Cheapest 0% Tax Route with Substance?
- Thread starter inector
- Start date
- Status
Just get a list of countries sorted by lowest corporate tax rate and get a list of countries by lowest GDP per capita. Find countries that have low corporate tax and low GDP per capita.
Low tax is what you want. Low GDP per capita usually equates to low cost of labor, i.e. you can cheaply hire a couple of workers to be the substance of the company.
Low tax is what you want. Low GDP per capita usually equates to low cost of labor, i.e. you can cheaply hire a couple of workers to be the substance of the company.
Depends on the activities.
Not a bad approach but this way you could miss out a lot of special tax︁ regimes, freezones, etc., depending on your activities. Also check withholding taxes on top of headline︂ corporate tax.
https://en.m.wikipedia.org/wiki/List_of_countries_by_tax_rateshttps://en.m.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)_per_capita
Not a bad approach but this way you could miss out a lot of special tax︁ regimes, freezones, etc., depending on your activities. Also check withholding taxes on top of headline︂ corporate tax.
https://en.m.wikipedia.org/wiki/List_of_countries_by_tax_rateshttps://en.m.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)_per_capita
Indeed. I wouldn't recommend using Wikipedia for that part of the exercise. I would start looking at jurisdictions that have free zones, and jurisdictions which have a reputation for being tax havens/low tax.
Once you've identified some options, look into the whole picture. CIT is just one of many taxes that might be in scope.
Seek legal advice before taking action. Don't want any nasty surprised down︀ the line. Especially labor laws, payroll, and so on.
Once you've identified some options, look into the whole picture. CIT is just one of many taxes that might be in scope.
Seek legal advice before taking action. Don't want any nasty surprised down︀ the line. Especially labor laws, payroll, and so on.
Just looking at this (i've︁ never considered anything like this, but in theory).
BVI Corp -> Barbados 'Graphic Designer '︂ + Barbados 'Copywriter' = 500$ per month. - ensure you've hired on a salary
+ Shared Office (300$).
Then i guess just all depends on yourself, actively being involved in︃ the business operations, or passive shareholder, or relocating to a country with no world-wide taxes.︄
BVI Corp -> Barbados 'Graphic Designer '︂ + Barbados 'Copywriter' = 500$ per month. - ensure you've hired on a salary
+ Shared Office (300$).
Then i guess just all depends on yourself, actively being involved in︃ the business operations, or passive shareholder, or relocating to a country with no world-wide taxes.︄
Still have the issue with countries which are not territorial (Thailand for example - as shareholder).
But that can be offset by a blind trust, and automated businesses processes i'd imagine and a company for dividends (when paid out every 5-10yrs).
That period you'd have to relocate, OR bounce around (some issues with that).
But that can be offset by a blind trust, and automated businesses processes i'd imagine and a company for dividends (when paid out every 5-10yrs).
That period you'd have to relocate, OR bounce around (some issues with that).
Don't forget the dividend withholding taxes, which for individual shareholders can be up to 15% depending on personal tax residence, so it requires some additional structuring to keep the tax rate low.
https://taxsummaries.pwc.com/barbados/corporate/withholding-taxes
Barbados residency is not very desirable with this structure since you would be exposed to 15% WHT on dividends from your Barbadian company.
Since I believe OP was an Estonian tax resident with an Estonian company, most sensible would be︀ to establish a branch office for the Estonian company in Barbados, since in such case︁ you can just pay the corporate income tax in Barbados and freely pass such income︂ as dividends to the head company and then to yourself.
Estonian company doesn't apply any︃ withholding taxes + Estonian tax residency doesn't require any days of physical stay so it︄ leaves you quite flexible.
On top of that you would of course have access to︅ the "no tax until profits are distributed regime" in Estonia, and broader options for banking.︆
https://taxsummaries.pwc.com/barbados/corporate/withholding-taxes
Barbados residency is not very desirable with this structure since you would be exposed to 15% WHT on dividends from your Barbadian company.
Since I believe OP was an Estonian tax resident with an Estonian company, most sensible would be︀ to establish a branch office for the Estonian company in Barbados, since in such case︁ you can just pay the corporate income tax in Barbados and freely pass such income︂ as dividends to the head company and then to yourself.
Estonian company doesn't apply any︃ withholding taxes + Estonian tax residency doesn't require any days of physical stay so it︄ leaves you quite flexible.
On top of that you would of course have access to︅ the "no tax until profits are distributed regime" in Estonia, and broader options for banking.︆
That wouldn't really work (in our scenario forecasts) as we would loose money annually in rate-rise years, and then a home run in rate decline years (usually 18 months) based on our forecasts, and the 5% could easily be a considerable set of figures in tax.
Which is better suited to reinvestment into the company.
---
Which is better suited to reinvestment into the company.
---
I wasn't proposing residence in Barbados. Just incorporation and substance there.
If you're a natural person resident in Barbados, yes. But if you're a non-resident, it might be lower or even zero. And WHT paid in Barbados might be applicable as tax credit where received, depending on whether there's a tax treaty and what︀ it says.
