Low-Tax EU or Non EU Company Setup with Substance, Advice Needed!

[Martin Everson]

For 25k you can get a‌ second residency and do everything local within that second tax friendly country and keep things‍ separate from your home country. You won't need to worry about economic substance when you⁠ take this approach.

I don't know your activity or needs but for example a Dubai⁤ Freelance license with residency visa may work well. You get a WIO bank account also⁣ and away you go. You will have plenty of money left for a chiller free⁢ rented apartment and compulsory medical insurance.

https://freelanceuae.com/

Full Freelancer pricing details below:

https://dmcc.ae/members/support/schedule-charges

Ideally you want to move from Sweden but︂ it sounds like that's not on your mind. So just keep both residencies separate and︃ its down to you to choose whether to declare the foreign one. I believe up︄ to AED 1m (approx $270k) your income is tax free as a freelancer (someone correct︅ me if I am wrong).

Otherwise an alternative fully arms length economic substance solution may︆ be costly and may not even work due to exchange of corporate information between low/zero︇ tax countries and your home country. You may fall foul of GAAR etc anyway.

 

[blizz]

WoW @Martin Everson that's something that I didn't seen detailed so much. Do you think‌ the Swedish or any EU tax office will accept this setup ? Sounds very easy‍ to me.

 

[ImKing]

If what martin suggest really works like that easy, not much other options can be‌ compared to it. Otherwise I would have suggested for a complete setup in Cyprus.

I would say that @CyprusLawyer101 , @CyprusLaw and @CyprusBusiness can do everything for that amount for‍ you, but the other thing sounds better.

 

[Don]

Do you have most clients in sweden and local people︀ doing sales in Sweden? Or what are the activities?

What @Martin Everson said might work︁ in some circumstances. However you should be wary about your personal tax residence as well︂ as I expect that at the end of the day you want to increase you︃ personal income that will not be taxed in Sweden.

With 25k budget you could have︄ dual residence in both EU and UAE + business setup.
EU legal residence for banking︅ in EU, but avoid tax residence in EU + UAE legal and tax residence for︆ tax free income.

Residence card is needed to avoid problems with banking, substance, etc.
As local resident the banks might also not automatically report your account under CRS.

It might︇ also be better for marketing purposes to invoice your swedish clients with an EU company,︈ so leveraging two jurisdictions could be the answer.

 

[Martin Everson]

If you tell them about the second residency then absolutely‍ not unfortunately. But a lot of people have been doing this for a while especially⁠ with other countries where the cost of living and local corporate setup/tax rate makes economic⁤ sense.

But be assured this will land you in hot water if discovered. So it⁣ requires examining your tax code for treatment of duties performed overseas while resident etc and⁢ doing it all properly under professional tax advice.

 

[JustAnotherNomad]

No, obviously not. It would be fraud. I'm⁠ surprising he's suggesting this outside the Mentor Group Gold forum.

 

[aniglo22]

Your budget is too low , to establish any true Substance .
CFC rules take‌ precedence over tax treaties for agreements signed before 2004. For treaties signed after 2004, they‍ are designed to incorporate CFC provisions.
And they would investigate the competence of your employees⁠ , so they would have too demonstrate qualification (e.g Degree ) , so you can't⁤ just have a layman working as Software engineer without any qualification . (https://www4.skatteverket.se/rattsligvagledning/27071.html?date=2025-01-01#section39a-7a)
You would have to look at companies higher than 11.8% Corp tax to be out︉ of scope of CFC rules .
But even then as long you manage & control︊ from Sweden , you will be liable for Swedish Tax as you have PE in︋ Sweden .

Swedish tax Authorities have a nice website with detailed information about CFC :⁢https://www4.skatteverket.se/rattsl...letteringsregel-2-for-lagbeskattade-inkomster

TLDR ( like 90% of threads here ) :
If you don't like Swedish︀ tax then leave Sweden .
If you like to live in Sweden then be prepared︁ to pay taxes .

 

[JustAnotherNomad]

This will be very tricky.
You not only have to︀ worry about the "managed from Sweden" part (corporate tax residence), but also the "some work︁ being done from Sweden" part (permanent establishment), as well as the "artificial arrangement" (CFC rules)︂ part.

Probably Malta would be your best bet since it has the lowest taxes in︃ the EU.
But you would have to explain to the tax authority why you set︄ up this company in Malta of all the places and how you're not involved in︅ the business.
You can also expect that they will investigate everything closely. If the company︆ has 10M in profits, but you only pay 5k for the office, 5k for accounting︇ and a 15k salary to the "CEO" (25k in total) - how realistic is it︈ that a CEO who can generate 10M in profits for the owner is willing to︉ work for just 15k per year? It reeks of a fake setup.

