Swedish company relocation - To where? (12M € turnover, 3M € yearly profits)

[AFG]

Do you want to prepare for an exit or setup a new structure for the actual business? Thats two different things.

If you plan to make an exit and sell the Swedish company, then you can prepare by setting up a holding company first of all, then you can move the money to Cyprus and move from Sweden after the exit: Exit utomlands

Since you are outsourcing everything and don't have any physical warehouses, there are many solutions, In EU for example Cyprus 12,5% tax, Estonia 20% tax, Bulgaria 10% and so on.

Either way, you have to move from Sweden and cut all ties. Everything is better than Swedens 50-70% tax.

You don't need to move to use a Holding company setup or putting another company between the supplier and Swedish company with a lower corporation tax rate. As long as the funds remain in the corporate structure you do not need to pay capital gains tax of 30%. You can use the funds you have built up to invest into a property in Spain via a UK company with the Swedish company holding preference shares to match the investment amount.

 

[AFG]

Hi all!

I am a Swedish citizen and run a company (B2C 90%) together with my partner who is based in Turkey himself. None of us are entitled, we are simple guys growing up from poor neighbourhoods and we have worked hard to where we are now with no previous connections or network. My partner is also a Swedish citizen but not tax resident here as he decided to move abroad 10 years ago with his turkish wife. We have zero own staff, everything is outsourced and billed to us.

We run an e-commerce site based of a limited company, that is registered in Sweden. We sell physical goods and ship them within Europe. I own 75% shares, and he 25%. We have been running this for 6 years now and it has been growing great, little too fast. We made a profit of 3M € last year and this year will probably surpass that. Our yearly turnover is 12M €. We also plan to make an exit here for about 20M €+++ when time comes so we wish to be prepared with our setup if/before that happens.

We are currently taking out a normal salary from company for living (about 70k€ each yearly, effectively taxed at around 55%). Everything has been done all legal so far and company records looks clear and good.

Each year we are paying a company profit tax here of 22% (profits are still stuck in company though). We have now collected a large sum in free capital which are just allocated in our Swedish bank that just sits there doing nothing. If we cash them out we will have to pay another 30%+ on this amount which is why we have not done that as we are looking for some solutions.

Since we are selling physical goods things does get a bit more complicated as I understand from reading on this forum compared to selling services.
Our customers are in EU and UK. We are using a 3PL(thirdpart logistics warehouse) in both EU (Netherlands) and UK, we own all our inventory. The products we import directly from China. We are VAT registered in Netherlands and UK and we also pay sales VAT to respective countries (through OSS) that are above the thresholds.

Does any of you have any suggestion or can point me to a possible tax effective setup as e-commerce owners where we are able to continue running our operation with same 3PL in Netherlands and 3PL in UK. Import our products to Netherlands/UK from China, pay any sales VAT but also be able to deduct the import VAT. But have the company profits taxed at much lower rates?
A setup where we are also able to have good company banking to send money for buying goods, PSP to accept payments online and so on.

Anything between 0-15% in final effective tax is acceptable for us.

If the possible tax effective setup requires personal relocation (excluding option of living on an island) up to 190 days per year to interesting places within +-3h timezone from Sweden, I would be up for it as what we pay in taxes here, could as well be spent as nice living as every work we do is done on remote.

Otherwise, we are fine if the profits are being collected somewhere offshore waiting for us to spend them when time comes. Our goal here is to try and avoid the yearly company profit taxes as well as any taxes that may arise if/when we exit. We want everything to be done legal.

Where I live (Sweden) it is not possible to "find a good tax advisor" unless you have the previous connections which is why I registered and reached out to this forum and reason why I started the topic explaining where we come from. I just a little guidance or direction where to continue searching for the optimal solution.


Thanks in advance!