It's unusual but the tax rate actually goes down the higher︂ the taxable basis is. It's 5.5% on the first 1 million BBD (500,000 USD), 3.0%︃ on the next 19 million BBD, et cetera, down to 1%.
If you're a natural person resident in Barbados, yes. But if you're a non-resident, it might be lower or even zero. And WHT paid in Barbados might be applicable as tax credit where received, depending on whether there's a tax treaty and what︀ it says.
It's unusual but the tax rate actually goes down the higher︂ the taxable basis is. It's 5.5% on the first 1 million BBD (500,000 USD), 3.0%︃ on the next 19 million BBD, et cetera, down to 1%.
Yeah, i read that (apologies)
1-3% is acceptable.
But suspect there's a better system out there (current BVI with Substance).
But BVI is getting a tarnished name, and doesn't really suit both sides of the company.
1-3% is acceptable.
But suspect there's a better system out there (current BVI with Substance).
But BVI is getting a tarnished name, and doesn't really suit both sides of the company.
That is indeed interesting, how would Estonia view BVI considering that it's a high-risk jurisdiction?
I assume they would investigate it from time to time, and banks would definitely scrutinize transfers from there.
That's a dream.
---
Got quoted like 20-30K per year for a︁ Jersey company, I assume the same for IOM and Guernsey.
Labuan seems like an option,︂ with only 1 employee at 200$ per month, but then what are the chances for︃ a traditional bank...plus people across forum have quite negative reviews of it.
I assume they would investigate it from time to time, and banks would definitely scrutinize transfers from there.
That's a dream.
---
Got quoted like 20-30K per year for a︁ Jersey company, I assume the same for IOM and Guernsey.
Labuan seems like an option,︂ with only 1 employee at 200$ per month, but then what are the chances for︃ a traditional bank...plus people across forum have quite negative reviews of it.
Jersey is usually the most expensive of the three, but it'll be a similar order of magnitude in IOM and Guernsey as well if the pricing includes genuine substance.
There's a decent chance you can get a bank account opened in Labuan if you have an actual presence in Labuan. Hard to say for sure if a single 200 USD/month︀ employee is enough.
I think a lot of the negativity around Labuan is that the︁ jurisdiction has failed to become the meaningful alternative to Hong Kong and Singapore it set︂ out to become. It's also excluded from several tax treaties signed by Malaysia, which makes︃ it less valuable for tax planning purposes. But incorporating in Labuan isn't necessarily the wrong︄ choice. I'm seeing a slight increase in interest for the jurisdiction among people who want︅ to incorporate in Asia but are wary of Hong Kong's reduction of independence.
There's a decent chance you can get a bank account opened in Labuan if you have an actual presence in Labuan. Hard to say for sure if a single 200 USD/month︀ employee is enough.
I think a lot of the negativity around Labuan is that the︁ jurisdiction has failed to become the meaningful alternative to Hong Kong and Singapore it set︂ out to become. It's also excluded from several tax treaties signed by Malaysia, which makes︃ it less valuable for tax planning purposes. But incorporating in Labuan isn't necessarily the wrong︄ choice. I'm seeing a slight increase in interest for the jurisdiction among people who want︅ to incorporate in Asia but are wary of Hong Kong's reduction of independence.
Not so fast, you didn't consider the 5% branch profit tax on profits remitted to the head company (unless DTA lowers that tax to 0% and unfortunately Estonia doesn't have a DTA with Barbados)
https://taxsummaries.pwc.com/barbados/corporate/branch-income
UAE FZ + BB branch instead could work.
It could also work with a UK LTD with branch exemption but don't know if HMRC would accept that.
@Sols What do you think?
https://taxsummaries.pwc.com/barbados/corporate/branch-income
UAE FZ + BB branch instead could work.
It could also work with a UK LTD with branch exemption but don't know if HMRC would accept that.
@Sols What do you think?
BVI is viewed pretty much the same way as Russia in the EU (better to avoid as you get hit with tax)
https://www.consilium.europa.eu/en/policies/eu-list-of-non-cooperative-jurisdictions/
reduced to 0% if paid out of income earned outside of Barbados
https://www.consilium.europa.eu/en/policies/eu-list-of-non-cooperative-jurisdictions/
reduced to 0% if paid out of income earned outside of Barbados
UAE participation exemption requires the participation to be subject to tax in its country or territory of residence at a rate that is not lower than 9%.
Also, in Cyprus, participation exemption might not be available if an effective tax rate of participation is less than 6.25%
I believe the UK could possibly work. To the extent the branch profits are considered to have been artificially diverted from the United Kingdom, the anti-diversion rule will stop them from qualifying for the exemption.
+You also need to consider CFC rules
Also, in Cyprus, participation exemption might not be available if an effective tax rate of participation is less than 6.25%
I believe the UK could possibly work. To the extent the branch profits are considered to have been artificially diverted from the United Kingdom, the anti-diversion rule will stop them from qualifying for the exemption.
+You also need to consider CFC rules
- Status