Countries like Malta︊ and Cyprus also have a very bad reputation, so you can expect extra scrutiny from︋ the tax office.

 

[JustAnotherNomad]

I did some googling‍ - isn't there a whitelist of countries, and also EU countries should be exempt from⁠ this?
So Malta should work, even at 5% corporate tax - provided that the company⁤ actually has substance and isn't an "artificial arrangement" (which is where it will get tricky)?⁣

If you manage and control from Sweden, the company will even be tax resident︁ in Sweden, it won't just be a PE (though the difference will probably be negligible︂ anyway).

Yup.

 

[aniglo22]

Malta won't work , because it's in the blacklist and also Cyprus︄ has some restrictions .
But it would still wouldn't work , if he has PE︅ in Sweden.

 

[JustAnotherNomad]

But it's also an EU member - can they‍ actually blacklist EU member states?
Usually EU law wins over local law, and CFC rules⁠ have to exempt companies in other EU countries - if they actually operate from there⁤ and aren't just an "artificial arrangement" (a shell company).
Anyway, it seems like Bulgaria should⁣ be fine, for example.

Exactly, and that will be OP's main problem.︀ I don't see how you can build sufficient substance with a budget of 25k.

As far as I remember, Sweden has some exemptions if you work abroad (similar to what︁ Cyprus has?) - so you can still be tax resident in Sweden, but Sweden will︂ not tax your salary if your salary was earned abroad. This even works without a︃ tax treaty. However, I think this requires that it's a job (can't be your own︄ company), you have to be working in the employer's country (can't travel), the employer has︅ to require you to work from the other country (can't be your choice), and then︆ there's also a limitation on how many days you can spend in Sweden.
Not sure︇ how attractive or relevant this would be for OP.

Otherwise probably the best option for︈ OP would be to just accumulate the profits in the Swedish company and then move︉ to Cyprus or some other tax-efficient country later and cash out from there? As far︊ as I recall, Sweden doesn't have an exit tax, they only tax you if you︋ sell the company within a certain number of years after moving abroad?

 

[MarkusCostigan]

Can you please explain what black list you are referring to?

EDIT: I'm reading something about‌ Sweden put Malta on blacklist in 2023 but it's not clear.

 

[aniglo22]

"Appendix 39 a" contains⁠ the blacklisted countries .
From Chapter 39 a. Section 7 ( Income tax law )⁤ :
Appendix 39 a :

 

[MarkusCostigan]

Thanks for clarifying. Very interesting.

 

[blizz]

great thread, thanks for clarification, better finding different method!

 

[uplana]

I totally agree, however now it is‍ out and still seems to be some sort of solution, depending on each individual situation.⁠

 

[JustAnotherNomad]

The thing is‍ - you rely on the bank not reporting you. You give them a UAE address⁠ and tell them you live there and not in Sweden or wherever you actually live.⁤
But there are no guarantees this will work - they have to report you if⁣ they suspect you really live in Sweden (could be a Swedish phone number of Swedish⁢ IP address giving this away), but more importantly, some banks just report to your passport︀ country regardless.
It is very risky. Better to move somewhere else and sleep well.

Or, if you can't move right away - keep your money in a Swedish company, move︁ abroad in the future and cash out then. Then you only pay Swedish corporate tax,︂ if I'm not mistaken.

 

[Martin Everson]

One needs to‍ read their local tax code in detail and any DTA agreement. It is perfectly legal⁠ to have two or more tax residencies and make use of DTA and any tie⁤ breaker rules for example if you do spend a little time in the other country⁣ and perform your freelance activity in that country. So one needs to check how it⁢ works in Sweden to really confirm. In i.e UK its pretty clear how it works︀ for dual residents but for others it may be different.

https://www.gov.uk/government/publi...ssessment-helpsheet/dual-residents-2024-hs302

 

[JustAnotherNomad]

Forget about "a little time", you have to move your life to the⁤ other country.
And even then, you would still pay tax in the other country, just⁣ a bit less (depending on how much time you spend there).

Yes, but pretty much pointless if OP doesn't actually want to move.

 

[plotoffshore]

You're correct, I'm moving to a different country, considering Monaco as it was‌ mentioned in another thread here today. Don't know how complicated it is, else I find‍ a different country.