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- Thread starter Alenka
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Then move your personal residence to UAE, incorporate in UAE and “employ” the people in Russia as freelancers. Should be pretty much tax free?
True, but I don't have 183 days this year 🙁 And I have belorussian passport that consider me tax resident of Belarus if I don't obtain any other tax residency even if I spend in Belarus 0 days a year.
I can employee people in Russia as freelancers, but then still my company will be considered as Georgian cause I live here.
From the next year I will do with UAE and live there for 183 days, but I need to make something useful for the next 5 months.
I can employee people in Russia as freelancers, but then still my company will be considered as Georgian cause I live here.
From the next year I will do with UAE and live there for 183 days, but I need to make something useful for the next 5 months.
Where is your team?
Those are pass-through entities where the members (there are no "shareholders") are taxed on personal income. If the members are other companies, it becomes income for the companies. Those companies must then
There are three options:︂ they pay tax (optimised through correct, legal structures), they don't pay tax (legally, through proper︃ residence arrangements), or they are getting by with a mix of luck and lack of︄ enforcement.
Those are pass-through entities where the members (there are no "shareholders") are taxed on personal income. If the members are other companies, it becomes income for the companies. Those companies must then
There are three options:︂ they pay tax (optimised through correct, legal structures), they don't pay tax (legally, through proper︃ residence arrangements), or they are getting by with a mix of luck and lack of︄ enforcement.
I hope you didn't pay too much for that︀ advice because that's not an accurate representation.
Then, as @JustAnotherNomad said, effective corporate tax rate across the world would drop to 0% as everyone would incorporate︉ overseas.
Your local gas station? That's now a Belize IBC.
The restaurant you had lunch︊ at? That's technically a Cayman Islands exempt company.
The hairdresser? Thank you for choosing Hong︋ Kong Haircuts Ltd.
Your ISP? They certainly offer great local coverage despite being a Marshall︌ Islands company.
But let's not stop there. Why would anyone choose to be employed and︍ pay income tax when they, in this magical world this top local lawyer concocted for︎ us, could just become independent contractors instead? Local employment would drop to zero as everyone️ instead started trading as offshore companies and pay only dividends tax.
Next we have VAT/sales tax. It would require a little bit more problem solving but I think we can even get away from them by having the trades be between two non-EU entities. When you (OJ333 International Ltd, a Seychelles company) go to the local grocery story (Ultra Market Grocery Ltd, a Mauritius company), the transaction is clearly between two foreign companies so no VAT is applicable. Right?
Then, as @JustAnotherNomad said, effective corporate tax rate across the world would drop to 0% as everyone would incorporate︉ overseas.
Your local gas station? That's now a Belize IBC.
The restaurant you had lunch︊ at? That's technically a Cayman Islands exempt company.
The hairdresser? Thank you for choosing Hong︋ Kong Haircuts Ltd.
Your ISP? They certainly offer great local coverage despite being a Marshall︌ Islands company.
But let's not stop there. Why would anyone choose to be employed and︍ pay income tax when they, in this magical world this top local lawyer concocted for︎ us, could just become independent contractors instead? Local employment would drop to zero as everyone️ instead started trading as offshore companies and pay only dividends tax.
Next we have VAT/sales tax. It would require a little bit more problem solving but I think we can even get away from them by having the trades be between two non-EU entities. When you (OJ333 International Ltd, a Seychelles company) go to the local grocery story (Ultra Market Grocery Ltd, a Mauritius company), the transaction is clearly between two foreign companies so no VAT is applicable. Right?
Team in Russia, but they can work in office or without contract, at home. Or even in office for some other structure, and I can send there money. So︀ it will be another company.
If I live in Cyprus for 60 days, and team︁ will work from Russia in office, will it be enough to obtain company tax residency︂ on Cyprus?
If it were so easy just to ask tax expert. The main is︃ to ask the right question. And now I can only ask "Look, my competitors have︄ Cyprus companies and they pay low taxes somehow, tell me how".
