Advice on where to open a company...?

[Guti]

You employ these persons in a Spanish company, also you can work in this company, however, Spanish company could be engaged in low added value operations and work as a “service center” on a cost-plus basis (all salaries plus other costs and plus 5% mark-up). Spanish company might issue an invoice to other companies in more tax-favorable jurisdiction (Cyprus, Malta or any other depending on your situation). It is important that this other company would be properly structured and would have economic substance. If it did not have substance previous comments as regards “permanent establishment” would be applicable. So I think it is possible to structure your business in a more tax-effective way and still stay on the legal side, but it also might be costly.

Thank you for your input, very helpful. That is what I am trying to achieve... a tax-effective way and still stay on the legal side

 

[speedster]

Thank you for your input, very helpful. That is what I am trying to achieve... a tax-effective way and still stay on the legal side

Just make sure the costs of the structure (incorporation and renewal fees, maintaining sufficient substance etc) don't outweigh the saved taxes. If you're making 100k per year and paying 24k in taxes, shifting to an offshore at 5% only leaves 19k to run the whole offshore operation.

 

[hernanday]

Hello everybody,

Just registered but been looking around for some time.. and researching. The more I read, the more confused I get.
Here's what I'd like to get some advice please.

I currently run an online business and it is legally registered in the UK where I do business, despite the fact that I live in Spain. I am looking to open a NEW company in a completely new industry.

Now, I am considering employing Spanish residents to do some remote (IT) work which is provided by some companies on another european country (kind of like a recruitment agency?). My partners find the work and I provide the talent

Now, I despise and literally hate opening or registering anything in Spain in my name... I simply do not want my name linked to anything in Spain due to its dysfunctional bureaucracy... (long story!)

I was thinking and reading about Ireland, Malta or Cyprus as places to register a company. As I said, the more I read, the more confused I get.

Are there any suggestions as to the best option for me? where can I open a company in a way that I remain as anonymous as possible and away from Spanish inquisition hands...

To be clear (before someone point it out), I am NOT looking to avoid taxes, I am looking to pay them elsewhere... NOT Spain and obviously in the most advantageous way possible, not only for us as a company but also for the employees.

Thanks in advanced, I appreciate everybody's input

Other posters are right to be critical of you. You are saying you don't want to pay taxes in Spain but run a business there. You even extend this to say you don't want your employees who work in Spain to pay Spanish taxes. My friend, that is the definition of avoidance. Don't piss in people's ears and tell them its raining.

If you want to legitimately reduce your taxes, I can offer you some suggestions but without knowing the industry you are in or where the clients would be, or what specific service/product you offer it is impossible to get a meaningful recommendation. So I'll wait for your response on that.

Also if your purpose for being anonymous is simply to avoid taxes, it will not work because of tax treaties. Most of the anonymous legislation get pulled back for government investigating tax cases. If your point is to be anonymous to creditors or just general public, then I have some recommendations.

 

[Sols]

And yes, you are right, I am not interested in paying in Spain, I definitely want to evade Spanish taxes by forming a new company outside of Spain and I still sleep very well. Why would anybody want to pay 24% instead of 5%?

Because it's the law and Spain is one of those countries that shoots first and asks questions later. I've known of expats in Spain who haven't had their affairs in order, get hit with an enormous tax bill, and have to spend months if not years sorting things out - or just paying it.

As I hinted at and @Gediminas laid out more clearly, you can try to establish a substantial economic presence and permanent establishment in a place like Cyprus or Malta and pay the low tax there. You're looking at high costs - office with utilities, local director, full-time employees, and other things required to make it a real, local company there.

That may absolve you of Spanish corporate tax. No guarantee, because if the Spanish authorities determine that the company is still under your control, they might send you an invoice for full corporate tax in which case you might be able to use a DTA to use taxes paid in CY or MT as credit and only pay the difference to Spain.

Funds you pay to yourself personally, though, is still subject to personal income tax.

But it sounds like you have made up your mind, though. I just hope they have wifi in your prison so you can post an update a couple of years from now.

