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

[maxiz]

@Marzio is right, getting ip box extra low tax rate is not easy, many countries also require that the "development" of the software to be in the country and not outside, which you can't prove anyway, since your software\solution is developed in Romania.
If you still want to try, you MUST hire proper local lawyer or at least paid consultation, where you get in detail answer.

Your current tax total which is 12% given overall tax rates in EU and World, its competitive.

You can consider Andorra, which has 10% corp tax , 0 dividends

regarding what @Don mentioned, all these options might work, but it is more complicated and you need to decide if you willing to spend much more time on more complicated structures and setups.
more complicated - more chances to make mistakes

good luck

 

[doomslayer123]

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.
This is basically what all IT freelancers do.

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.

Very interesting information, thank you for sharing.

I guess my question is: In that case, am I not at risk of the Romanian government saying the Estonian company is tax resident in Romania due to place of effective management?

Would it not be the same if I just opened a US LLC and received + kept the money in the US company until a time when I move to a different jurisdiction?

 

[Don]

Very interesting information, thank you for sharing.

I guess my question is: In that case, am I not at risk of the Romanian government saying the Estonian company is tax resident in Romania due to place of effective management?

You are right to point out the most critical aspect of "setting anything up" which is your residence in Romania and the corporate residence test of POEM.

The extent of risk depends on how the business is structured and run.

Would it not be the same if I just opened a US LLC and received + kept the money in the US company until a time when I move to a different jurisdiction?

Although it has been a popular structure due to no exchange of information, the US banking secrecy is about to end + there are more regulations that make it less feasible, making it a riskier structure going forward. And for a single-member US LLC, it's clear that the POEM is in Romania since you are the person managing this (the only person in the business).

 

[jinobino]

Cyprus non dom with offshore company wins it all

 

[sergeylim88]

Offshore where?
Banking where?

 

[JimBeam]

You're doing great!

If you move anywhere to save on these $48k/year it may cost you half of that or even more so you're real savings would be maybe 20k.
Places like UAE or Cyprus will be costly to run and manage all that (company running costs ~10k/year all in + travel + health insurance + place to live there) so it will eat up a lot of these 48k so you're potential savings would be insignificant and you'll lose so much time on things that are not important and without any headaches.

I would stay in Romania and keep working there as usual. Look how you can optimize and bring the profit down.

The only slightly better option if you're on the south of Country is to move to Bulgaria where you would pay 10% CIT and 5% dividend tax but also won't pay any taxes on capital gains tax on financial instruments that are traded on regulated EU exchanges (UCTIS ETFS) so you could invest your profits into stocks/etfs. You can also easily move between countries so it's super easy and convenient.

 

[scooterguy]

You're doing great!

If you move anywhere to save on these $48k/year it may cost you half of that or even more so you're real savings would be maybe 20k.
Places like UAE or Cyprus will be costly to run and manage all that (company running costs ~10k/year all in + travel + health insurance + place to live there) so it will eat up a lot of these 48k so you're potential savings would be insignificant and you'll lose so much time on things that are not important and without any headaches.

I would stay in Romania and keep working there as usual. Look how you can optimize and bring the profit down.

The only slightly better option if you're on the south of Country is to move to Bulgaria where you would pay 10% CIT and 5% dividend tax but also won't pay any taxes on capital gains tax on financial instruments that are traded on regulated EU exchanges (UCTIS ETFS) so you could invest your profits into stocks/etfs. You can also easily move between countries so it's super easy and convenient.

It seems that OP wants to keep increasing profits though, so those 48k/year could become much more than that, especially if OP crosses the micro company threshold.

UAE is not that expensive outside of Dubai, but also keep in mind that there is no need to really live in UAE anyways.

Keep company and legal residence in UAE and spend most of the time in SEA. Much cheaper, no need to deal with the harsh Romanian winters, and an extra $30k+ per year.

Also, no taxes on investments either with UAE residence.

 

[jinobino]

Offshore where?
Banking where?