If I live in Cyprus for 60 days, and team︁ will work from Russia in office, will it be enough to obtain company tax residency︂ on Cyprus?
If it were so easy just to ask tax expert. The main is︃ to ask the right question. And now I can only ask "Look, my competitors have︄ Cyprus companies and they pay low taxes somehow, tell me how".
Then that's probably fine. You can have a company in Russia which does nothing but hire these people and receive enough funding from the parent company to survive. Speak with a Russian tax adviser to make sure that this is fine; sometimes there are other, minor considerations (for example, you might need to appoint a local director/manager).
You can be tax resident in multiple︂ jurisdictions, by personal choice or by decision by the local tax authority/courts.
The 60-day scheme︃ in Cyprus works if you are not also tax resident anywhere else.
For example, if︄ you live 60 days in Cyprus and the other 305 days in Georgia, you are︅ tax resident in Georgia and the tax residence in Cyprus would be invalid under Cypriot︆ law.
Have to start somewhere. Don't focus on what others have done so much. Focus on︊ what you want to achieve. Then present that goal to highly skilled advisers.
You can be tax resident in multiple︂ jurisdictions, by personal choice or by decision by the local tax authority/courts.
The 60-day scheme︃ in Cyprus works if you are not also tax resident anywhere else.
For example, if︄ you live 60 days in Cyprus and the other 305 days in Georgia, you are︅ tax resident in Georgia and the tax residence in Cyprus would be invalid under Cypriot︆ law.
Have to start somewhere. Don't focus on what others have done so much. Focus on︊ what you want to achieve. Then present that goal to highly skilled advisers.
Guys, I probably did not communicate properly the issue. The examples you are giving have a lot to do with territorial factors.
Hairdressers, pizza shops etc - they work locally, their business is conducted locally, they at least have to rent the real estate and work only with local customers. Last of all, no bank at least here in BG will open a UAE company bank account.
Now, when your company is abroad, your customers abroad, part of your employees abroad - thats a different story. The entity is not liable under local laws. Dont you think thats why the IRS has definitions of "effectively︀ connected income"? They have to describe when an entity has a tax nexus in the︁ states and its definitely NOT when the owner is a native citizen. If there is︂ no effectively connected income, then owner only pays dividend tax on their profits.
The advice︃ doesnt come from one person only. Even though this lawyer is literally highest up the︄ chain you can go (ex head of the national tax revenue legal department with a︅ lot of connections and 10+ years experience there). Accountants, even the tax agencies themselves -︆ they all support my thesis. I have been declaring dividends from a foreign company and︇ filing that I own UAE company with a certain amount of shareholder capital and paying︈ dividend tax only for years.
In the world you describe a french who wants to︉ sell sandwiches in Germany and employs germans who work in a german shop, but spends︊ the majority of the year in France will be double taxes in both countries. This︋ is just plain wrong. I have had UAE AND USA companies that do internet business,︌ consulted with more lawyers and accountants I can count and never have anything like that︍ come up.
Perhaps its a Bulgarian thing. But I highly doubt it we are the︎ only country that doesn't require a Canadian dog store with canadian employees, customers and offices️ that is run by an owner living here to pay taxes in both places 🙂
Hairdressers, pizza shops etc - they work locally, their business is conducted locally, they at least have to rent the real estate and work only with local customers. Last of all, no bank at least here in BG will open a UAE company bank account.
Now, when your company is abroad, your customers abroad, part of your employees abroad - thats a different story. The entity is not liable under local laws. Dont you think thats why the IRS has definitions of "effectively︀ connected income"? They have to describe when an entity has a tax nexus in the︁ states and its definitely NOT when the owner is a native citizen. If there is︂ no effectively connected income, then owner only pays dividend tax on their profits.
The advice︃ doesnt come from one person only. Even though this lawyer is literally highest up the︄ chain you can go (ex head of the national tax revenue legal department with a︅ lot of connections and 10+ years experience there). Accountants, even the tax agencies themselves -︆ they all support my thesis. I have been declaring dividends from a foreign company and︇ filing that I own UAE company with a certain amount of shareholder capital and paying︈ dividend tax only for years.
