Invoice from US LLC (non resident) to Estonian Company

[Puzel12]

I wonder how risky it is to invoice your own company. Meaning: let's say you own 50% of shares in Estonian company where you are also director and at the same time you own US LLC (non-resident). As US LLC owner you invoice Estonian company for work for clients that are under Estonian OU Company.

Is it legal? Anything to keep in mind while doing so? If I invoice on lets say 70% of profit every month and then the rest will be paid out in dividend, does it cause any risk? We are talking about ~10k€ per month profit under the company.

 

[Martin Everson]

Puzel12 said:
Is it legal?
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Technically yes

Puzel12 said:
Anything to keep in mind while doing so?
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BEPS profit shifting 😕.

https://en.wikipedia.org/wiki/Base_erosion_and_profit_shifting

Puzel12 said:
If I invoice on lets say 70% of profit every month and then the rest will be paid out in dividend, does it cause any risk?
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That sort of aggressive profit shifting bu invoicing is risky especially when to a zero tax company.

Puzel12 said:
We are talking about ~10k€ per month profit under the company.
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You will most likely fly under the radar and be of no interest to Estonia taxman. They would be looking at multinationals before you. Most people that do this sort of profit shifting often do not ever get caught . However if questions are asked and paperwork asked to be shown you better have a good story as to why this zero tax company with common ownership with the Estonian entity is invoicing it.

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Please note my posts should not be taken as financial or tax advice. Please seek professional advice in that respect.

 

[Puzel12]

Martin Everson said:
Technically yes



BEPS profit shifting 😕.

https://en.wikipedia.org/wiki/Base_erosion_and_profit_shifting


That sort of aggressive profit shifting bu invoicing is risky especially when to a zero tax company.




You will most likely fly under the radar and be of no interest to Estonia taxman. They would be looking at multinationals before you. Most people that do this sort of profit shifting often do not ever get caught . However if questions are asked and paperwork asked to be shown you better have a good story as to why this zero tax company with common ownership with the Estonian entity is invoicing it.
Click to expand...

Does it relate to any other legal entity? If Estonian company is managed by 2 people: 1. from Thailand and 2. from Spain, can a person from Thailand legally invoice Estonian OU? Let's say with company in Seychelles. The idea is to use Estonian OU as payment processing + grow our ecommerce there, and use tax free jurisdiction to get dividend that will not be taxed in Thailand.

I am really curious if in that case of Estonian OU with 50% shareholder from Thailand and 50% from Spain will cause PE in any of these countries? Our only substance in Estonia would be banking and virtual office. I was thinking about hiring local director.

 

[Martin Everson]

Puzel12 said:
Does it relate to any other legal entity? If Estonian company is managed by 2 people: 1. from Thailand and 2. from Spain, can a person from Thailand legally invoice Estonian OU? Let's say with company in Seychelles. The idea is to use Estonian OU as payment processing + grow our ecommerce there, and use tax free jurisdiction to get dividend that will not be taxed in Thailand.

I am really curious if in that case of Estonian OU with 50% shareholder from Thailand and 50% from Spain will cause PE in any of these countries? Our only substance in Estonia would be banking and virtual office. I was thinking about hiring local director.
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This does not change anything as you are still using an artificial construct to erode the OU company tax base i.e base erosion. You are best to speak to an Estonia based accountant at this point and get their opinion.

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Please note my posts should not be taken as financial or tax advice. Please seek professional advice in that respect.