It looks like you have two seperate issues to solve, the corporate structure to make the future potential sale more appealing to investors by using a holding company setup with the swedish company being used for the EU side and a UK company for the UK (non-EU). You would also include a 3rd entitiy to import from China and resell on to the Swedish & UK entities with your management cost being covered in this new entitiy. All three under the holding company. You can even invest the funds accumulated via investment companies to buy property which you can use and/or rent out to try out a few different countries before changing your residency. Your personal tax residency is the 2nd issue but it's only an issue if you personally want to take a salary and dividend to 'personally' own poperties. You have a lot of flexibility inside a multi-jurisdiction corporate structure to buy properties, boats, cars etc. Instead of holidays you have business trips, it's a different mindset but the last thing you want to own things in your personal name. You want to control things not own them, on paper this means you don't have to pay income and captial gains tax etc. Change a family holiday into a business trip with a board meeting with all expenses paid by one of the companies and you'll have the lifestyle you want without the massive personal tax bills. You can still pay yourself the same salary you are now to continue contributing and pay off any debts you personally have plus cover the personal expenses you can not deduct from your group of companies. As you learn how to use different setups and become more comfortable using different jurisdictions, you'll also naturally expand the business into other areas.

Feel free to contact me if you would like to discuss some of your options, my team can walk you through some easy adjustments to your corporate structure to start exploring new markets and regions.

 

[JustAnotherNomad]

Crazy talk. Any company you own as a Swedish resident is under major risk of being taxed in Sweden.

To give an example, Estonia has no tax if you keep money in the company. So many people falsely believe they can register a company in Estonia and then only pay tax if they pay out something.
That's NOT how it works. This is absolute crazy talk because he's trying to sell you something. That's what I meant when I said it's important to check everything with licensed professionals.

Yes, in theory, you could own a holding company in Cyprus while living in Sweden. But I really, really, really doubt that the Swedish tax authorities would accept not taxing it without significant substance in Cyprus.
And for the Chinese company, you'd have the same issue - who manages it? "Oh, but they won't find out..." - have fun in jail.

 

[AFG]

Crazy talk. Any company you own as a Swedish resident is under major risk of being taxed in Sweden.

To give an example, Estonia has no tax if you keep money in the company. So many people falsely believe they can register a company in Estonia and then only pay tax if they pay out something.
That's NOT how it works. This is absolute crazy talk because he's trying to sell you something. That's what I meant when I said it's important to check everything with licensed professionals.

Yes, in theory, you could own a holding company in Cyprus while living in Sweden. But I really, really, really doubt that the Swedish tax authorities would accept not taxing it without significant substance in Cyprus.
And for the Chinese company, you'd have the same issue - who manages it? "Oh, but they won't find out..." - have fun in jail.

You may be correct if the companies are setup with one shareholder and one director, as this can be considered just an 'alter ego'.

However, when you have 3 directors/officers, with 3+ shareholders then the structure is correctly formed as seperate from the individuals estate by every jurisdiction/nation globally.

There are rules you have to comply to but no tax authority has unlimited jurisdiction to seize assets and funds from every corporate structure, especially if you do not own it completely/100%. If they did, this would be considered slavery.

Do you have any case law on the Estonia companies being taxed by a different jurisdiction, you mentioned the Swedish Tax Authority gaining some sort of jurisdiction/control of funds held in an Estonia company. It would be interesting to read how the corporate veil was pierced.

 

[JustAnotherNomad]

Ok, then you don't have management and control in Sweden, but you'd most likely still have permanent establishment.
Sweden also has strict CFC laws which would allow Sweden to tax the companies if they don't pay enough tax.
Also for obvious reasons, he wants to keep 80% in the company or what its was and not reduce his ownership to 10-30% or something like that.

Do you have any case law on the Estonia companies being taxed by a different jurisdiction, you mentioned the Swedish Tax Authority gaining some sort of jurisdiction/control of funds held in an Estonia company. It would be interesting to read how the corporate veil was pierced.

There is no need to pierce any corporate veil. It's called permanent establishment, look it up.

https://www2.deloitte.com/se/sv/pag...e-office-driven-permanent-establishments.html
https://assets.kpmg.com/content/dam/kpmg/xx/pdf/2016/11/fa16-129.pdf

 

[Carl Thomas]

Ok, then you don't have management and control in Sweden, but you'd most likely still have permanent establishment.
Sweden also has strict CFC laws which would allow Sweden to tax the companies if they don't pay enough tax.
Also for obvious reasons, he wants to keep 80% in the company or what its was and not reduce his ownership to 10-30% or something like that.



There is no need to pierce any corporate veil. It's called permanent establishment, look it up.

https://www2.deloitte.com/se/sv/pag...e-office-driven-permanent-establishments.html
https://assets.kpmg.com/content/dam/kpmg/xx/pdf/2016/11/fa16-129.pdf

I'm interested to know how turning on a laptop and replying to a load of emails etc creates 'Permanent Establishment'?