 

[andres33]

@Guti, you have 2 problems. One it's that you can't move with family to other country. This is the big one. The second it's that actualy you are in a comunist country. All will be wrost from now.
Meanwihle you will be resident in Spain you will have problems. And I'm conscient that Spain is the best country on the world to live. Well it was !!!. But right it's imposible to think about a future there working or having assets.
But if you can't go out, and you can have the posibility to open an office, and employ worker, you can have a small oportunity to reduce taxes legally. But not anonymously. For that you would need to create a structure for exemple in CY with trustee.
If you can have 1 employee you can try to open a company in Madeira. You will pay 3% taxes. And if you are in a Special industrial zone in Funchal, you will pay 1/2 of 3%. You need to invest 75K in your business but not obligatory in the island, and the directives and decisions must be taken from a person who is resident on the island and all the direction must be done from the island. Your employee can do it. This advantage are limited on the time. This structure has a caducity. It remain 9 years. After this time the EU wil decide if they stop this special traitement or if they give some years more.
You have the same advantage in Canary Island. There in the small island you need 3 employees. Is named the ZEC. Zona especial canaria. But it's not a sepcial zone. Is all the islands. On the big island you need 5 employees.
Tax are 4%. Completely legal and acepted by the european union. No TVA. Only IGIC with 7%.
Canary has the same problem than Madeira. In 9 years the caducity of this previlege will arrive. No body know right now if it will be renewal.
But If you business is for IT, in Georgia the special zone for IT business is free tax. To pulish that and if you can, you can try to have substance. It's not obligatory. You rent a flat less than 200€ and put an employee 300€. There is not social security in Georgia. Is the best country to get substance very cheap.
In the case of Georgia you will need also to find a system to find a trustee if you don't want to be visible as UBO. But this is other history.
But after all that, in your place, I should beguin seriously to think to convince my family little a little to change the residence one day. Better in short time that in long time. In Spain is better to saty as emigrant or visitor than as resident.

 

[Guti]

Just make sure the costs of the structure (incorporation and renewal fees, maintaining sufficient substance etc) don't outweigh the saved taxes. If you're making 100k per year and paying 24k in taxes, shifting to an offshore at 5% only leaves 19k to run the whole offshore operation.

Absolutely right, this is something to consider and I did not (yet) think about it

Other posters are right to be critical of you. You are saying you don't want to pay taxes in Spain but run a business there. You even extend this to say you don't want your employees who work in Spain to pay Spanish taxes. My friend, that is the definition of avoidance. Don't piss in people's ears and tell them its raining.

If you want to legitimately reduce your taxes, I can offer you some suggestions but without knowing the industry you are in or where the clients would be, or what specific service/product you offer it is impossible to get a meaningful recommendation. So I'll wait for your response on that.

Also if your purpose for being anonymous is simply to avoid taxes, it will not work because of tax treaties. Most of the anonymous legislation get pulled back for government investigating tax cases. If your point is to be anonymous to creditors or just general public, then I have some recommendations.

Yes, the idea is to legitimately reduce taxes and to be anonymous to the general public. If avoidance if the definition, so be it. I am not too big into labels. It seems people in the forum are misunderstanding where I am coming from. Spain is NOT the best place to be tax wise so I can either move or ty and look for further options. All I am doing is look for better options.

Spain I think doesn't recognise trusts or nominees they look straight through them and want to know the beneficial owner

Thanks for that, I am not 100% sure to be honest, but it would not surprise me...

 

[Gediminas]

Spain is NOT the best place to be tax wise

Yeh, nobody meant that. It's a good place to live disregarding taxes. I can agree on that as well, speaking of my own experience.

 

[Guti]

Because it's the law and Spain is one of those countries that shoots first and asks questions later. I've known of expats in Spain who haven't had their affairs in order, get hit with an enormous tax bill, and have to spend months if not years sorting things out - or just paying it.

As I hinted at and @Gediminas laid out more clearly, you can try to establish a substantial economic presence and permanent establishment in a place like Cyprus or Malta and pay the low tax there. You're looking at high costs - office with utilities, local director, full-time employees, and other things required to make it a real, local company there.

That may absolve you of Spanish corporate tax. No guarantee, because if the Spanish authorities determine that the company is still under your control, they might send you an invoice for full corporate tax in which case you might be able to use a DTA to use taxes paid in CY or MT as credit and only pay the difference to Spain.

Funds you pay to yourself personally, though, is still subject to personal income tax.

But it sounds like you have made up your mind, though. I just hope they have wifi in your prison so you can post an update a couple of years from now.

It makes sense al you are saying, thank you. I did not made my mind up yet, I am listening to what advise I get here.

