Ecommerce business Malta, NHR Portugal

[fshore]

Yes in theory.

In practice the German Warehouse will create substance and the german "Finanzamt" tries to tax the German Branch of the Malta Company - we were going through this with a very expensive tax adviser and we even figuered out that this on EU wide level should work and even found some examples.

However the German Tax Authority didn't want to accept the arguments and imply that one warehouse worker and the warehouse itself would even cause substance that is taxable - what's basically bulls**t.

So the deal from the tax authorities was basically either to pay taxes in Germany and get the VAT refund or to not pay any taxes and not get any VAT refund.

The issue was also that they doubt my residence on Malta as a German Citizen etc. - so they argumented with so many stuff that even the tax advisor that planned the structure initially didn't advised to take it to the court as the chances are very low.

Again on EU level and in several other EU countires we have seen this working with success.

Finally this was the trigger for leaving the EU and even shifting all the focus on how to do Business with a non-EU Company in Dubai within the EU by buying in China etc. and selling in EU

We have been doing this in Germany (with a UK company) without triggering any kind of profits tax in Germany. Also you could use the Malta Germany tax treaty which says that a warehouse doesn't create a permanent establishment.
I guess your problem was related to the fact that you were German and trying to get out.

Anyway, germany was just an example. OP could fulfill from Ireland or another place.

 

[Enrique123]

Hi @Fred - thought id post a short update on a recent line of thought for our structure:

We are juggling the idea of maintaining all Spain operations under the Spain company, but create a holding company in Malta (which would be the 100% owner of the Spanish company).

This would I think benefit in two ways:

1. We can draft a royalty agreement between SpainCo and MaltaCo for the use of the brand (and hence pay no dividend tax if the owners are based in Portugal under NHR)

2. Continue paying corporate taxes in Spain under the 25% corporate tax rate, but transfer after-tax profit to MaltaCo


This solution seems to avoid us moving business operations to Malta (thereby avoiding the issues you highlighted earlier).

Interested to know your thoughts on the same (whether the above is indeed true, and whether you see any considerable risks).

Thanks as always

Amrit

 

[Enrique123]

I have been more or less doing similar with Ecom successfully for years but I have an american company which gives me US business bank account + paypal and other payment processors, then I pay a little taxes in the US but shift most of the profits to a Maltese company, and I recently just setup residency in Malta as well post-covid.

I think you have an added layer of complexity since you're looking to keep inventory in Malta as well which I don't do.

the thing about the setup you're trying to do, is that by law you should be paying corporate taxes in the country from where you are running your company, so the portuguese tax man can go after you for living in Portugal and running a company based elsewhere and make you pay full Portuguese corporate tax. From what I know Portuguese tax authority does not do this yet, but some day they might decide to. So the safe way to do it for you is to setup Malta residency as well. Rent a place there, and then you can travel where you want.

the good thing about Malta residency is that they don't care how much time you spend there and don't check, so you'll only need to worry about if other countries where you are really staying might go after you.

other benefits are that taxes as a Malta resident are 0% for foreign sourced income and you dont have to hire a director for your maltese company, you can be your own director, so you save a lot of money there, as you'll only be paying taxes on the little salary your company pays yourself.

Hi @Vince

Apologies - I somehow missed your comment and just read it today when I logged into my account.

We've pretty much given up on the Portugal/Malta option, and are just considering Malta (as you suggest).

Interested in knowing a little bit more about how you decide what % of profits to pay in the US and what % to send to Malta. Are you using some sort of royalty agreement? What sort of risks are invovled and would you have any advice for us in this area?

Thanks in advance!

Enrique