The KPMG pdf referenced a German company turning up in Sweden annually with employees, equipment and cars etc to conduct research and development. This is totally different from an individual managing different business relationships in different jurisdictions via a computer, especially if that individual doesn't draw a salary from these activities.

You also mention CFC (Control of Foreign Company) would allow 'Sweden' to tax companies IF they don't pay enough tax. How would you classify 'enough tax'?

You are again reinforcing what my associate has said, the weakest link is you personally owning these corporate structures.

There is a very good article on this very forum explaining this concept. Own Nothing, but Control Everything – A Concept That Can Change Your Life

 

[JustAnotherNomad]

I'm interested to know how turning on a laptop and replying to a load of emails etc creates 'Permanent Establishment'?

Read the link from Deloitte.

The KPMG pdf referenced a German company turning up in Sweden annually with employees, equipment and cars etc to conduct research and development.

Yes, for a couple weeks. No Swedish customers. No permanent office. Just a few weeks in some village in the far north, doing tests in cold conditions.

You also mention CFC (Control of Foreign Company) would allow 'Sweden' to tax companies IF they don't pay enough tax. How would you classify 'enough tax'?

https://www.sovereigngroup.com/news...-offer-cfc-sidestep-for-swedish-shareholders/

You are again reinforcing what my associate has said, the weakest link is you personally owning these corporate structures.

Yes, you can put everything into a Liechtenstein foundation or whatever - but at the end of the day, if you are anything but a passive investor in a business while living in Sweden, there is always a risk.
There is no way to run his business legally from Sweden without paying Swedish tax. Period.

"But how would they know... how would they catch him..."
He's bringing in significant tax revenue.
"Oh, btw, I will still be living in Sweden, but I'm a passive investor now, I don't work at all for my companies anymore. I only own some companies abroad that are involved in e-commerce, but I really nothing to do with them. Pinky promise."
Of course the Swedish tax authorities would just accept his word for that. No way they would actually investigate if it's true. They have never dealt with a case like that before, they wouldn't even know where to begin to prove he has a tax obligation in Sweden, it's impossible. Give me a break...

 

[EliasIT]

since everybody is saying is opinion, I will say my opinion too:

That is why we are all here... it's what makes us smarter every day.

 

[Dandyline]

You don't need to move to use a Holding company setup or putting another company between the supplier and Swedish company with a lower corporation tax rate. As long as the funds remain in the corporate structure you do not need to pay capital gains tax of 30%. You can use the funds you have built up to invest into a property in Spain via a UK company with the Swedish company holding preference shares to match the investment amount.

You should look up CFC, BEPS and Permanent Establishment.

 

[Mike Forman]

As I have posted today, almost all authorities under OECD agreement of tax exchange information will exchange tax information when requested to another country.

This goes as far as obtaining profit loss, ubo, nominee shareholders, rental contracts, invoices, employee names etc.

They just have to send a letter to the tax authorities of the other jurisdiction making claims that they believe there is serious tax avoidance (they will inflate things and put whatever they want), and they will get all information they want. We have had it from several jurisdictions and were surprised everything is given.

Also who are the top 10 customers and there revenue etc was requested as well who are all the decision makers.

Creating a veil with nominee shareholders and directors is quickly pierces this way unless they agree to claim they make the decisions, which they won't do and definitely not when there is a tax investigation.

Cut all ties with Sweden, assets, bank accounts and business for two years and you should be ok to setup any other construction, just make sure you asses the risk with your new residence in case you decide to establish corporations outside your new country of residence.

In any of the other circumstance risk is substantial you get a tax inspection and for the amounts you mention they go all in and will want to have double of what was reported before (fines, interest etc.). Their funding is unlimited ( paid by tax payers) and they will go to court and even when they lose in court will further appeal.

 

[JustAnotherNomad]

I actually just remembered something else. I've heard that there are two tax exemptions in Sweden called the 6-month and the 1-year rule.

https://www4.skatteverket.se/rattsligvagledning/edition/2023.8/323993.html
I don't remember the details, but if you work abroad and you have to be abroad to work and you don't work from Sweden and you only spend up to 70 days per year or so in Sweden - then you don't have to pay tax on that employment income in Sweden. This in the domestic law, so it doesn't require a tax treaty, so it should work even with the UAE.
This is explicitly intended for cases where you are otherwise tax resident in Sweden, e.g. because you have a home in Sweden.
Might be worth checking out.

