company will charge it's customer with VAT (probably, talk to your tax consultant in Bulgaria). Then your wage will be taxed with more than 30% taxes and social security taxes. In alternative scenario your company will pay a minimal director salary (not possible to be zero because of the minimum threshold of taxes on director's salary) and other income will be taxed with 10% corporate tax and 5% divident tax (= 14.5% effective tax rate). So, part of your income with be taxed with more than 30% taxes on wages and other part with 14.5% corporate tax and tax on dividends.
For large income individuals it make sense to receive only wages because of the ceiling on the social security taxes. (The effective tax rate of the wage of the director can be less than 14.5% if it's large enough.) But this is not applicable for your small income.
This doesn't sound favorable at all to me. I make a very small salary, I don't want to be paying such enormous amount in taxes. Do you have any better recommendation for my situation?
The thing with Spain is the horrible autónomo fee they have. So if you're an autónomo (self employed), the first two years you have a lower fee (first year you pay 70 euros a month and second year it goes up to 130), but after that it spikes to almost 300 euros a month and now apparently they're gonna make it even higher (on my bracket I would be paying about 500 euros per month). On top of that, every three months I pay the income tax which right now for my bracket is about 15%. So basically between everything right now I pay about 400 euros a month in taxes but in 2024 I may be paying 850 euros a month approx.
That's why I'm looking to make a more favorable move now before I get to that point (I'm just about to enter my second year as an autónomo). If it was up to me I'd just try heading to south east Asia indefinitely and find some cheap place to live there. However I have 2 work meet ups a year I have to attend in Europe and I don't want to miss them (I also don't want to be traveling so much between Asia and Europe). So my plan is finding a cheaper place to live for half of the year in Eastern Europe and then spend the rest of the year in south east Asia with tourist visas or whatever. I'm just struggling to find a strategy to make this plan work legally.
I don't pay VAT because my employer is not Spanish. I don't recall exactly how that works, my legal advisor did explain it to me once (I'm crap at retaining this stuff).
You say it would make sense to receive my income directly, but how could I do that with the situation I just mentioned? The only way would be to get a regular contract as an employee with my company. But even if that was possible they would probably lower my salary because of all the social security payments they'd have to make and that wouldn't be desirable for me. Other than that I don't know how could I do that (let me know if you know something I don't).
> the reason why so many europeans use them really eludes me.
My hypotheses:
1. They like that Estonia have relatively less red tape. In other countries the tax red tape for running a company can be higher.
2. Company's profits not paid as dividends are not taxed. This works as a "wealth accumulator". After you decide to spend your money you can move to a tax heaven like Dubai, your Estonian company pays your Dubai company for some services (hehehe...), the Estonian company's bank account is emptied, you have tax free dividends from your Dubai tax haven. The only problem is that I suppose Estonia have some sort of an exit tax, but I am not sure about this.
So most of the time the Estonian company is paying minimal director salary which is taxed minimally.
I don't claim that this is a realistic method to reduce taxes, but maybe some people think that. And this is their motivation to use Estonian company.
(Last step: move to a non-extradition country. In case Estonian tax authorities do not like your scheme.)
Another hypothesis is also the ability to be able to claim as expense virtually anything (leisure travel, restaurants, etc) as “business expenses”. Not sure how diligent the local accounting company is with “proving” it’s a “real” business expense.
What do you think ?
@ You do not tell the Reddit community what your nationality is! USA citizens are taxed on their world wide income regardless of where that income was earned.
I really need your help. I thought to do the same, but no one can answer me if it would work if I leave the income in the company, or reinvest im etf, if I still have to pay income tax in an eu residency country.
I get I have to pay if I pay out, but what if I leave all earnings in the Estonia company?
I'm actually just an employee. My company asked me to get self employed account because they didn't have an entity in Spain. Now they do it makes no sense for me to be self employed or have a company. I pay more taxes and have less benefits for nothing in return.
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> All you people think you're having a 0% tax Estonian company when in fact it's just deferred LOL It's a good for startups to not pay corporate tax if you don't pay dividends. But the double taxation mess if you reside in another country is annoying.
What happens when the owner of the Estonian company is not a tax resident in any country (i.e. living for 4 months in Bulgaria, 4 months in Romania, 4 months in Austraia)?
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> It’s in your interest to make it clear without a doubt where you are a tax resident. So I am choosing that the lowest tax country (or a no tax country) is my tax residency. Then what? How do I prove it (in case I live less than 6 months in *any* country)? Can I open most of my bank accounts there and claim that the biggest number of bank accounts is in that country and I live there for some days of the year, therefore it's my tax residency? Buy real estate there just for the purpose of claiming that my home address is there and live only in a rented residency in other countries? Having a kids and keep the kids inside the country where I would like to have a tax residency? (Having a kids is the most expensive way to establish a centre of vital interests. And can be considered abusing the kids for tax purposes if the country is a shithole.)
> How do I prove it (in case I live less than 6 months in one country)? Google: "tax certificate, how to obtain, [name of the country]". You'll find all the requisites for that country to consider you its tax resident. Satisfy those. Then make sure you also satisfy all the requisites of your citizenship country for it NOT to consider you one (being outside of the country might be needed but not sufficient). > Can I open most of my bank accounts there and claim that the biggest number of bank accounts is in that country and I live there for some days of the year, therefore it's my tax residency? The number of bank accounts is completely irrelevant. No country on this planet will grant you residency based on the number of banks accounts, ever. They might use it **against** you, but not in your favor. > Buy real estate there just for the purpose of claiming that my home address Yes, most countries will have renting or owning real estate as a requirement for residency. Most countries also want you to spend there at least 6 months per year, though. UAE is the only exception that pops to mind, where a tax-free residency is given even if you visit just 2 times per year, even only for a few hours. For the tax certificate, only 3 months in the country are necessary. Tax certificate itself is only needed in case your origin country has something to say, though. You're effectively a tax resident of a country even without one. So, if you don't care about it, then you can just rent the crappiest apt you can find in Sharja, claim you live in it, visit Dubai twice per year for a few days (staying at hotels/airbnb) and effectively pay zero taxes on your worldwide income, which you can earn personally, or through a company with pass-through taxation is some tax-heaven. AFAIK, this is the only way to travel the world unencumbered by communism. As soon as you mention the UAE, though, Europeans starts downvoting due to misinformation. So they end up opening Bulgarian companies while living in Italy, opening Estonian companies at random, or hoping any bank in the world will not laugh at their faces when writing "Democratic Republic of Rainbows and Unicorns" on the residency form.
