Best country / setup to minimize tax? (software biz, ~400k, eu)

[doomslayer123]

I'm residing in Romania, running a (completely remote) software business which is currently earning around 400k USD / yr. If relevant my net worth is around 1M, most of it liquid.

Currently I'm paying around 12% tax (3% revenue + 8% dividend withdrawal + ~smaller taxes), which is not horrible, but still amounts to $48k going out the window. A bigger concern is that it's unlikely this setup will last for more than 1-2 more years, as taxes here are going up rapidly + I'm approaching the "micro" company threshold anyway. That would then put me at around 25% tax which I find just not acceptable. Therefore I find myself thinking about what my next steps will have to be.

What would you do? Some options / questions:

- Do not move but start an offshore company in BVI or a US LLC, get a Wise bank account and invest in stocks with a broker like IBKR, without bringing any money into Romania, just keeping it in the foreign company (with the goal of withdrawing it at a later time when I'm tax resident somewhere else with 0% tax). Doable? How risky is that? In a way I feel it's unlikely the incompetent local government which hasn't managed to find my PayPal account in the last 10 yrs will be capable of determining a BVI or US company is a controlled foreign company. Or perhaps times are changing?

- Any nice place in Europe I could move to with little tax? I've read some people saying they pay 8-9% in Zug, Switzerland. Is that realistic / easy to get? I love Switzerland though I was thinking it is too expensive for my situation? My plan was to save money and only move when I'm older.

- I've read about Cyprus though I'm not that excited about the country personally. Is it worth it, could I get 2-3% tax there?

- Could I move to Singapore and pay 0% by running US LLC from there?

Some good option I haven't considered?

 

[scooterguy]

A UAE freezone may work for you. There is a 9% tax but I think that it can be reduced (and I believe that the first $100k are tax-free, but I could be wrong).

Also, no dividend tax and no personal income tax.

 

[Marzio]

Any nice place in Europe I could move to with little tax?

How about paying 5% total tax by moving to Poland and leverage US LLC + Polish IP Box for software developers?

 

[doomslayer123]

The government in Romania is as bad as dump. That's why all your fellow countryman are touring Switzerland and the rest of the EU scamming me in the street. Horrible to even think what kind of reputation your country gets here. I hence would not be too worried that they will find you. And if? You just don't pay the fine, for which you will have to go to jail. But you know what? Just take Flixbus to Berlin. You will then be on par with your scammers: Germany won't send you back to Romania as the prison conditions are not human. Hahaha.

Talking about Zug, yes the 8% federal taxes are correct. But then come another 7% cantonal ones. That brings you to the Swiss minimum corporate tax of 15%. If you take it dividends, you pay income tax on the dividends on the full income tax but minimum 50% of it.

Singapore won't work as you form a permanent establishment. You just pay normal taxes.

Cyprus and Malta could actually work if you like living there.

Thanks for the info. Yeah, crap government, the mountains / nature are pretty much the only nice things here. Not sure where you're from but Germany is a dump as well, you couldn't pay me to move there. Swiss is great though, best in Europe probably.

A UAE freezone may work for you. There is a 9% tax but I think that it can be reduced (and I believe that the first $100k are tax-free, but I could be wrong).

Also, no dividend tax and no personal income tax.

How about paying 5% total tax by moving to Poland and leverage US LLC + Polish IP Box for software developers?

Thanks for the suggestions! Will look into

 

[koohl]

How about paying 5% total tax by moving to Poland and leverage US LLC + Polish IP Box for software developers?

That may be the best suggestion so far for minimal tax if you can live in Poland! Personally I would not like to live there.

 

[ilke]

How about paying 5% total tax by moving to Poland and leverage US LLC + Polish IP Box for software developers?

Good idea, but I don't think it will last much longer with Tusk. For now, though, it's a good way to decrease the tax rate while living in a very nice country.

 

[karishi]

I think that Dubai is the best option, unless you hate living there. It's expensive but it is a fantastic place in my opinion, especially for living. It's much better than switzerland and even safer.

 

[JonnyStekkino]

Buy an apartment in Bahrain (minimum 120k eur), you get a 10 years renewable residency there (0% personal basically no taxes at all).

