Belgium resident + Micro SRL in Romania

[whocares61]

You should mention your industry. Without knowing the type of your business you can not give a serious suggestion for the best country to establish it.

Romania is very slow and bureaucratic, in my opinion it is not a good place to form a company for tax reasons, more for factories or "cheap labor".

Consider Cyprus, Georgia, Bulgaria.

I am providing software consulting and web devleopment outsourcing

 

[AndrewJ]

You will most likely be required by law to tell the Belgian tax authorities that you have formed a company in Romania. Then they will start asking questions and the end of it will probably be that you will be paying the same amount of taxes you would have paid in the first place + additional fees for the structure, accounting etc. Doesn’t make sense at all. Unless maybe if you have many Romanian customers who prefer dealing with a local company or some stuff like that.

If you don’t tell the Belgian authorities and they find out later, you will probably be charged with tax evasion and pay all taxes + a hefty fine, or even go to jail.
If you are willing to risk going to jail, then I don’t see the point in choosing an EU country for your illegal operation. Then you might as well go for a country that at least doesn’t exchange information, has no taxes at all etc.

I find it really amazing how many people believe they can just legally register a company in some other country and not pay taxes where they live and work. How stupid do you think the authorities are? If it was that easy, nobody would be paying any taxes in high-tax countries. Just think about it for one minute. Do you really think you are the first person who came up with that idea? That the reason nobody does it is because they all aren’t as smart as you?

 

[AndrewJ]

Actually, you do not have to tell the Belgian authorities if you start a company in another country. You only need to report any dividend income on your personal tax. I already asked my Belgian accountant about that.

 

[JustAnotherNomad]

Where are those accountants you spoke to licensed? You probably spoke to Romanian accountants who will be happy to help you form the company? Or did a Belgian accountant actually tell you that your plans would work?

It has NOTHING to do with where your customers are. That is completely irrelevant. It also has NOTHING to do with whether it is an online or offline business. There are no separate tax laws for online companies.
Have you heard about this thing called corporate income tax? That it has NOTHING to do with whether you pay yourself from that company or not?
You are trying to run a company from Belgium without paying the Belgian corporate income tax. If your Belgian accountant really told you that’s fine, then you better find yourself a new accountant.

What you are describing would work perfectly fine - if you owned a ROMANIAN company. Meaning you would need a local director who gets paid a regular salary. A local office. Maybe some other local employees. Electricity, a phone bill etc.
And you would have to be able to prove to the Belgian authorities that all decisions and effective management of the company was always in Romania.
They don’t have to prove s**t to you. They don’t need a court order. They will just say it’s a Belgian company if you’re the only director and you will have to prove the opposite.

And yes, it’s indeed about being stupid. You just confirmed it again. You still seem to believe that you’re smarter than everybody else. Common sense would tell you that it cannot be that easy, otherwise everybody would be doing it. No online business would be paying corporate income tax in Belgium. But you still seem to believe that the reason nobody else does it is just that they don’t have such great ideas and smart accountants.

If you want to save taxes legally, you will have to physically MOVE out of Belgium. Now. Or create economic substance somewhere else. Or pay for a more complex structure, but then you will be paying much more for the structure, so it probably wouldn’t make sense.

 

[AndrewJ]

Did you look at Estonia? Easy to start a company without residency, and you can bank with Holvi or Transferwise. But it only really works with SEPA customers paying in Euro.

 

[JustAnotherNomad]

It’s the exact same case with Estonia. The only advantage is that there is less bureaucracy.

 

[micand]

You should do some research on the following topics

• management and control
• economic substance
• cfc rules
• beps
• aeoi

and with 50-60k per year in revenue costs for substance e.g. a director´s salary and social security contributions might outnumber tax advantages easily.

 

[JustAnotherNomad]

Also just look at the tax treaty between Belgium and Romania/Estonia, specifically the articles about permanent establishment and corporate income tax.
And just be happy that someone told you it’s not possible the way you’re imagining this, instead of finding out when they visit you early in the morning without knocking.