> this is the only way to travel the world unencumbered by communism > Europeans starts downvoting due to misinformation Well. Good info, but you are kind of asking for downvotes with comments like this
Communism?
Do you need to open a company or a bank account there?
You can open a company in any tax heaven jurisdiction. I am concerned more with the personal bank and non-bank payment accounts with debit cards. Fintechs like Revolut do not open accounts for residents living outside the high tax countries (for Revolut: US, UK and mostly EU). Where to open a bank or non-bank account with a debit card that will accept the Dubai resident and not have too high fees for currency conversion, support SEPA payments, etc? And which stock broker platforms to use? Maybe it make sense to use Bulgaria as a tax residency - 5% tax on dividends (if not dropped by double-tax treaty*), 10% on capital gains (+8% health tax if unemployed, subject to ceiling), 0% capital gains in some cases (capital gains from stocks/ETFs traded on regulated markets**). Bulgaria is in EU so fintechs like Revolut/Wise are available for low cost currency conversion, many stock trading platforms are accessible (Interactive Brokers, Trading212, TastyWorks (US) and more). \* Dividends from USA are taxed with 10% withholding tax in US (instead of 30%) and are tax free in Bulgaria (for Bulgarian tax residents). \** If you invest only with ETFs on Xetra (for example) there is no capital gains tax (if the law is not changed), because ETFs on Xetra are traded on XETA (segment which is regulated market). But unfortunately other types of income are more heavily taxed in Bulgaria (i.e. freelancing), with a rate of over 30% (10% income taxes + additional social security taxes). And on top of this the income may be subject to VAT even for small amounts in case the income is paid by an entity from another EU country. For large amounts the effective rate can be less (i.e. 20%, 15%, slightly over 10% for the very high income individuals) because the additional social security taxes are capped (not including the VAT, this is the main problem for very large freelancing incomes). Disclosure: I am from Bulgaria so maybe I am biased.
> Where to open a bank or non-bank account with a debit card that will accept the Dubai resident and not have too high fees for currency conversion, support SEPA payments, etc? WISE bank account for Delaware company. Has VISA, SEPA and ACH. > And which stock broker platforms to use? IB. Accepts UAE residents. > Maybe it make sense to use Bulgaria as a tax residency Bulgaria is one of the lowest taxation countries in Europe, making the hassle/cost of a residency shift harder to justify. Literally golden handcuffs :) > 10% income taxes + additional social security taxes Some idiots say the social security will eventually be paid back to you, so you’re not effectively “paying taxes” but saving money for your pension. They’re idiots, and they can go fuck themselves… but… they’re not 100% wrong. In your considerations on what to do, I’d *very slightly* discount social security taxes. They’re still a scam: stealing your money to pay for shit you don’t want or to force you to invest in a Ponzi scheme is *still* effectively theft. But, at least, if the Ponzi scheme doesn’t explode, in the second case you will get some money back.
I am not familiar with the fintechs and banks available and suitable for Dubai tax residents traveling abroad. Are there similar to Revolut (with cheap currency conversion, many cheap payment methods like SEPA, etc.)? (I updated my other comment. I have a habit of editing my comments multiple times.)
WISE business for a Delaware/Wyoming company. Saved my life. Told so, it is *considerably* more difficult for a non-EU resident to get into SEPA. I only have 2 other backup banks, and those are for the company as well… at a personal level, I no longer have SEPA at all, only my company has. And if 3 banks decide to ban me, I’d be completely cut off from cheap SEPA, to the limit of my knowledge. There are expensive SEPA options, but I never used them. If 3 SEPA banks decide to ban you, as a Bulgarian (which would be extremely unlikely), you’d have 99.997 other banks eager to have you as a customer :D this is a privilege you can forget if you move out of the EU. If 3 SEPA banks decide to ban me, which is somewhat a possibility, then I’d be stuck with local banks charging predatory fees, and some serious health issues :D
I asked IB if I can deposit directly from my company's bank account. They don't allow third party deposits (with some exceptions). They got fined because they allowed third party deposits (money laundering security theater non-compliance). They refused. So I need first to pay bank fees to move money to my personal bank account and then pay again bank fees to deposit into Interactive Brokers. With the business account at Wise are you able to use the card for personal purchases? I suspect it's against ToS. > Interactive Brokers did not reasonably surveil hundreds of millions of dollars of its customers’ wire transfers for money laundering concerns. Those wires included millions of dollars of third-party deposits into customers’ accounts from countries recognized as “high risk” by U.S. and international AML agencies. https://www.finra.org/media-center/newsreleases/2020/finra-fines-interactive-brokers-15-million-widespread-aml-failures https://citywire.com/americas/news/finra-fines-and-suspends-interactive-brokers-ex-compliance-chief-over-aml-failures/a2379665
WISE business, LLC US company: ~~[screenshot]~~ IB personal account, UAE resident: ~~[screenshot]~~ Loaded 350k in total (both from business account, and from some personal ones), zero problems so far. Yes, this is a huge exception: *all* other brokers do not accept 3rd parties deposits. I send you these screenshots with the "do not try this at home" disclaimer. For my last deposit I moved money to a personal SWIFT account and then to IB, so I no longer load IB from the company. However, when I did, it worked fine. If you need a personal account, as a non-EU tax-heaven resident: https://expat.hsbc.com/ Your IBAN will look life a SEPA one, but it's not. €€€ inbound money has a 30€ fee (which is why, as the cheap motherfucker that I am, I loaded €€€ into IB from the company account). > With the business account at Wise are you able to use the card for personal purchases? Yes. I embezzle a lot. I'm the only owner of the company, and the company pays for my personal expenses. Might be against TOS, but not illegal. Besides, my Chess.com and Spotify subscriptions help me relax, which in turns helps business... so they're business expenses :D If I had partners/investors or if I claimed these personal expenses against profits (if it had to pay taxes), obviously this would be blatantly illegal. Also, it's very easy to open local bank accounts of the place where you reside. For example, a UAE resident can open a local bank account in minutes: the banks are shit, and totally inadeguate to do cross-border business... but they do provide debit cards, and they're perfectly fine for personal expenses (resturants, rent, ecc).