In the world you describe a french who wants to︉ sell sandwiches in Germany and employs germans who work in a german shop, but spends︊ the majority of the year in France will be double taxes in both countries. This︋ is just plain wrong. I have had UAE AND USA companies that do internet business,︌ consulted with more lawyers and accountants I can count and never have anything like that︍ come up.
Perhaps its a Bulgarian thing. But I highly doubt it we are the︎ only country that doesn't require a Canadian dog store with canadian employees, customers and offices️ that is run by an owner living here to pay taxes in both places 🙂
If you manage and control a company from a territory that has effective control and management regulations, it becomes tax resident there.
That is effectively no different from︀ having an office (including a home office) or other Permanent Establishment in a country, thereby︁ making you tax resident there.
Double Taxation Avoidance Agreements help solve︅ frontier workers like in this example.
It is a Bulgarian thing. Bulgaria seems︉ to be lacking the control and management regulations found in most other countries. Companies seem︊ to only be tax resident in Bulgaria if they are incorporated or registered in Bulgaria.︋
That is effectively no different from︀ having an office (including a home office) or other Permanent Establishment in a country, thereby︁ making you tax resident there.
Double Taxation Avoidance Agreements help solve︅ frontier workers like in this example.
It is a Bulgarian thing. Bulgaria seems︉ to be lacking the control and management regulations found in most other countries. Companies seem︊ to only be tax resident in Bulgaria if they are incorporated or registered in Bulgaria.︋
An example was︀ given with Australia. But check this from the page - "However, the government has proposed︁ amendments to the existing legislation to clarify the position so that a foreign incorporated company︂ only will be treated as an Australian tax resident if it has a ‘significant economic︃ connection to Australia’. This test will be satisfied where both the company’s core commercial activities︄ are undertaken in Australia and its central management and control is in Australia. The measure︅ will have effect from the first income year after the enabling legislation is enacted; however,︆ taxpayers will have the option of applying the new law from 15 March 2017"
So even they realize that this regulation is absurd. The key here is "core economic activity".︇ What is that? Where are the customers? Where are the employees? Any offices? Warehouses? Factories?︈ Etc etc.
I am wondering if Alenka does a deep dive in Georgia's tax laws︉ and practices if he will be able to find something like this test.
So even they realize that this regulation is absurd. The key here is "core economic activity".︇ What is that? Where are the customers? Where are the employees? Any offices? Warehouses? Factories?︈ Etc etc.
I am wondering if Alenka does a deep dive in Georgia's tax laws︉ and practices if he will be able to find something like this test.
Here is a continuation of the "australian" issue that︂ we have used as an example - Home is where the 'central management and control'︃ is: Upcoming changes to the corporate residency test | Cornwalls
Furthermore - Deloitte | tax@hand︄ - "On 6 October 2020, as part of the Federal Budget 2020-21, the government stated︅ that it will make technical amendments to the central management and control (CMAC) test to︆ clarify that a non-Australian incorporated company will be treated as an Australian tax resident if︇ it has a "sufficient economic connection to Australia."
So it definitely isn't a "clear and︈ defined" rule, which was my point with the thread's author - may be the case︉ with his country is how much monetary and brain capital can he summon to prove︊ his point.
Furthermore - Deloitte | tax@hand︄ - "On 6 October 2020, as part of the Federal Budget 2020-21, the government stated︅ that it will make technical amendments to the central management and control (CMAC) test to︆ clarify that a non-Australian incorporated company will be treated as an Australian tax resident if︇ it has a "sufficient economic connection to Australia."
So it definitely isn't a "clear and︈ defined" rule, which was my point with the thread's author - may be the case︉ with his country is how much monetary and brain capital can he summon to prove︊ his point.