 

[cyprus123]

Have a look into the Virtual Zone Georgia. As an IT and software company you benefit from zero CIT, an existing DTA with Belgium and low costs to establish real substance there.

 

[JustAnotherNomad]

How much do you think proper substance in Georgia would cost (roughly)?

 

[Marc M]

My point of view....

1. as we all don't know the tax treaty Belgium/Romania, analyze it deeply instead of speculating. This is the base for your business and nothing else
2. "usually" you have to create REAL structure (=office, phone, DSL, bank account, etc.. contracts) and at least officially move to Romania with all consequences (=rent real flat, etc.). You have to guard all invoices proving your REAL structure, movement and existence in Romania with at least 183 days/year there.
3. All trials to escape from this can mean that you will loose much more than you expect (including fines, etc.)
4. A Romanian SRL with at least 1 employee (can be you) is taxed with 1% of turnover (if <1 Mio. EUR), which is European benchmark.
5. Divdends are taxed with 5%. This means totally 6% effectice tax, which is almost European benchmark. After costs, I would say it's European benchmark.
6. The decision to move to Romania is a strategical one and not only taxes should be considered

 

[whocares61]

Also just look at the tax treaty between Belgium and Romania/Estonia, specifically the articles about permanent establishment and corporate income tax.
And just be happy that someone told you it’s not possible the way you’re imagining this, instead of finding out when they visit you early in the morning without knocking.

Thanks for bringing it up to my attention (no sarcasm).
It seems like you are tired of repeating yourself and hearing people thinking that they can so easily avoid taxes, by just simply opening a company abroad.
Beacuse of your frustration the way you reply creates a feeling that instead of trying to help, you just critisize. This makes people defensive and making it harder to acceept your point of view.

Based on the discussion here, I am going to challenge the sources that told me this and see what they have to say about this.

 

[whocares61]

Have a look into the Virtual Zone Georgia. As an IT and software company you benefit from zero CIT, an existing DTA with Belgium and low costs to establish real substance there.

Thanks, will check it out next!

 

[whocares61]

My point of view....

1. as we all don't know the tax treaty Belgium/Romania, analyze it deeply instead of speculating. This is the base for your business and nothing else
2. "usually" you have to create REAL structure (=office, phone, DSL, bank account, etc.. contracts) and at least officially move to Romania with all consequences (=rent real flat, etc.). You have to guard all invoices proving your REAL structure, movement and existence in Romania with at least 183 days/year there.
3. All trials to escape from this can mean that you will loose much more than you expect (including fines, etc.)
4. A Romanian SRL with at least 1 employee (can be you) is taxed with 1% of turnover (if <1 Mio. EUR), which is European benchmark.
5. Divdends are taxed with 5%. This means totally 6% effectice tax, which is almost European benchmark. After costs, I would say it's European benchmark.
6. The decision to move to Romania is a strategical one and not only taxes should be considered

Thanks!

1. I will check try to google it deeper. I was talking to who i thought specialists and that was based from what they told me. I am not saying that they are right or wrong, but based on this was my initial assumption.
2. If that's the case with Belgium/Romania then it will not work now indeed.
4. Can you please explain the term "European Benchmark"? Google gives me something irrelevant, I think

 

[Marc M]

Thanks!

1. I will check try to google it deeper. I was talking to who i thought specialists and that was based from what they told me. I am not saying that they are right or wrong, but based on this was my initial assumption.
2. If that's the case with Belgium/Romania then it will not work now indeed.
4. Can you please explain the term "European Benchmark"? Google gives me something irrelevant, I think

1. Download it and analyze it directly in the document. Don't stay on google-level...You can normally scip the first chapters in the treaty. Comparing it with the so called German DBA's, the relevant stuff begins in chapter III.

