Question EU resident seeking optimal tax setup for corp/freelance work?

[Gman92]

I am a SWE that is currently running my own company in the Nordics. But as most of you know the taxes here are extremely high (and the country is going to s**t, but that's another topic).

I've been looking to move abroad and also optimizing my taxes along the way.

In a optimal world I'd like to spend about half the year in a country in EU where I have my "base" and then the rest of the year traveling, I like SEA.

I've looked into the "obvious" ones with Portugal NHR and the like. But with social security, CIT etc it adds up to what I believe are too high taxes for my liking.

Now I know that for example Estonia have their e-residency program where you can setup a company there, and as long as you are paying yourself a salary and you're not a resident in Estonia you pay 0% tax.
But then the issue is, where should you be a resident?

My first thought was, oh, maybe this is where Portugal comes into play? Under the NHR 20% income I could maybe get away with a clean 20% on the income via my estonian company.

But I'm unsure how this would work for the Portugese authorities? Since I'd be doing the "work" from a place in Portugal. then that would count as me doing most of my work in portugal, thus making me liable for the rest of the taxes and SS.

So my question is this, what is a good way to setup a company + tax residency to lower my taxes working as a consulting SWE within EU?

I might add that my clients are fine working with companies outside EU, but then you have to think about VAT and more. So having a company within the EU seems like the easier option?

Any and all feedback is greatly appreciated!

 

[Sols]

Look at Cyprus and Malta.

In Cyprus, you'd be getting 12.50% CIT and social healthcare contribution of 2.65% (max 4,800 EUR/year). As a non-domiciled resident, you wouldn't pay any further income taxes if you pay yourself dividends. You only need to stay in Cyprus for 60 days per year to qualify as tax resident, if you are not tax resident anywhere else.

In Malta, you can get a lower corporate tax (net 5%) but it's more cumbersome and it's currently on the FATF grey list. So while the tax might be lower, your overhead costs go up.

 

[Gman92]

Look at Cyprus and Malta.

In Cyprus, you'd be getting 12.50% CIT and social healthcare contribution of 2.65% (max 4,800 EUR/year). As a non-domiciled resident, you wouldn't pay any further income taxes if you pay yourself dividends. You only need to stay in Cyprus for 60 days per year to qualify as tax resident, if you are not tax resident anywhere else.

In Malta, you can get a lower corporate tax (net 5%) but it's more cumbersome and it's currently on the FATF grey list. So while the tax might be lower, your overhead costs go up.

Thank you for the input.

I'm still unsure what the optimal way to do it is. if I pay myself a salary from all the income I'm generating I guess I would pay 0% CIT. But then I would pay PIT and SS right? And 60 days seems like a nice minimum. But tbh I don't have any issues staying longer, at least during the summer months, in EU.

Malta is also interesting. How does FATF affect my? Does it require me to have more strict accounting/paperwork?
Also, I believe Malta has some progressive tax rates spanning 15-35%? How would you get the money in your pocket without paying these huge PIT?

 

[Sols]

I'm still unsure what the optimal way to do it is. if I pay myself a salary from all the income I'm generating I guess I would pay 0% CIT. But then I would pay PIT and SS right?

You can't necessarily take everything out of the company as salary. It has to be reasonable and within market rates.

Most people in your situation just pay themselves dividends. 12.50% CIT, 2.65% SS (capped at 4,800), and the rest goes in their pockets.

Some pay themselves 19,500 EUR/year in salary, which is taxed at 0% PIT and 2.65% for social security, and lower the company's remaining taxable base. This gives you access to the healthcare system. But you can just get a private health insurance instead.

And 60 days seems like a nice minimum. But tbh I don't have any issues staying longer, at least during the summer months, in EU.

Malta is also interesting. How does FATF affect my? Does it require me to have more strict accounting/paperwork?

It will make banking harder than it already is/was, and it can in some cases affect your chances of working with certain clients. Government or large corporate (especially publicly traded) clients might chose another consultant over you, all else being equal between you and the other consultant.

It also makes the future less clear. The grey listing comes largely from government corruption.

But being an EU member, it hasn't been devastating to Malta yet. It will probably go away within a few years.

Also, I believe Malta has some progressive tax rates spanning 15-35%? How would you get the money in your pocket without paying these huge PIT?

There are a few ways to accomplish that. Depends a bit on what makes sense in your case. But you can apply for some special tax status, treat your income as capital gains, and/or use the remittance based scheme where you only pay tax on what you remit into Malta.

Worth having a discussion with a tax adviser in Malta about to see what would work for you.

 

[Gman92]

You can't necessarily take everything out of the company as salary. It has to be reasonable and within market rates.

Most people in your situation just pay themselves dividends. 12.50% CIT, 2.65% SS (capped at 4,800), and the rest goes in their pockets.

Some pay themselves 19,500 EUR/year in salary, which is taxed at 0% PIT and 2.65% for social security, and lower the company's remaining taxable base. This gives you access to the healthcare system. But you can just get a private health insurance instead.


It will make banking harder than it already is/was, and it can in some cases affect your chances of working with certain clients. Government or large corporate (especially publicly traded) clients might chose another consultant over you, all else being equal between you and the other consultant.

It also makes the future less clear. The grey listing comes largely from government corruption.

But being an EU member, it hasn't been devastating to Malta yet. It will probably go away within a few years.


There are a few ways to accomplish that. Depends a bit on what makes sense in your case. But you can apply for some special tax status, treat your income as capital gains, and/or use the remittance based scheme where you only pay tax on what you remit into Malta.

