I've seen this mentioned before, but I can't understand it. Yes, from a profit/dividend of 100 you'd pay 20 tax (20 percent) and can withdraw 80. Yes 20 is 25% of 80. However that is the same for all countries/taxes. In any country where it's 20% tax you'd pay 20 tax on a profit of 100. What am I missing?
Best LEGIT Country to Incorporate to minimise Corporate Tax?
- Thread starter banafinfodafuggiano
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Here's an example (that I am loosely copy-pasting from an email from an Estonian lawyer):
Let's say you have a dividend of 10,000 EUR.
The taxable basis is 10,000 / 0.80 = 12,500.
Of this, you pay 20% tax, i.e. 2,500 EUR.
2,500 / 10,000 = 25%
Let's say you have a dividend of 10,000 EUR.
The taxable basis is 10,000 / 0.80 = 12,500.
Of this, you pay 20% tax, i.e. 2,500 EUR.
2,500 / 10,000 = 25%
Pwc says this, it's a bit unclear to me if they mean that the 20 should be paid out of the 80 (so you'll receive 60), or distribute and receive 80 and pay 20 tax. If they mean pay 20 tax out of the 80, then what happens to the last 20 not distributing in this example?
Edit, ok i get it. In︃ your example, if you distributor 10k then you have to pay 2.5k tax. So that's︄ the same as if you had earned 12.5k and paid 20% tax, you could also︅ distribute 10k and pay 2.5k tax.
So the tax is the same as other 20%︆ regimes.
It's much easier to think about it︊ this way:
You have 12500 profit. Then you pay 20% tax (2500) and distribute 10000.︋
Its very confusing when calculated starting with the distributed amount.
Edit, ok i get it. In︃ your example, if you distributor 10k then you have to pay 2.5k tax. So that's︄ the same as if you had earned 12.5k and paid 20% tax, you could also︅ distribute 10k and pay 2.5k tax.
So the tax is the same as other 20%︆ regimes.
It's much easier to think about it︊ this way:
You have 12500 profit. Then you pay 20% tax (2500) and distribute 10000.︋
Its very confusing when calculated starting with the distributed amount.
Have a doubt. If profit is︂ 100 USD, and we decide to distribute entire profit as dividend, tax will be 20︃ USD. Am I right? Remaining 80 USD will be distributed as dividend which is tax︄ free for residents.
That means, tax percentage is 20/100 = 20%. Am I missing anything?︅
That means, tax percentage is 20/100 = 20%. Am I missing anything?︅
You are correct. It is 20%.
If you take 20 USD of 80 USD, it would be 25%.
The are countries where taxes are deductible business expenses. But for withholding taxes, it is almost always non-deductible. Hence the 20% are correctly worded. It has the same effect as a 20% non-deductible corporate tax when distributed.
Of course @Sols can find a jurisdiction where corporate︀ taxes are deductible (25% becomes 20%, 20% becomes 16.667%, etc.) but there aren't that many.︁
If you take 20 USD of 80 USD, it would be 25%.
The are countries where taxes are deductible business expenses. But for withholding taxes, it is almost always non-deductible. Hence the 20% are correctly worded. It has the same effect as a 20% non-deductible corporate tax when distributed.
Of course @Sols can find a jurisdiction where corporate︀ taxes are deductible (25% becomes 20%, 20% becomes 16.667%, etc.) but there aren't that many.︁
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