 

[Cloudbanck]

I actually just remembered something else. I've heard that there are two tax exemptions in Sweden called the 6-month and the 1-year rule.

https://www4.skatteverket.se/rattsligvagledning/edition/2023.8/323993.html
I don't remember the details, but if you work abroad and you have to be abroad to work and you don't work from Sweden and you only spend up to 70 days per year or so in Sweden - then you don't have to pay tax on that employment income in Sweden. This in the domestic law, so it doesn't require a tax treaty, so it should work even with the UAE.
This is explicitly intended for cases where you are otherwise tax resident in Sweden, e.g. because you have a home in Sweden.
Might be worth checking out.

These exemptions apply if you are an employee of a Swedish company and are sent out to work abroad. The 6-month rule is only applicable if you are taxed in the country you are sent to, so this doesn't work for the UAE as it has zero income tax.

The 1-year rule is applicable even if the country you are sent to doesn't tax you, i.e. it works for the UAE. But I dont think it works for business owners, just for employees. Or maybe if a business owner is technically also an employee of his/her own company, Im not sure.

 

[JustAnotherNomad]

Thanks for the clarification. I would think it can work if you hire yourself as an employee. Anyway, it was just a suggestion for further research, I don't know much about those rules.

 

[factual]

Thanks for the clarification. I would think it can work if you hire yourself as an employee. Anyway, it was just a suggestion for further research, I don't know much about those rules.

In an Aktiebolag/limited company we are already employees of the company so that point is checked.

However this will not work at all. See google translate of below.
https://www4.skatteverket.se/rattsligvagledning/390590.html?date=2021-03-16It was linked further from the first url posted.

This has also been going to trial once where Tax agency won and taxed it in Sweden.

Google translate below of the reason it fails.

The Court of Appeal, like the Tax Agency and the administrative court, assumed that an application of the one-year rule presupposes that the employment is of such a nature that its exercise requires a stay abroad. According to the court of appeals, the fact that X is employed in a small company that he himself controls is of importance for that examination. Since he thus himself, in his capacity as employer, decides where the work is to be carried out, according to the court, it is required that circumstances emerge which make it clear that the stay abroad was caused by reasons attributable to the company's operations in order for the employment to be considered to require a stay abroad.

The Court of Appeal considered that the investigation into the activities conducted in Grenada did not strongly suggest that the company's activities required X to exercise employment there. According to the court, X had not made it likely that the stay abroad was caused by reasons attributable to the employer's business. The employment was therefore not of such a nature that its exercise required a stay abroad, which is why the one-year rule was not applicable.

 

[JustAnotherNomad]

Damn. Anyway, please keep us posted! Excited to hear how you solved this.

 

[JustAnotherNomad]

@factual How did it go?

 

[factual]

@factual How did it go?

I should have more news in a month from now as things are going slow and I am busy with the daily operation of continue running the business. Also we are into holiday periods and I have a family to take care off and require time spending as well..

I think I might have found the right persons to speak more into details with though which is a very good thing as that was my biggest hurdle. So once I gather all possible options it will need a good and long consideration as well as decisions being accepted by the family members. And once that has been done, I have learned that I need to seek local advise in the decided jurisdiction to double-confirm any possible setup if it's going to be offshore.

But in short (and also mentioned by some forum members here) if anyone reads and is in same seat:
To continue to run your business with very low profit tax = move from Sweden ASAP.
To continue to run your business with slightly reduced effective profit taxes = can still stay in Sweden and continue operation just need re-structure it a bit. This involves opening multiple companies on family members name and so on. Depending on amounts it can be worth it.
To make an exit there are many solutions and depending on tax-hit willing to take some options involves stay in Sweden but the most lucrative is to move out for 4 years, (short irregular visits can still be done) and then come back and bring all back as well. Some countries more popular than others, Cyprus being one of them.

Also I learned that tax treaty is very important here when selecting country so that it falls within those 4 years and your back is clear.
Extremely important is also to have a good and reputable banking partner and contact on your side accepting the new structure setup.

Within all this there can also come new regulations and legislations which can change things. Some are already on topic in EU while others has been postponed.

 

[EliasIT]

Cyprus and Switzerland I would look into. Pay some good tax attorneys in both countries and ask them for the best solution. I believe they have both what you are looking for.