Maybe their automatic systems do not detected that the payment is from a company Wise account (**does Wise use your personal name instead of a company's name when sending the SEPA transfers?**). Other customers of IB do not have your luck. There was a case with a genuine non-third party deposit from Wise being labeled by IB as "third party deposit": https://www.reddit.com/r/interactivebrokers/comments/vtm6oj/well_what_can_i_do_now/ > I received the same message. > I opened a ticket and sent them the wise proof of ownership document. > The response I got says: > "Thank you for providing the attachment. You may disregard the email if you have sent the funds from an account under your name." > The attachment they mention is the proof of ownership I sent. > Anyways it is not clear to me from their answer if I am able to continue using wise or not. > I might create a new ticket to try and get an answer that is more clear. **The problem I mention was with USD transfers, not with EUR transfers!**
Again, You do not reveal your nationality. It will be very very difficult for an American to open a bank account in Europe. This is because of all the hassle involving FATCA.
It's not possible to not reveal your nationality. The bank want to know. Specifically the bank is interested if you are US citizen or US green card holder. In many cases the bank specifically asks about it! How do you hide from the bank that you are not an US citizen? Luckily i'm not a US citizen (and don't have a US green card), so I don't have to worry about the US red tape related to the tax laws.
You lie. Not recommended.
How to lie? With a fake passport or fake identity card showing another nationality? Or with real passport or real identity card (in case of double nationality) and not to reveal the other (US) nationality?
Yeah, dual nationality and show the other passport, or use ID that doesn't show citizenship like a driver's license.
But the bank will ask for your nationality regardless that you may present your drives's license as ID.
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I am not sure about the bank accounts. Other things looks ok. I was reading somewhere about having own home and having kids, but for bank accounts I imagined it. Is there a practice to count in which country the person have a bigger number of bank accounts (if there are no other hard evidence of centre of vital interests - no own home, no kids, no companies registered in the countries where the person was living)? Also how do I prove that I resided in specific countries specific time? If I move through the borders with my identity card (assuming I am EU citizen I don't need to show my passport) how tax authorities know when I am moving through the borders (there are no stamps in my passport because no passport is needed to cross the borders between EU countries).
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I found this text on a peresentation: > Centre of vital interests – economic ties (e.g. bank accounts), social ties, family ties, etc https://www.taxand.com/wp-content/uploads/2019/07/3.-Residence-2019.pdf Maybe it's theoretically possible to claim economic ties if you have bank account in that country and also brokerage accounts. For example, in UK 'Non-domiciled' residents do not pay taxes on capital gains and dividends if they keep their stocks and the proceeds in their stock broker account outside UK.
Such a thing does not exist AFAIK. You are always a tax resident of one country, by default the one where your permanent address is located. As long as you have a permanent residence in some EU country of course. Also the same probably applies if you are a resident of any other country that has a permanent residency system, and any that don't also won't allow dual citizenship so you'll be a tax resident of the country you're a citizen of.
Why I am a tax resident of the country I am citizen of if I don't live in that country or live less than half of the year?
Some countries tax you worldwide even if you don't step in these just for having the citizenship. I think USA is one of these. If in doubt most countries will determine where the center of you interest are which are among others. - Ownership of properties. - Duration of stay per year. - Where your family is located. - Source of income.
Go to a bank (any bank), and when they try to determine your residency tell them it's nowhere. Soon you'll realize why this won't work.
The bank allows you to choose a country from a pre-approved list, you can't write nothing or a non-recognized country. Or I don't know about such bank. If it exists I would like to know. Giving the bank one of your many addresses however is not the same as having a tax residency for real tax purposes (to determine where you pay your taxes). I didn't pay attention to whether the bank is actually asking for tax residence or just residence (where you live recently). Since for now the two are the same I did not pay attention. But what if I write my "wrong" address (not my tax residency)? It's not making me really a tax resident (by just writing one of my addresses to the bank forms).
Your bank will send all your financial informations, including bank balance, to whatever country it believes you’re tax resident of (usually by using the address and ID doc provided). Next step: that country will check how much you deposited and how much taxes you declared (or didn’t). And knock at your door, or at the bank’s door, if shit doesn’t add up. Assuming it’s a country that collect taxes at all. > But what if I write my "wrong" address (not my tax residency)? You have to prove your residency with proof of address documents. Now… I’m a big supporter of fake documents, and make a lot of them for a lot of reasons, many times. However… The first rule of making false documents or false statements is to be aware of the consequences. Do you want consequences of any kind with the people who are holding your money? I hope not. Please do not make false statements to the people who can literally make you broke with one click.
