Ecommerce incorporation options from Portugal

[Zenon]

Hi,

I recently moved to Portugal in the beginning of this calendar year. Correct me if I'm wrong, but there are no downsides to applying for the NHR status, so I will do this later this year (before next year's march 31st deadline).

Three other partners and I are looking to incorporate an ecommerce business. The main activity will buying, storing and selling products from warehouses directly to consumers in Spain. Obviously, we would love to keep expenses and taxes as low as possible to not eat on the profitability of the product margins. What would you say is our best option?

I looked at typical recommendations of Delaware/Wyoming LLCs and they should work fine for ecommerce given the support for payment processors, accounting software, credit and even the possibility of reselling the company later on. I've also seen the more expensive incorporation structures with a cyprus/malta holding company that might take advantage of the NHR, but for us starting out, probably out of budget until we reach certain profitability.

I understand if company is run mostly from our shared portuguese residence we will have to pay CIT in portugal and wonder if there is any setup that might not trigger CFC rules (like limiting individuals shares to 24% of the company, a specific operational agreement, avoiding black listed jurisdictions, etc?).

Any advice is highly appreciated.

 

[bountymounty]

Zenon said:
I looked at typical recommendations of Delaware/Wyoming LLCs and they should work fine for ecommerce given the support for payment processors, accounting software, credit and even the possibility of reselling the company later on
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You want to check with Mercury Bank and FirstData before you start setting up a Wyoming company. Or Stripe for the payment processing.

 

[lostguy]

It's a nice start you guys planning. Relocating to a new country and start setting something up you think will help you evade taxes in that country. I would be careful with doing that.

Personally I would have checked my options for a local company and it's benefits before I moved there.

 

[Mr Gus]

Zenon said:
Hi,

I recently moved to Portugal in the beginning of this calendar year. Correct me if I'm wrong, but there are no downsides to applying for the NHR status, so I will do this later this year (before next year's march 31st deadline).

Three other partners and I are looking to incorporate an ecommerce business. The main activity will buying, storing and selling products from warehouses directly to consumers in Spain. Obviously, we would love to keep expenses and taxes as low as possible to not eat on the profitability of the product margins. What would you say is our best option?

I looked at typical recommendations of Delaware/Wyoming LLCs and they should work fine for ecommerce given the support for payment processors, accounting software, credit and even the possibility of reselling the company later on. I've also seen the more expensive incorporation structures with a cyprus/malta holding company that might take advantage of the NHR, but for us starting out, probably out of budget until we reach certain profitability.

I understand if company is run mostly from our shared portuguese residence we will have to pay CIT in portugal and wonder if there is any setup that might not trigger CFC rules (like limiting individuals shares to 24% of the company, a specific operational agreement, avoiding black listed jurisdictions, etc?).

Any advice is highly appreciated.
Click to expand...

I see a lot of things that could go wrong..

First off if you have warehouse and employees in Spain that could create PE in Spain already making your company liable for tax there potentially, so make sure to check Spanish rules on PE.

The question about US LLC's is that it is unclear how they will be taxed, since there is no equivalent to a LLC in Portugal.

A lot of people have been using Malta/Cyprus together with the NHR and as far as I know so far so good because Portugal is not actively going after people NHR so far. However it's a faulty setup if you are still running the company from Portugal.

The only way to get this done the safe way is having an actual company abroad that is run without your management and control from Portugal and is not a blacklisted jurisdiction. So you could create actual PE in Cyprus or Malta by having a office, and foreign director there and as long as all management and control is done from Malta or Cyprus you are safe. You will pay CIT there and since there is no withholding tax you can distribute the dividends tax free to Portugal. But as you can imagine this brings significant cost to setup and annual cost as well, and since you just started out and I assume are not making any profit yet this doesn't sound like an option.

CFC rules basicly same story if more then 25% of the shareholders are resident in Portugal you will be seen as a CFC in Portugal the only way to have them not apply is creating a company with actual economic substance in any EU/EEA country, so again having an actual office with employees and a foreign director etc. However in this case it obviously involves setting up a Portuguese holding, so dividends from the foreign company to the Portuguese holding will be exempt however you will be subject to tax once you turn out dividends from the Portuguese holding to yourself.

If you are taking advantage of the NHR you should have nothing to do with CFC because you want to stay away from having a Portuguese holding to begin with.

I don't see in this scenario you are able to save on tax the correct way unless you are willing to spend a lot of money on creating PE abroad and doing the actual Management and Control from there, which with an active company like yours sound practically impossible to me.

 

[lostguy]

Mr Gus said:
The only way to get this done the safe way is having an actual company abroad that is run without your management and control from Portugal and is not a blacklisted jurisdiction. So you could create actual PE in Cyprus or Malta by having a office, and foreign director there and as long as all management and control is done from Malta or Cyprus you are safe.
Click to expand...

That is a much better setup, you should lesson to this guy!