Worth having a discussion with a tax adviser in Malta about to see what would work for you.

The Cyprus option does seem very tempting I have to say. Especially since it seems to be a very, or at least quite, easy way to do things. Basically just setup company there, move, live there for at least 60 days (although I don't mind living there longer) and it's in the EU so can bill my clients easily without VAT.

As a EU citizen are there good services that can help you setup everything for this?

 

[Sols]

As a EU citizen are there good services that can help you setup everything for this?

The island is full of law firms and corporate service providers that help out with incorporation, company admin/management, and immigration (not that you need much help as an EU citizen). Everything from large international firms (Vistra, Baker Tilly, Grant Thornton) to local law firms like Elias Neocleos, AGP Law, and Neophytou.

If you want someone local from this forum, speak with @CyprusLaw and @CyprusLawyer101.

If you're Swedish, maybe the Danes at Hügge coworking space will let you in. They also do corporate services through Hügge Consult

 

[Gman92]

The island is full of law firms and corporate service providers that help out with incorporation, company admin/management, and immigration (not that you need much help as an EU citizen). Everything from large international firms (Vistra, Baker Tilly, Grant Thornton) to local law firms like Elias Neocleos, AGP Law, and Neophytou.

If you want someone local from this forum, speak with @CyprusLaw and @CyprusLawyer101.

If you're Swedish, maybe the Danes at Hügge coworking space will let you in. They also do corporate services through Hügge Consult

If only I shared a fondness of sleek cold danish design

But to be considered a "non-domiciled" resident. Do I have to have another country where I'm considered "domiciled"?

 

[CyprusLawyer101]

Hi @Gman92 , I would be happy to discuss your requirements. Let me know if you wish that I send you a PM.

Thank you @Sols for mentioning us, it is appreciated.

 

[CyprusLaw]

The Cyprus option does seem very tempting I have to say. Especially since it seems to be a very, or at least quite, easy way to do things. Basically just setup company there, move, live there for at least 60 days (although I don't mind living there longer) and it's in the EU so can bill my clients easily without VAT.

As a EU citizen are there good services that can help you setup everything for this?

@Sols thank you for the recommendation!

@Gman92 happy to PM you to discuss your requirements

 

[Sols]

But to be considered a "non-domiciled" resident. Do I have to have another country where I'm considered "domiciled"?

You are considered non-domiciled in Cyprus for a period of 17 years of living there, as long as you state you are not domiciled. As proof, you might be asked to submit your father's passport or birth certificate and other documents proving that your family it not Cypriot.

Some people go a step further and reserve a grave plot or buy real estate in a foreign country, as proof they have no intention to stay in Cyprus forever.

But as long as you aren't Cypriot, it's easy to get the domicile exemption certificate.

 

[Gman92]

You are considered non-domiciled in Cyprus for a period of 17 years of living there, as long as you state you are not domiciled. As proof, you might be asked to submit your father's passport or birth certificate and other documents proving that your family it not Cypriot.

Some people go a step further and reserve a grave plot or buy real estate in a foreign country, as proof they have no intention to stay in Cyprus forever.

But as long as you aren't Cypriot, it's easy to get the domicile exemption certificate.

That solves that problem! Thanks a bunch!

 

[RealDude]

Leaving Cyprus after 17 years is possible without exit taxation?

 

[CyprusLawyer101]

Leaving Cyprus after 17 years is possible without exit taxation?

Yes

 

[FixieHartmann]

Yes

Would I need to rent an apartment for the entire year to keep my non-domiciled status active or can I stay two months in an Airbnb per year and be fine?

 

[CyprusLawyer101]

Would I need to rent an apartment for the entire year to keep my non-domiciled status active or can I stay two months in an Airbnb per year and be fine?

You need to have something proving, like an electricity bill for example. If you just show them an air b n b reciept with a 60 day stay its like asking them to play along your little mascarade. You might get through, but where does this leaves you in the event of an investigation because of a claim by another country of taxing rights over you?

 

[CyprusLaw]

Would I need to rent an apartment for the entire year to keep my non-domiciled status active or can I stay two months in an Airbnb per year and be fine?

Just to clarify the non dom status will be maintained regardless. The question is whether you would be deemed a Cyprus tax resident or not - one of the requirements set out by the law is that the person seeking to use the 60-day rule has a permanent residence in Cyprus either through property owned by him or leased. As a rule of thumb and from the practice of the authorities such lease shall be of at least 1 year duration - so to answer your question airbnb would not work

 

[detailoriented]

Just to clarify the non dom status will be maintained regardless. The question is whether you would be deemed a Cyprus tax resident or not - one of the requirements set out by the law is that the person seeking to use the 60-day rule has a permanent residence in Cyprus either through property owned by him or leased. As a rule of thumb and from the practice of the authorities such lease shall be of at least 1 year duration - so to answer your question airbnb would not work

So generally one should always minimum maintain a rented apartment year round?

 

[CyprusLaw]

So generally one should always minimum maintain a rented apartment year round?

Short answer yes - for the tax residency

 

[sylwiasj]

So generally one should always minimum maintain a rented apartment year round?

Yes. I just rented a flat with my husband for 300 eur per month. I guess you could split rent it with someone.

 

[Dexur]

Check Romania. Around 8% tax in total (dividend + revenue tax ). I'm a software developer from Finland, and that's my country of choice to move to