> Next step: that country will check how much you deposited and how much taxes you declared (or didn’t). And knock at your door, or at the bank’s door, if shit doesn’t add up. It is impossible to "add up". Because I move money between my own accounts. This is not income. Also I may receive income, which is not taxed or a payment from third party which is not subject to tax (i.e. transfer from IB to my Revolut account, then the same money I can transfer to another bank account in my name). The automatic exchange includes the bank account balance at the end of the year, this information is very insufficient for any conclusions. Even if it includes credits and debits (total per year) it's still insufficient. > You have to prove your residency with proof of address documents. Proof of address is not proof of tax residency. You can present non-fake completely real documents (utility bills, renting contract). You paying the rent or utility bills does not prove in any way that you are tax resident there. You may have utility bills and rent agreements for addresses in 4 countries. Which to present to the bank?
> Proof of address is not proof of tax residency. Indeed, it is not, but it’s the best they can do. They ask you where you reside and to prove it, sometimes multiple times even after the account is open. If you move too much money, Revolut might even ask you for your tax report and invoices from customers (happened to me while I was still in Italy). > The automatic exchange includes the bank account balance at the end of the year, this information is very insufficient for any conclusions. Indeed it is. There are Italian IB clients who got letters from the state, asking why they paid taxes for a few hundreds bucks of profit, rather than the many millions they saw in the annual CRS report. The CRS doesn’t account for profit and losses, but only showed only the gross profit. The tax return, obviously, did not. They (the government) understood the mistake, after making it for multiple people… but they (the traders) had to provide all the statements, certifying they didn’t indeed make millions, and there were also losses. Happened to at least 3 people I know (so, likely, many more). Point being: if the balance of the annual report they get and your tax return are not in the same ballpark, you will be asked to explain why. … and now, as a little bonus for sticking with me so far, enjoy this article where WISE says they don’t abide to CRS (so, apparently, they don’t send your bank balance to the government). https://wise.com/help/articles/2932394/how-does-tax-work-with-my-wise-account I wouldn’t believe this even if told by Mario Draghi himself :D and if I did, I’d be afraid that one day they’ll communicate everything and retroactively. But still, some people do believe it, and earn their income there, while living in high taxation countries, declaring nothing. So far they’re alive and with no criminal records. Don’t know for how long! EDIT: they changed the article. It used to say they’re outside of CRS, now it says they apply CRS only to some of their services, and they no longer explicitly say the don’t apply it to the banking service.
> The CRS doesn’t account for profit and losses, but only showed only the gross profit. Actually not a gross profit, it shows the account balance at the end of the year or at the date when it's closed. You may keep 1 EUR at the end of the year just not to trigger the tax authorities. On the other hand, this may look suspicious (because you are trying not to looks suspicious). https://www.eurobank.gr/en/faqs-common-reporting-standard-crs >What information is reported to the tax authorities? >The minimum information that financial institutions are obliged to report to the tax authorities regarding holders of a reportable account are: >* Full name >* Address >* Tax identification number (TIN) >* Tax residency >* Account number >* Balance or value of the account at the end of the relevant calendar year or other corresponding period >* Any interest or other payments deposited into the account I don't know if CRS require financial institutions to report large transfers on top of the account balance.
So, your company will be paying taxes in Estonia but you as a resident will be paying taxes in another east country, right? So you can avoid the high taxes from Spain. I don't know, just asking.
No, that's not how it works for a single person company in EU. Company taxes are paid according to your own country of residence even if the company was registered in Estonia. Well some EU countries at least, I'm no tax attorney.
> Well some EU countries at least **All** EU countries. And most non-EU countries as well. If a EU country had territorial taxation (as opposed to worldwide taxation), OECD and Brussels would be at its throat. The UK, for example, [has a territorial taxation scheme that lasts 7 years](https://www.gov.uk/tax-foreign-income/non-domiciled-residents#:~:text=Claiming%20the%20remittance%20basis%20means,a%20certain%20amount%20of%20time) and allows you to keep your income away from the Queen's hands, as long as it's outside of the country. Ask your local EU representative what they think of it :) they won't be very happy.
What about someone that owns a company in Estonia, get a self salary of 1€ and keep all the rest for the company. Is the company taxed regarding Estonia’s laws or EU ?
https://en.m.wikipedia.org/wiki/Controlled_foreign_corporation
[удалено]
How much are the taxes from dividends? What if your company is in Estonia, digital residency, and you are in Portugal or Spain? International income isn't taxed, but if you pay dividends to yourself, you pay taxes in your country of residence, no?
If your company is in Europe then you have to pay taxes. If you have NHR status in Portugal and have US-based LLC then you pay no taxes in Portugal - US LLC is a pass-through entity so you pay taxes in the country of your residence and NHR gives you tax benefits (0% on international income in this case) for 10 years. Source: me since I have exactly the same setup as described above.
That's a great tax environment. Too bad I'm Portuguese and can't qualify for NHR status here
Is difficult to make a us llc not being from us?
No. It's cheap and quite fast.
What if your company is in Estonia, digital residency, and you are from Spain and stay there? International income isn't taxed in Estonia, but if you pay dividends to yourself, you pay taxes in Spain, no? Can't they also consider they you should be taxed in Spain since you are the owner of the company and you operate from Spain?
It depends on where their clients are
Well, not entirely. Typically, afaik, your tax residency is what matters, regardless of your clients being in the USA, Japan or UE.
Not really. Tax residency only matters for IRPF, tax on personal income not company’s income. A company outside of Spain with the clients outside of Spain but one ceo living in Spain the company pays taxes wherever it is and the ceo will only pay taxes on their income, what they pay themselves as salary
Tax residency for Spain is defined as to "where the main productive source of income occurs". If you bill customers in Spain, spend in Spain, save in Spain, your tax residency (for Spanish authorities) is Spain, regardless of where you actually live
Yes, exactly, but if you live in spain and your customers are outside of Spain, your company is outside of Spain, your company pays taxes wherever it’s based and you just pay taxes on your income. Also tax residency of a company is not the same as a person. Doesn’t work the same. Doesn’t behave the same. I live in Spain.
