Best setup to avoid European withholding tax? Anything better than Malta?

[Don]

By the way, have you considered establishing a European Company (Societas Europea or SE)?‍
Perhaps it's worth looking into?

As a new legal form, the SE coexists with the⁠ existing corporate forms of each Member State. It is a separate legal entity with a⁤ minimum registered share capital of EUR 120,000 divided into shares which are eligible for listing⁣ on a stock exchange. The name of an SE must include the letters “SE”. An⁢ SE is domiciled in the MemberState, where its head office is located and is registered︀ in the appropriate commercial register. In addition to the SE Regulation, the SE is subject︁ to and governed by the national laws of the Member State of its domicile,i.e. the︂ national law implementing the SE Regulation and the SE Directive, as well as the respective︃ national stock corporation acts. As a result, the basic requirements for an SE are the︄ same in each member-state, but most of the details are still determined by national law︅ – making the SE a national rather than a uniform European legal entity.

 

[JustAnotherNomad]

What's the advantage? I thought it's‍ mostly relevant for very large companies?

 

[Don]

Reputation - as you said, they might be perceived as very large‌ companies

 

[JustAnotherNomad]

But the clients would always be interacting with the local subsidiaries anyway?
I expect my‌ clients to be looking for local businesses, so they know if there is a problem,‍ the company will be easy to hold accountable.

In terms of reputation, I was mainly⁠ thinking about:
1. Tax offices (if they see the subsidiary shifts profits or pays dividends⁤ to a country like Malta or Cyprus --> increased audit risk)
2. If clients want⁣ to understand the whole ownership structure and they see that the local subsidiary is owned⁢ by a MT company - again, bad reputation

But if they see it's owned by︀ an SE that has its head office in MT, what's the advantage? I'm not sure︁ it's worth paying 120k for that... And probably accounting would also be more expensive?

 

[clemens]

I am sure that if the company structure is frequently changed and little to no taxes‌ and other fees are paid despite high revenue, there will be an audit.

 

[inector]

For a UK company‍ with PE in Malta, do UK CFC rules apply (or the Maltese CFC rules apply)?⁠ Technically it's still a Maltese company then
That concludes the setup?

 

[JustAnotherNomad]

The UK company would be tax resident in Malta, so it would be treated⁠ like a Maltese company, so only Maltese CFC rules should apply.

 

[JustAnotherNomad]

@Don What about using a Swiss company with a branch/PE in the UAE? There is‌ a tax treaty, so branch profits should be excluded from taxation in Switzerland.

 

[Marzio]

Your UAE PE will be tax free up t AED 3 million so good thiking‌ but:
1. you'll pay A LOT in salaries if you want to hire local staff‍
2. you'll be stuck with money in CH and you'll need to form another company⁠ to distribute dividends tax free

 

[Don]

The same⁢ applies to Estonia, and not only by treaty but domestic law.
Check carefully article 22︀ and whether it is flexible enough to fit your purpose.

It's a kind of bureaucratic︁ setup to open a branch office in the UAE, but one huge benefit in favour︂ of doing it compared to establishing a local company is that foreign tax resident companies︃ are exempt from economic substance requirements in the UAE. So it could be worth it︄ if your business is related to IP or management, service centre, holding, lease/finance.

I find︅ operating as an unincorporated partnership often to be more beneficial, as you would just need︆ a tax number.
Opaque unincorporated partnerships should maintain financial statements but must obtain audited financial︇ statements only if the revenue exceeds AED 50 million.

Small Business Relief exempts eligible Resident︈ Persons with revenue under AED3 million from CT including unincorporated partnerships.

 

[2fire]

Luxembourg seems offers a generous participation exemption‌ regime for holding companies, which can result in significant tax savings.

Dividend Income: Dividends received‍ from qualifying subsidiaries are exempt from corporate income tax (CIT), municipal business tax (MBT), and⁠ net wealth tax (NWT).

Capital Gains: Capital gains on the sale of qualifying participations are⁤ exempt from CIT and MBT.

Does anyone has an experience with Luxembourg holding company and⁣ related expenses?

 

[koohl]

It depends on how many staff members / worker you need.‍ You can just ask your agent in Switzerland to manage the company, so you pay⁠ 4000 - 5000 CHF a year that's it.

 

[Marzio]

Managing the company on paper is one thing, another is paying staff to‌ work which will cost him at lest 10x more than 4000CHF

 

[JustAnotherNomad]

It's a popular choice for very large companies.
But it's known to be‌ very expensive, and you would likely be required to have proper substance there.
There's also‍ the EU's "Unshell" directive, which pretty much is making pure holding companies a think of⁠ the past.

It's doubtful that this⁢ would be accepted as proper substance (for profit shifting and tax-free flow of dividends).

 

[JohnLocke]

yeah it depends what he/she means‍ with this! But if a real person is hired and appointed as managing director for⁠ the company it could work well.

 

[JustAnotherNomad]

Not for a few thousands bucks per year, that's no proper substance. And even then,‌ the Unshell directive could be a problem.

 

[inector]

What setup did you choose OP? If you don't mind hinting or sharing.

 

[JustAnotherNomad]

Have been to busy with other stuff, haven't had time to look more into this.‌

 

[brianK]

Is it expensive to rent‍ an office, hire some random guy, and get internet and electricity installed there?

 

[bountymounty]

You have been there I⁠ can understand from your comment ?