@Guti, you have 2 problems. One it's that you can't move with family to other country. This is the big one. The second it's that actualy you are in a comunist country. All will be wrost from now.
Meanwihle you will be resident in Spain you will have problems. And I'm conscient that Spain is the best country on the world to live. Well it was !!!. But right it's imposible to think about a future there working or having assets.
But if you can't go out, and you can have the posibility to open an office, and employ worker, you can have a small oportunity to reduce taxes legally. But not anonymously. For that you would need to create a structure for exemple in CY with trustee.
If you can have 1 employee you can try to open a company in Madeira. You will pay 3% taxes. And if you are in a Special industrial zone in Funchal, you will pay 1/2 of 3%. You need to invest 75K in your business but not obligatory in the island, and the directives and decisions must be taken from a person who is resident on the island and all the direction must be done from the island. Your employee can do it. This advantage are limited on the time. This structure has a caducity. It remain 9 years. After this time the EU wil decide if they stop this special traitement or if they give some years more.
You have the same advantage in Canary Island. There in the small island you need 3 employees. Is named the ZEC. Zona especial canaria. But it's not a sepcial zone. Is all the islands. On the big island you need 5 employees.
Tax are 4%. Completely legal and acepted by the european union. No TVA. Only IGIC with 7%.
Canary has the same problem than Madeira. In 9 years the caducity of this previlege will arrive. No body know right now if it will be renewal.
But If you business is for IT, in Georgia the special zone for IT business is free tax. To pulish that and if you can, you can try to have substance. It's not obligatory. You rent a flat less than 200€ and put an employee 300€. There is not social security in Georgia. Is the best country to get substance very cheap.
In the case of Georgia you will need also to find a system to find a trustee if you don't want to be visible as UBO. But this is other history.
But after all that, in your place, I should beguin seriously to think to convince my family little a little to change the residence one day. Better in short time that in long time. In Spain is better to saty as emigrant or visitor than as resident.

WOW, thanks you so much for the insights my friend! I did not have a clue of most of what you said. I could not agree more than Spain is a communist style country and that it is better to live as a visitor or emigrant... problem is I am Spanish and came back here from abroad, where I spent 2 decades away, a few years ago due to family concerns... I may move in the future but right now I have to look after some people.

Interesting ideas about the canary Islan

Yeh, nobody meant that. It's a good place to live disregarding taxes. I can agree on that as well, speaking of my own experience.

Well, not that good in opinion (and I am Spanish) I lived abroad for many years and coming back was a shock to the system. Certainly a better lifestyle that most though.

 

[catpower]

I´m in similar situation. In Spain too and looking to open a company out of Spain and close my spanish company.

I used to operate from France and now from Spain using a Bulgarian company at somebody name (nominee) easy and cheap to open and 10% taxes. no need of any office or presence there.

 

[JohnLocke]

Not easy when you have kids...

Thats most proparly the problem for of people around. They have kids and other relations and can't relocated for that reason. That's what banks, lenders and even tax authorities know which again is the reason for why they have a good grip on the balls of the majority of people within the EU.

 

[Guti]

I used to operate from France and now from Spain using a Bulgarian company at somebody name (nominee) easy and cheap to open and 10% taxes. no need of any office or presence there.

Thank you for the straightforward message and idea, I appreciate the input (unlike some people in the forum coming up with their judgement and morals). I know someone who operates in Bulgaria, but he actually relocated there... I'll have to ask him Thanks!

Thats most proparly the problem for of people around. They have kids and other relations and can't relocated for that reason. That's what banks, lenders and even tax authorities know which again is the reason for why they have a good grip on the balls of the majority of people within the EU.

Absolutely. The younger generation with no family commitments have more flexibility as they can relocate. I have relocated myself with kids but was not an easy task... the thought of relocating again sounds like a nightmare... hence looking for options

 

[dvm]

But If you business is for IT, in Georgia the special zone for IT business is free tax.

It's not tax free. You will have to pay 5% upon withdrawing money from the company as dividends.

To pulish that and if you can, you can try to have substance. It's not obligatory.

In theory it is not indeed, but you will have a hard time opening and running a business account in Georgia without substance these days. Moreover, you will have a hard time opening a business account in most Georgian banks as a foreigner, even if you have some substance. Overall, Georgian banks is a huge pain the behind to deal with, at least when it comes to business accounts.

 

[andres33]

It's not tax free. You will have to pay 5% upon withdrawing money from the company as dividends.

Totaly Right. I was thinking in free zone. The FIZ in Tbilisi or Kutaisi

In theory it is not indeed, but you will have a hard time opening and running a business account in Georgia without substance these days. Moreover, you will have a hard time opening a business account in most Georgian banks as a foreigner, even if you have some substance. Overall, Georgian banks is a huge pain the behind to deal with, at least when it comes to business accounts.

I know that's very complicate right now open bank account. But I think that the interest to have a compnay with substance it's to open in other juridiccion the account. Personaly I don't trust in any georgian bank. One thing is to have a company with substance and other think is to open an account there.

I used to operate from France and now from Spain using a Bulgarian company at somebody name (nominee) easy and cheap to open and 10% taxes. no need of any office or presence there.

be vigilant with bulgarian companies. I was reading last year from a lawyer firm about the companies kidnapping in the register. Mafias with hacker take the control of your company and change the director name and they check for your bank account to empty their.