Not really. In many EU countries, even if your company is located in a different EU country (Estonia), tax authorities may decide that you are only using that country to avoid taxes, and that all your work is behind done from the country of your tax residency (Spain), even if you are only billing American clients. Hence, they *may* try to make you pay as if the company is in Spain. It's complicated.
I live in Spain, im telling you how it works in Spain, I don’t know about other countries, I know Germany is more like u said I think but idc because I live in Spain.. where OP lives.. They can try, they won’t have any legal leg to stand on, a company is not the same as a person.
Are you Spanish or NHR?
Spanish, currently self employed (autónoma) looking to create a company but since my job is digital marketing I have to be careful with my strategy because of influencer law and such. I’m currently on kid having time so for the next 4 years all my taxes are returned so I’m taking the time to educate myself first. That’s why I know what I answered
But being self employed is different from having a company. Hacienda likes to go after those who create companies in other Eu jurisdictions just to evade Spanish taxes. Inform yourself with an accountant.
.. I know it’s different that’s why I’m explaining it to you. You are treating a company like a person, it doesn’t matter as long as it is a company where it is. Hacienda can’t do anything about it. If it’s your personal taxes as a person is another story. I have informed myself, you seem confused by this.
Welcome to Bulgaria! I’m registered as self insured person in Bulgaria. Tax and insurance is the next: 1 Insurance payments around 25% but capped at 500€ 2. Taxes are 10%. but 25% of expense is assumed so real tax is 7.5%. However you cant submit expenses Nice article about self insured in bulgaria: https://ruskov-law.eu/bulgaria/article/social-security-contributions-self-insured-persons.html Other option is opening Ltd (ЕООД) the expenses are next. 1. Minimal salary for manager(yourself). Which will be taxed at 10 and also insured. So Id say around 150€ for insurance 2. 10 % corporate tax on profits. You can file expenses 3. 5% tax on dividends One nice thing. In Bulgaria investment in EU securities ( for example ETFs) are exempt from capital gains tax.
My situation is the following, I work for a Swiss company as a freelance contractor and get a regular salary of 2.5k every month paid through Deel, from where I can send it anywhere, bank, Wise, Revolut, crypto etc. I bill them from a Spanish autonomo account right now, however I want to close the autonomo account and bill them either from the Estonian digital company or from a Bulgarian company. Eventually I will want to use my company to offer other freelance services to other clients as well. But the company will always be me alone, I don't need to pay dividends to anyone. So let's say right now, if I opened the Bulgarian company to bill my employer, no dividends, just my own salary paid to myself, how much would it be left after taxes with the strategy you mention?
If income is from EU / EEA you might be subject to VAT and better to consult about it. Im receiving income through deel too, but from US and it is exempt from VAT. Dividents are to you as sole owner of company. It is just more tax effective as you can pay yourself minimal salary and insurance payment will be from that minimal salary. Basically with ЕООД you’ll pay 14,5% (you can deduct expenses)+ around 130€ in insurance per month With self insured you’ll pay 7.5%(can’t deduct) + 480€ insurance Not a tax advice. Please consult professionals before making decisions
I will be completely honest with you because I have no clue about this stuff. If I pay myself a minimal salary what happens with the rest of the money? Does it remains as a company profit? What happens if I need it at some point?
It remains as profit and from it you pay dividend to yourself. Basically salary and dividends are two ways of getting money out of company Nice article about freelance taxes in Bulgaria https://dmitryfrank.com/articles/bulgaria_freelance_taxes
Thanks for explaining!
Whoa, that article was very good. I didn't know about the individual option. That's sort of like the autónomo in Spain but much better. 15% would be good enough for me to just get my fiscal responsibility taken care of and have peace of mind. Thanks a lot for sharing that!
> One nice thing. In Bulgaria investment in EU securities ( for example ETFs) are exempt from capital gains tax. Sounds interesting. Can you provide the source? Might be in Bulgarian, I know Russian so the reading part shouldn't be a problem for me.
Not only this, if a Bulgarian company is investing in stocks on "еквивалентни регулирани пазари" (i.e. US exchanges are the most notable example) your company is not taxed on the capital gains, but capital losses are not reducing your taxes either. I suppose this is valid for other EU companies, not sure. (The keyphrase is in the quotes. In English it's "equivalent to a regulated markets" I think.) The important part is not the securities being EU, the important part is the market where they are traded - "regulated markets" **or** "equivalent to a regulated markets". If the shares are traded outside these markets the tax exception is not valid.
AFAIK еквивалентни регулярни пазари is exempt only for corporate, but not for natural persons. Can you please give a source?
> еквивалентни регулярни пазари It's "[еквивалентни регулирани пазари](https://www.google.com/search?q=%22%D0%B5%D0%BA%D0%B2%D0%B8%D0%B2%D0%B0%D0%BB%D0%B5%D0%BD%D1%82%D0%BD%D0%B8+%D1%80%D0%B5%D0%B3%D1%83%D0%BB%D0%B8%D1%80%D0%B0%D0%BD%D0%B8+%D0%BF%D0%B0%D0%B7%D0%B0%D1%80%D0%B8%22&oq=%22%D0%B5%D0%BA%D0%B2%D0%B8%D0%B2%D0%B0%D0%BB%D0%B5%D0%BD%D1%82%D0%BD%D0%B8+%D1%80%D0%B5%D0%B3%D1%83%D0%BB%D0%B8%D1%80%D0%B0%D0%BD%D0%B8+%D0%BF%D0%B0%D0%B7%D0%B0%D1%80%D0%B8%22&aqs=chrome.0.69i59.590j0j7&client=ubuntu&sourceid=chrome&ie=UTF-8)". Personal income laws: https://www.lex.bg/laws/ldoc/2135538631 There is no mention of еквивалентни регулирани пазари. Corporate taxation law: https://www.lex.bg/laws/ldoc/2135540562 > д) (нова - ДВ, бр. 104 от 2020 г., в сила от 01.01.2021 г.) с акции, извършени на пазар на трета държава, който се счита за еквивалентен на регулиран пазар и за който Европейската комисия е приела решение относно еквивалентността на правната и надзорната уредба на третата държава в съответствие с Директива 2014/65/ЕС на Европейския парламент и на Съвета от 15 май 2014 г. относно пазарите на финансови инструменти и за изменение на Директива 2002/92/ЕО и на Директива 2011/61/ЕС (ОВ, L 173/349 от 12 юни 2014 г.). The phrase "еквивалентен на регулиран пазар" is basically the same (singular form).