The OECD has various models which are implemented by︅ many jurisdictions to agree on definitions on these things. In the OECD's terminology the definition︆ of a Permanent Establishment is in Article 5 of this model: https://www.oecd.org/tax/treaties/1914467.pdf Not all laws︇ use that exact wording, but it gives you a sense of what a PE is.︈ If you have a PE, you have economic substance.
To some extent, these rules are︉ intentionally vague so as to not restrict the government's authorities by creating easily exploited loopholes,︊ and cater to future developments. You will never find an exact checklist that for sure,︋ 100% defines what "core economic activity" means because things change.
What is Australia's incentive? The︌ want to increase tax revenues and close loopholes.
What has Australia's track record been? AUSTRAC︍ and ATO are considered among the most respected financial intelligence units and tax authorities, often︎ touted as among the most effective in the world.
Is Australia hard at work making️ it easier for residents to dodge tax? No. But they might be trying to clarify the rules and update the laws, to make things easier for businesses to be compliant.
I see your optimism but it isn't the reality outside of jurisdictions like Bulgaria with somewhat outdated laws.
Georgia's rules are quite clear: resident companies and PEs of non-resident companies are taxed on their worldwide income. This means in Alenka's case there is a risk that his business is considered solely, partly, wholly, or jointly/dualy tax resident in Georgia.
Is Georgia likely to go after Alenka? Not today, no. Does the risk exist? Yes, and it only grows with time.
To some extent, these rules are︉ intentionally vague so as to not restrict the government's authorities by creating easily exploited loopholes,︊ and cater to future developments. You will never find an exact checklist that for sure,︋ 100% defines what "core economic activity" means because things change.
What is Australia's incentive? The︌ want to increase tax revenues and close loopholes.
What has Australia's track record been? AUSTRAC︍ and ATO are considered among the most respected financial intelligence units and tax authorities, often︎ touted as among the most effective in the world.
Is Australia hard at work making️ it easier for residents to dodge tax? No. But they might be trying to clarify the rules and update the laws, to make things easier for businesses to be compliant.
I see your optimism but it isn't the reality outside of jurisdictions like Bulgaria with somewhat outdated laws.
Georgia's rules are quite clear: resident companies and PEs of non-resident companies are taxed on their worldwide income. This means in Alenka's case there is a risk that his business is considered solely, partly, wholly, or jointly/dualy tax resident in Georgia.
Is Georgia likely to go after Alenka? Not today, no. Does the risk exist? Yes, and it only grows with time.
Yes, of course. The risk always exists. But you should always︋ try to manage it and think about the pros and cons. Stupid example - I︌ will save 100K on taxes and the maximum amount I will owe IF the court︍ doesn't accept my lawyers' interpretation of the law is 150K. Hence I will risk it︎ (please don't get focused on that it's just an illustration).
What I am confused by️ though is that Bulgaria, with all the problems and corruption it has, has been a member of the EU for 15 years now, has a relatively stable economy and rule of law. So without any offence (though I think hardly anyone on this forum is a nationalist) I don't think Georgia ranks as a "more advanced country with a stronger government and better rule of law". But then again, I don't live there. All I am saying is that if there is financial incentive Alenka COULD potentially try to get into the "I will persuade the tax agency and then the court this and that︀ game and if they don't accept it I will have a warchest to pay for︁ the mistake" mindset.
What I am confused by️ though is that Bulgaria, with all the problems and corruption it has, has been a member of the EU for 15 years now, has a relatively stable economy and rule of law. So without any offence (though I think hardly anyone on this forum is a nationalist) I don't think Georgia ranks as a "more advanced country with a stronger government and better rule of law". But then again, I don't live there. All I am saying is that if there is financial incentive Alenka COULD potentially try to get into the "I will persuade the tax agency and then the court this and that︀ game and if they don't accept it I will have a warchest to pay for︁ the mistake" mindset.
Bulgaria seems to have a broader definition of permanent establishment to make up for that.
If you run your business from Bulgaria, I don't see any difference since everything you do (even outside of Bulgaria, unless there's a PE elsewhere) will probably count as connected to that PE, so it's all corporate income that's taxable in Bulgaria anyway.