Then use a Hong Kong Company, if you manage to get the offshore status you pay 0% on the company as well.


Perks:
- no stay requirement in bahrain, you can live anywhere
- you can rent out the apartment in bahrain for some extra returns

 

[JohnLocke]

Then use a Hong Kong Company, if you manage to get the offshore status you pay 0% on the company as well.

What does it take to get that status, any additional well explaining information about that ?

 

[AtlasShrugged]

That's why all your fellow countryman are touring Switzerland and the rest of the EU scamming me in the street.

Dude, these are gypsies not Romanians. Get your s**t straight.

 

[ilke]

What does it take to get that status, any additional well explaining information about that ?

The status is not completely easy to achieve. In some cases, you need to prove that you already paid taxes on that in your country of tax residence (because it's supposed to pick up residency somewhere else, either with PE or CFC). Sometimes, they may also request your personal tax returns or a declaration on oath that the work was conducted elsewhere.

It's, in a lot of cases, not worth the hassle. Hong Kong is pretty accepting with deductions (corporate expenses), so a majority of common purchases can be made with the company. With the 8.25% tax rate on profit below 2mil HKD, the very easy corporate expenses process, many banking solutions, and decent trust, it's still very much a great jurisdiction for incorporation, although you are not very likely to achieve 0% tax.

 

[daniels27]

Thanks for the info. Yeah, crap government, the mountains / nature are pretty much the only nice things here. Not sure where you're from but Germany is a dump as well, you couldn't pay me to move there. Swiss is great though, best in Europe probably.

Germany is about the last place I would go to live. Romania has nature, it is good once you are alone. Switzerland is the same. It is good once you are in nature. The government... yes better than elsewhere but not something to be proud of.

The status is not completely easy to achieve. In some cases, you need to prove that you already paid taxes on that in your country of tax residence (because it's supposed to pick up residency somewhere else, either with PE or CFC). Sometimes, they may also request your personal tax returns or a declaration on oath that the work was conducted elsewhere.

It's, in a lot of cases, not worth the hassle. Hong Kong is pretty accepting with deductions (corporate expenses), so a majority of common purchases can be made with the company. With the 8.25% tax rate on profit below 2mil HKD, the very easy corporate expenses process, many banking solutions, and decent trust, it's still very much a great jurisdiction for incorporation, although you are not very likely to achieve 0% tax.

Honestly, from what I heard I highly doubt that it makes sense. Even at 0% tax, you end up paying to much for the accountant with the mandatory audit. There are reasons why the locals in Hong Kong use BVI and the like.

 

[sergeylim88]

if you say that locals from HK use BVI, does that mean there are no PE or CFC rules in HK?

 

[daniels27]

if you say that locals from HK use BVI, does that mean there are no PE or CFC rules in HK?

There are. You have to pay tax in Hong Kong if you run a company from there. What I said is that there is no point in using a Hong Kong company when you are not there. Any other implications from my post are unintentional and won't be discussed here as it is not part of the discussion.

 

[JonnyStekkino]

Germany is about the last place I would go to live. Romania has nature, it is good once you are alone. Switzerland is the same. It is good once you are in nature. The government... yes better than elsewhere but not something to be proud of.

Honestly, from what I heard I highly doubt that it makes sense. Even at 0% tax, you end up paying to much for the accountant with the mandatory audit. There are reasons why the locals in Hong Kong use BVI and the like.

I find the accounting costs in HK lower than 90% of the jurisdisctions honestly.. many modern accounting services out there pretty much like Estonia or UK.

 

[intlman]

The status is not completely easy to achieve. In some cases, you need to prove that you already paid taxes on that in your country of tax residence (because it's supposed to pick up residency somewhere else, either with PE or CFC). Sometimes, they may also request your personal tax returns or a declaration on oath that the work was conducted elsewhere.

It's, in a lot of cases, not worth the hassle. Hong Kong is pretty accepting with deductions (corporate expenses), so a majority of common purchases can be made with the company. With the 8.25% tax rate on profit below 2mil HKD, the very easy corporate expenses process, many banking solutions, and decent trust, it's still very much a great jurisdiction for incorporation, although you are not very likely to achieve 0% tax.