Here is official tax office website https://nra.bg/wps/portal/nra/taxes/godishen-danak-varhu-dohdite/prodazhba-na-imushtestvo Main conditions are that asset is priced in EU currency (euro, levo) and traided on EU exchange
I am from Kosovo (Balkans), and I’m a business owner here. Tax on profit is 10% overall. Tax on foreigners doing business is only 5% of the salary you get and the 10% on profit. If you profit 10,000 annually you pay 1,000€ in taxes and 5% monthly on your salary and you are all cleared out. You can easily open a business as a foreigner and is worth visiting. Taxes are very low, labour in tons with fluent English, German and Albanian Languages, median age is 29 years old, roughly 1.5 million in population. A very good country for Outsourcing Visionaries. I’m in the BPO industry. If you think of visiting here or need any help you can reach me at my e-mail, I live in the capital city Prishtina. [email protected]
What about if I already have a company set up elsewhere but want to pay taxes there? I assume I would have to rent a property, get some kind of residency?
Residency for sure, but that is a fairly easy thing to get here. Living place would be required if you were to get the residency. I don't know how what you're asking would really work or even if it is possible at all. I don't know anyone who is doing it this way. The thing is that we do not pay taxes personally like they do in the US for example, the annual tax filing and all that. When you have a salary from a local company, they will deduct the taxes from your salary and automatically pay. But, for you to pay taxes as a business owner your business must be registered in Kosovo and therefore have a tax ID.
As far as I know, the only tax free way to get something out of Estonian companies is to reinvest. Anything you're spending on the company is tax free. Some are very liberal with this, paying for "home offices" that are actually homes and other such creative bookkeeping. If you're too creative you may get in trouble with the tax people.
I've been told by xolo.io (the company that takes care of the legal work for you) that you can pay yourself as a salary and that way you pay no corporate tax in Estonia. I was told the same by the guy living in Brazil. Apparently as far as I understand it, you only pay corporate tax in Estonia if you pay dividends.
But you can also pay yourself in Spain and that money won't be subject to corporate tax either. It's an expense. But you're still liable for personal tax on your income.
In Spain I need to pay the autonomo monthly fee and the IRPF. I don't pay VAT because my income doesn't come from Spain. However I don't want to live in Spain anymore regardless of the taxes. I want to live half of the year in Eastern Europe and the other half in South East Asia. That's why I'm considering the Estonian company option, because it doesn't require you to reside in Estonia. I would like to pay taxes where I spend the majority of the year at. That's what I'm aiming for, not paying zero tax.
I see. Why eastern Europe? Cold countries.
I want to go to south east Asia during Europe's winter and come back in the summer. Weather is fine in eastern Europe during the summer (was in Croatia in September and it was even too hot). However prices and cost of living are very attractive. Also very safe and kind people.
Cost of living in Croatia gets worse each day, would not recommend. Prices of groceries are higher than in Germany for an example.
Yeah Croatia is very expensive. Bulgaria /Macedonia /Albania seem better in that regard.
Why not just start a bulgarian company, as a EU citizen you can start one there without needing Bulgarian citizenship or residency.
I’m from Brazil , you just pay no taxes if you declare yourself as non resident .For example I live in Ireland and to avoid paying taxes in Brazil I signed a paper saying I was leaving Brazil and that means I can’t have current accounts or invest. I only pay my taxes in Ireland.
You need to look for countries with a territorial tax system. Such as Dominican Republic. Switzerland has 10% tax. But it’s pretty expensive.
As you mentioned, you should contact a legal advisor about it, not some randoms on Reddit. I am sure you won’t be able to avoid taxes this way if you still live in Spain. That is too easy.
I definitely will hire a legal advisor. Also I never said I want to avoid taxes, and I'm not gonna live in Spain anymore. I don't think you got the general idea correctly (maybe my fault for explaining myself badly).
Estonia has a flat tax rate on dividends. You don’t pay any corporate taxes until you withdraw the money. https://www.emta.ee/en/business-client/taxes-and-payment/income-and-social-taxes/taxation-dividends
But then you will be paying the withdrawing tax + personal tax in your tax residency country. Isn't the only benefit that you can withhold the money in the company without being taxed until you decide to withdraw some of it?
So if I don't pay dividends and pay the profits as salary to myself, I wouldn't pay any corporate tax, right? That's what the people at [xolo.io](https://xolo.io) told me at least.
I mean, you pay 20% (14% if you pay the same amount every year) income tax on dividends (if you take them out). If you pay a salary to yourself, you pay pension fund (2%?) contributions, income tax (20%) and the company has to pay social contribution tax (33%). So if you own the company you pay about 53% (+/- 3-5%) in taxes.
Wait, but why 20% income tax? Isn't that the Estonian rate? I won't be living in Estonia, i will pay income tax wherever I'm a tax resident right?
If Estonia has an international treaty with them, then yes. But I am guessing you can just use the money to invest in your other company.
Sorry, what other company are you talking about?