2. If it doesn't work with Romania it will not work anywhere. 50k/60k turnover is critical costwhise.

3. There are other locations like Malta and Cyprus which are taxwhise nominally sometimes below Romania (after dividends). But the structural costs (one-time and ongoing) are normally higher.

 

[blockchain4ever]

One thing you can consider is to neither do business in Romania nor in Belgium. If your business is registered in Romania and you live in Belgium but you do your business in a 3rd country, then you can prove to the tax office in Belgium that you are not running the business from Belgium.

This requires not being in any 3rd country for more than 183 days per year.

As an example, if you work in Germany, France, or in the Netherlands for your Romanian company, stay for a limited time in those countries, and do not run your Romanian business while in Belgium, then I think you can get away with it.

 

[JustAnotherNomad]

Then there would probably be a PE in that 3rd country.
What could work is renting an apartment in Romania, staying less than 183 days in Belgium and not working from Belgium, and ideally not having customers in Belgium.
Then you might be able to say your home in Belgium is just a vacation home, your center of life is in Romania. But I think Belgium has pretty strict residency laws and they can declare you a non-resident if you spend less than 183 days in your Belgian home. Not sure if that would be good or bad in this case.

 

[blockchain4ever]

I think a PE in the 3rd country would be highly unlikely in that situation, given that there is not a single person permanently working there. Just don't make it too permanent.

OECD's DTA article 5 defines this, so we can look at the commentary:

Page 53, http://www.oecd.org/dataoecd/15/51/43324465.pdf

6. Since the place of business must be fixed, it also follows that a permanent establishment can be deemed to exist only if the place of business has a certain degree of permanency, i.e. if it is not of a purely temporary nature. A place of business may, however, constitute a permanent establishment even though it exists, in practice, only for a very short period of time because the nature of the business is such that it will only be carried on for that short period of time. It is sometimes difficult to determine whether this is the case. Whilst the practices followed by member countries have not been consistent in so far as time requirements are concerned, experience has shown that permanent establishments normally have not been considered to exist in situations where a business had been carried on in a country through a place of business that was maintained for less than six months (conversely, practice shows that there were many cases where a permanent establishment has been considered to exist where the place of business was maintained for a period longer than six months). One exception has been where the activities were of a recurrent nature; in such cases, each period of time during which the place is used needs to be considered in combination with the number of times during which that place is used (which may extend over a number of years). Another exception has been made where activities constituted a business that was carried on exclusively in that country; in this situation, the business may have short duration because of its nature but since it is wholly carried on in that country, its connection with that country is stronger. For ease of administration, countries may want to consider these practices when they address disagreements as to whether a particular place of business that exists only for a short period of time constitutes a permanent establishment.

Also OECD's DTA article 15 means you can work up to 183 days in a country without getting taxed for your personal income from that work. In the commentary for article 15 a PE can or cannot be present, so it clearly must be possible to work 183 days in a country without that creating a PE.

Art. 15 OECD Model Tax Convention for those that have not memorized it

1. Subject to the provisions of Articles 16, 18 and 19, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.

2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:
a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any twelve month period commencing or ending in the fiscal year concerned, and
b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and
c) the remuneration is not borne by a permanent establishment which the employer has in the other State.

3. Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic, or aboard a boat engaged in inland waterways transport, may be taxed in the Contracting State in which the place of effective management of the enterprise is situated.

 

[JustAnotherNomad]

Well, how much time would you want to spend there?
You register a company in Romania, you live in Belgium, but you only work for the company one day per month, from the Netherlands? The rest of the time, the company runs itself?

 

[whocares61]

Well, how much time would you want to spend there?
You register a company in Romania, you live in Belgium, but you only work for the company one day per month, from the Netherlands? The rest of the time, the company runs itself?

Actually, that brought me an idea:

What if I don't receive a payment from my customer on a monthly basis, but on a half a year basis (my customer is flexible about that).
I go for a month to Romania, I do the work from there for that customer and receive the payment for the whole half a year in the Romanian company.

Would that make sense?