That's correct. It's been very hit or miss with HK companies to obtain that status. My former business partner got that status with very little effort, however others have had to jump through many hoops including - as you point out - proving that they have PE and/or paid tax in another jurisdiction.

To each their own, but I do like the ability to write of a *ton* of expenses (my Friday night drinking and cigar expenses are always "client entertainment" lol) and pay a minimal amount of tax.

 

[maxiz]

Given the discussion and options offered so far, you probably would be better as you are now, paying ~8%

 

[doomslayer123]

Given the discussion and options offered so far, you probably would be better as you are now, paying ~8%

Currently paying 12% though. I work almost every day with rare exceptions, so that's 44 days a year wasted ( a month and a half) . In 10 years, that's over 1 year of my life wasted slaving away for government and parasites.

I've been thinking about it, I think the tax evasion option is not that great, I need to invest the money for any of this to be worth it, and any broker would report me via CRS or other mechanisms.

Cyprus seems the best for me so far. 2.5% IP BOX tax rate + health insurance cost, 60 days minimum requirement of staying in the country. I think once I move my tax residency, in practice no one will care where I actually stay, especially as Cyprus / Romania are close to entering Schengen. In any case, I can handle 60 days at the beach there. And with the ~30k a year I'd save I could take a nice vacation anywhere in the world.

 

[Marzio]

2.5% IP BOX tax rate

If you don't have any qualifying expenditure you can forget about 2.5% tax rate.

https://ipbox.cy/

 

[Don]

Given the discussion and options offered so far, you probably would be better as you are now, paying ~8%

Maybe just set up a holding company for the time being to get rid of the WHT of 8%.
Then, the structure would be just 3% +- 1% tax.

- Do not move but start an offshore company in BVI or a US LLC, get a Wise bank account and invest in stocks with a broker like IBKR, without bringing any money into Romania, just keeping it in the foreign company (with the goal of withdrawing it at a later time when I'm tax resident somewhere else with 0% tax). Doable? How risky is that? In a way I feel it's unlikely the incompetent local government which hasn't managed to find my PayPal account in the last 10 yrs will be capable of determining a BVI or US company is a controlled foreign company. Or perhaps times are changing?

Times have changed regarding the automatic exchange of information between financial authorities. In practice, this means you shall have substance. Also, banking is increasingly complicated.

- Any nice place in Europe I could move to with little tax? I've read some people saying they pay 8-9% in Zug, Switzerland. Is that realistic / easy to get? I love Switzerland though I was thinking it is too expensive for my situation? My plan was to save money and only move when I'm older.

It depends on how much income you need to live.
Some people are happy with 40k net income per year in Slovenia while having a company abroad.
Sole proprietor with normalized expenses -> they assume your expenses are 80% of your income, and they tax you 20% on the remaining 20%, so effectively 4% tax (a bit more if you make more than 50.000€). This is basically what all IT freelancers do.

Some good option I haven't considered?

As mentioned above, you could start by setting up a holding company in an EU jurisdiction for zero WHT on dividends.

Estonia could be quite a cost-efficient choice for such a simple holding company.

You distribute dividends to the holding and can redistribute those profits to yourself later without further tax, depending on where you will be a resident.
Having this in mind, Estonia presents a decent proposal since such dividends sourced from Romania would not be taxed if distributed to Estonian tax residents from the Estonian resident holding company, and getting Estonian tax residence is simple. It does not require a physical presence in the country, but you must register your address in the population register.
Alternatively, you can consider other jurisdictions for personal tax residence that would not tax such dividends.

On top of that, you will get access to 0% tax until the distribution regime + some other potential structures that could be interesting going forward, like:

• Estonia-Malta fiscal unit structure (effective tax 5%)
• Estonia-Georgia Virtual Zone company with Estonian tax residence (effective tax 5%)
• Estonia-Bulgaria/Hungary/Switzerland (effective tax ~10%-11)
• Payout salary from the Estonian company while being a tax resident in UAE (0% tax)

and more...