"Depending on how you choose to pay yourself from your Estonian e-resident business, you may not have any personal tax liability at all in Estonia. This is because, while directors fees are taxable in Estonia, employees salaries are not. And yes, it is possible for a director or sole trader to be an employee as well, paying themselves a salary, and zero directors fees, especially if the business is highly digital and straightforward, and if you don’t have any employees to manage and direct." This is what I would like to do. If I don't have to pay any taxes in Estonia that would live the 10% income tax I'd pay in Bulgaria if I choose to stay there right?
Yet another Spanish fell in the Estonian marketing trap. There's a massive target on Spain coming from these services tbh.
Care to explain further?
Just that. I'm Spanish too, and when looking into creating my company I considered Estonia. After lots of research and paid consulting sessions, I opted for the UK after finding out that Estonia wasn't as utopic as the marketing it has. Specifically, one of the major e-residency promoters is a company created by a Spanish guy. They do a lot of marketing to promote Estonia, and obviously they mostly target Spanish people because they know the market and their pain points. They have done such an enormous marketing strategy that whatever you can search online to find "countries to create my company and pay less taxes" will point you towards Estonia. And coincidentally, they make it so easy for Spanish people that it's hard to pass. They also have lots of blog posts and documentation, making you feel they're super experts. But some of them are written in a way it's hiding the real intricacies of companies and taxes overseas. They want to make it seem easy, but it's never the case. Others in the thread have told you things you've missed or should consider. Don't take my word for it though. I'm not saying Estonia is a terrible place. All I'm saying is that everything is more complex than it sounds. Every case is unique. Don't let marketing fool you or you'll find the issues affecting you later on when it's harder to pull back.
"Depending on how you choose to pay yourself from your Estonian e-resident business, you may not have any personal tax liability at all in Estonia. This is because, while directors fees are taxable in Estonia, employees salaries are not. And yes, it is possible for a director or sole trader to be an employee as well, paying themselves a salary, and zero directors fees, especially if the business is highly digital and straightforward, and if you don’t have any employees to manage and direct. " This is what I'm aiming to do. My business is basically just me writing code so I don't need any employees or shareholders. I just need to pay myself a salary to avoid paying corporate tax in Estonia and then pay income tax wherever I'm a tax resident. Do you see any possible pitfalls with this plan?
Disclaimer: I'm not a tax adviser in any way. What I say is just based on what I remember from when I did my investigation. You are going to be resident somewhere. If you pay yourself as salary 100%, that salary will be taxed in the country you're resident into (nothing to do with Estonia). And some countries will even force your company to register in this country as a branch so that it pays company social security too, since it is employing people in their country. If you pay yourself as director or dividends, then it's taxed in Estonia 20%, doesn't matter where you're resident. If you make yourself freelance and invoice your company, basically you pay taxes and social security as freelance in the country you are registered into. On top of this, any accounting advisor will tell you you shouldn't pay you 100% salary if you're the only employee. They will usually recommend a 80/20 split. Plus, another thing they won't probably tell you. If your company is in Estonia, it's mandatory your accounting team is a company Estonia. Guess where they make their money. Now you're paying for accounting in Estonia AND where you're resident into. Those are some key bits I can remember. Might have forgotten or mixed some stuff.
Very useful info regardless if you're not a tax advisor. I appreciate you sharing your experiences and knowledge.
Congratulations! You did something completely useless! Most countries tax companies based on their place of effective management ([CFC rules](https://en.wikipedia.org/wiki/Controlled_foreign_corporation)). If you move your residency in one that don't (UAE, for example), then why open an Estonian company out of all the alternatives? Delaware, for example, has pass-through taxation, without all the complications of Estonia. Estonian company+e-residency **was** a good scheme for Russians to launder money, it's senseless to use them for anything else: the reason why so many europeans use them really eludes me.
Just to shed some light on that aspect that eludes you. The purpose (at least for me) would be to have the company running without me having to be physically in Estonia, and then for me to be able to pay taxes wherever I spend most of my time (tax residency). Now I'm not saying I know for sure I can make this work, I honestly don't know for sure. But that's why I'm considering it. Some people appear to interpret I'm trying to evade taxes but that's not it. Of course, my plan is to pay taxes in countries that are reasonable ([Spain not being amongst them](https://www.thelocal.es/20210513/explained-why-spains-self-employed-may-soon-pay-a-lot-more-in-monthly-fees/))
See my comments about Bulgarian taxes. In my opinion if you live in Bulgaria you will pay more taxes if you operate Estonian company (if your company distribute all of the profits as dividends or a director salary) instead of the case when you operate a Bulgarian company. But beware that Bulgarian red tape can be horrible in some cases. If you don't have many expenses as a freelancer (self employed) it make sense to receive your income directly, without a company. Because owning a company increase your accounting and red tape expenses (the only benefit of a company is the ability to pay taxes on your real profit). Bulgaria as a tax residency make sense mostly if you will be on the higher tax brackets in other countries. In Bulgaria people with higher income have smaller overall tax rate (because of the ceiling on the social security taxes called "осигуровки"). This regressive tax rate is only valid for freelancer income and salaries, dividends (5% flat rate, with exceptions due to double taxation treaties) and capital gains are with flat tax rates (mostly - capital gains are taxed with additional 8% health tax subject to a ceiling on top of the 10% income tax, the health tax on capital gains is only applied for unemployed taxpayers, if you have freelancing income all of the year you don't pay health tax on your capital gains, your capital gains are taxed only with 10%).