Hk company plus some emi would work

 

[CyprusLawyer101]

Can you elaborate a bit more on your business operation?

 

[JonnyStekkino]

It seems that OP wants to keep increasing profits though, so those 48k/year could become much more than that, especially if OP crosses the micro company threshold.

UAE is not that expensive outside of Dubai, but also keep in mind that there is no need to really live in UAE anyways.

Keep company and legal residence in UAE and spend most of the time in SEA. Much cheaper, no need to deal with the harsh Romanian winters, and an extra $30k+ per year.

Also, no taxes on investments either with UAE residence.

UAE has the requirement of 2 days every 6 months presence there if u are with any company residency.
Bahrain much better, if you get the residency through the purchase of an apartment, you have no requirement of stay, and 10 years visa.

 

[Don]

UAE has the requirement of 2 days every 6 months presence there if u are with any company residency.
Bahrain much better, if you get the residency through the purchase of an apartment, you have no requirement of stay, and 10 years visa.

In UAE you can also get 10 years golden visa fairly easily within 6 months paying a high salary and then you have no requirements to visit the country at all.
No need to invest or have an apartment.

 

[JimBeam]

In UAE you can also get 10 years golden visa fairly easily within 6 months paying a high salary and then you have no requirements to visit the country at all.
No need to invest or have an apartment.

Once issued - do they actually check if you lower your salary back let's say half of the original one?

 

[Don]

Once issued - do they actually check if you lower your salary back let's say half of the original one?

No.. and you can even sponsor your family members.
With 6 months of steady income you might even get access to some leverage to buy a property or lease a vehicle.

 

[doomslayer123]

Can you elaborate a bit more on your business operation?

- I am selling software for online stores (plugins that extend the functionality of a popular e-commerce platform). I have developed the software.

- The main source of income is selling this software through my website. I work with Paddle.com for payment processing, and their company also acts as a merchant of record / reseller ("Digital Services licensed to Paddle for resale" is technically on their reverse invoice). Paddle then sends a single monthly payment to my company from their UK entity & bank.

- Some other smaller collaborations (10-20%) through marketplaces, which likewise send me a monthly payout.

 

[CyprusLawyer101]

- I am selling software for online stores (plugins that extend the functionality of a popular e-commerce platform). I have developed the software.

- The main source of income is selling this software through my website. I work with Paddle.com for payment processing, and their company also acts as a merchant of record / reseller ("Digital Services licensed to Paddle for resale" is technically on their reverse invoice). Paddle then sends a single monthly payment to my company from their UK entity & bank.

- Some other smaller collaborations (10-20%) through marketplaces, which likewise send me a monthly payout.

Thank you. Is your product undergoing any fine tuning or on-going development?
And do you expect income to rise?

 

[JimBeam]

No.. and you can even sponsor your family members.
With 6 months of steady income you might even get access to some leverage to buy a property or lease a vehicle.

Does this visa requires a visit once every 6 moths?

 

[Don]

Does this visa requires a visit once every 6 moths?

No.. The benefit is the ability to stay outside the UAE for more than the usual period of six months in order to keep the residence visa valid.

 

[doomslayer123]

Thank you. Is your product undergoing any fine tuning or on-going development?
And do you expect income to rise?

Yes, updates for the software are constantly released (1-2 updates per month), including new features and improvements to existing features.

I expect a slight income increase but I cannot guarantee it in any way.

 

[CyprusLawyer101]

Yes, updates for the software are constantly released (1-2 updates per month), including new features and improvements to existing features.

I expect a slight income increase but I cannot guarantee it in any way.

You could qualify under the CY IP regime. A cyprus company could be your solution.

 

[scooterguy]

Yes, updates for the software are constantly released (1-2 updates per month), including new features and improvements to existing features.

I expect a slight income increase but I cannot guarantee it in any way.

I think that with the nature of this business (mostly passive income) you can set up anywhere with no tax or low tax and just live in Thailand or Malaysia.

A combination of UAE + residence in one of the aforementioned countries could work well.