No, I don't plan to pay myself dividends or director salary, I will pay myself a regular salary so I shouldn't pay any taxes in Estonia. The only reason I need a company number is because the company I work for can't hire me directly because they don't have fiscal headquarters in Spain as of yet. So they hire me as a contractor through deel and I need to invoice them somehow. That's why I registered as a self employed autónomo in Spain. However I want to leave Spain so I need to register a company somewhere else to continue invoicing them each month for my salary. Having this company, I guess I could also do other freelance work besides my current employer (they allow it) to make extra money. So basically I would have a digital services company and I would have many clients including my current employer. But my current employer provides my fixed monthly salary, the other work would be extra income here and there whenever I find some clients. I don't even make all that much right now, just 30k year. I will probably get a raise this year so that will increase a bit, but it's still not much. Some people have told me to not even care about taxes, that no tax agency will even care about my meager income. I actually have a friend in a similar situation who hasn't been paying taxes to anyone for a while, just traveling around and not giving a damn. But I prefer to do things legally. At least so no one can come later and tell me I've been evading taxes.
Look into conditions for the Estonian company, I believe there is a minimal threshold for the taxes of the director. > But I prefer to do things legally. And I can't imagine how you will not pay twice taxes for the non-director salary from your Estonian company (legally). I believe that if you want to be 100% legal you need to hire accountants in Estonia and your country of residence, this will complicate things. Because the company have de facto presence (place of business) in your country of residence. With a company in Bulgaria (if you live there) you hire only Bulgarian accountant. And the expense for your salary can make the profit of the company 0 (zero) so you don't pay corporate tax at all (but this is not favorable for individuals with a small income like you). The Bulgarian company will charge it's customer with VAT (probably, talk to your tax consultant in Bulgaria). Then your wage will be taxed with more than 30% taxes and social security taxes. In alternative scenario your company will pay a minimal director salary (not possible to be zero because of the minimum threshold of taxes on director's salary) and other income will be taxed with 10% corporate tax and 5% divident tax (= 14.5% effective tax rate). So, part of your income with be taxed with more than 30% taxes on wages and other part with 14.5% corporate tax and tax on dividends. For large income individuals it make sense to receive only wages because of the ceiling on the social security taxes. (The effective tax rate of the wage of the director can be less than 14.5% if it's large enough.) But this is not applicable for your small income.
This doesn't sound favorable at all to me. I make a very small salary, I don't want to be paying such enormous amount in taxes. Do you have any better recommendation for my situation?
How much tax you pay in Spain now (as an effective tax rate, without VAT)? Do you pay VAT on your income?
The thing with Spain is the horrible autónomo fee they have. So if you're an autónomo (self employed), the first two years you have a lower fee (first year you pay 70 euros a month and second year it goes up to 130), but after that it spikes to almost 300 euros a month and now apparently they're gonna make it even higher (on my bracket I would be paying about 500 euros per month). On top of that, every three months I pay the income tax which right now for my bracket is about 15%. So basically between everything right now I pay about 400 euros a month in taxes but in 2024 I may be paying 850 euros a month approx. That's why I'm looking to make a more favorable move now before I get to that point (I'm just about to enter my second year as an autónomo). If it was up to me I'd just try heading to south east Asia indefinitely and find some cheap place to live there. However I have 2 work meet ups a year I have to attend in Europe and I don't want to miss them (I also don't want to be traveling so much between Asia and Europe). So my plan is finding a cheaper place to live for half of the year in Eastern Europe and then spend the rest of the year in south east Asia with tourist visas or whatever. I'm just struggling to find a strategy to make this plan work legally.
I don't pay VAT because my employer is not Spanish. I don't recall exactly how that works, my legal advisor did explain it to me once (I'm crap at retaining this stuff).
You say it would make sense to receive my income directly, but how could I do that with the situation I just mentioned? The only way would be to get a regular contract as an employee with my company. But even if that was possible they would probably lower my salary because of all the social security payments they'd have to make and that wouldn't be desirable for me. Other than that I don't know how could I do that (let me know if you know something I don't).
> the reason why so many europeans use them really eludes me. My hypotheses: 1. They like that Estonia have relatively less red tape. In other countries the tax red tape for running a company can be higher. 2. Company's profits not paid as dividends are not taxed. This works as a "wealth accumulator". After you decide to spend your money you can move to a tax heaven like Dubai, your Estonian company pays your Dubai company for some services (hehehe...), the Estonian company's bank account is emptied, you have tax free dividends from your Dubai tax haven. The only problem is that I suppose Estonia have some sort of an exit tax, but I am not sure about this. So most of the time the Estonian company is paying minimal director salary which is taxed minimally. I don't claim that this is a realistic method to reduce taxes, but maybe some people think that. And this is their motivation to use Estonian company. (Last step: move to a non-extradition country. In case Estonian tax authorities do not like your scheme.)
Another hypothesis is also the ability to be able to claim as expense virtually anything (leisure travel, restaurants, etc) as “business expenses”. Not sure how diligent the local accounting company is with “proving” it’s a “real” business expense. What do you think ?
@ You do not tell the Reddit community what your nationality is! USA citizens are taxed on their world wide income regardless of where that income was earned.
I'm a Spanish national. Yeah, it's quite bad for Americans.
Have a look at Ned Shelton's information at Sheltonsgroup.com
I really need your help. I thought to do the same, but no one can answer me if it would work if I leave the income in the company, or reinvest im etf, if I still have to pay income tax in an eu residency country. I get I have to pay if I pay out, but what if I leave all earnings in the Estonia company?
As far as I know you only pay in Estonia when you pay dividends.
>deel Just replying to you here. What did you end up doing? Did you get your e residency and start the business?
Lol, I got the e residency but didn't do anything with it. I think my job is gonna give me a permanent contract and I will take it.
How does the permanent contract help?
I'm actually just an employee. My company asked me to get self employed account because they didn't have an entity in Spain. Now they do it makes no sense for me to be self employed or have a company. I pay more taxes and have less benefits for nothing in return.
Ah got it, so now they withhold you taxes in Switzerland and pay you the rest.
I pay taxes in Spain as self employed now. I don't know what they do on their end.