If you run your business from Bulgaria, I don't see any difference since everything you do (even outside of Bulgaria, unless there's a PE elsewhere) will probably count as connected to that PE, so it's all corporate income that's taxable in Bulgaria anyway.
That depends. You may get lucky and nobody will notice, but then you definitely shouldn't spend those savings.
On the other hand, if you did not declare everything properly, you may still be on the hook for evasion. I would keep very good records of everything you discuss with︀ your lawyer, as proof that you had no intention of being noncompliant.
On the other hand, if you did not declare everything properly, you may still be on the hook for evasion. I would keep very good records of everything you discuss with︀ your lawyer, as proof that you had no intention of being noncompliant.
If someone really starts investigating, they will see that your UAE directors are just nominees, that won't hold up. The next step will be that they will decide you are managing the company from Georgia, so it's tax resident in Georgia, or at least it︀ has a PE there.
You will probably also have to follow Russian labor laws, which︁ may require you to register your "UAE" company in Russia. Which in turn may trigger︂ the Russian tax authorities' attention.
With workers in Russia, there could also be a PE︃ in Russia, especially if they work from an office, but that may not even be︄ required. A certain number of workers will probably be enough. You may be able to︅ mitigate that risk by hiring them as freelancers, but even then, some countries could rule︆ that they are essentially employees and you are trying to avoid Russian labor regulations.
It's a complex question and you should ideally work with someone who can advise on both︇ Georgian and Russian tax and labor law.
You will probably also have to follow Russian labor laws, which︁ may require you to register your "UAE" company in Russia. Which in turn may trigger︂ the Russian tax authorities' attention.
With workers in Russia, there could also be a PE︃ in Russia, especially if they work from an office, but that may not even be︄ required. A certain number of workers will probably be enough. You may be able to︅ mitigate that risk by hiring them as freelancers, but even then, some countries could rule︆ that they are essentially employees and you are trying to avoid Russian labor regulations.
It's a complex question and you should ideally work with someone who can advise on both︇ Georgian and Russian tax and labor law.
You create the company that doesn't have anything to do with the country and they literally don't care how much or if corporate income tax is paid. As it should be. It's the business of the government of the jurisdiction of the︀ incorporation. You pay your 5% dividend tax up to the 0.01$ and it's all clean︁ and legal. Is there corporation tax paid? Are you filing income reports? Do you have︂ proper articles of incorporation? It's the domicile country issue, not theirs.
Now I know what︃ you are all thinking - but no, you can't open a pizza place that serves︄ pizza to bulgarian customers in a bulgarian town using bulgarian waiters and cooks and bulgarian︅ tomatoes and claim it's Belize's property. That won't work.
But writing code or selling products︆ that are warehoused in China to USA consumers with your UAE / Swedish / Hong︇ Kong / You-name-it company that has Filipinos as freelance employees? Not our governments business.
Back to the Georgia question - I am not encouraging the author to break any law,︈ that would be fullish. I am telling him to get creative, get good lawyers, may︉ be connections in the tax departments and a warchest of savings should his system not︊ hold up.
Now I know what︃ you are all thinking - but no, you can't open a pizza place that serves︄ pizza to bulgarian customers in a bulgarian town using bulgarian waiters and cooks and bulgarian︅ tomatoes and claim it's Belize's property. That won't work.
But writing code or selling products︆ that are warehoused in China to USA consumers with your UAE / Swedish / Hong︇ Kong / You-name-it company that has Filipinos as freelance employees? Not our governments business.
Back to the Georgia question - I am not encouraging the author to break any law,︈ that would be fullish. I am telling him to get creative, get good lawyers, may︉ be connections in the tax departments and a warchest of savings should his system not︊ hold up.
@OJ333 You are just wrong. The risk of getting caught is obviously much lower compared to a local pizza restaurant, but that doesn't change anything else fundamentally.
It's also not about Bulgaria.
If you live in country A and you manage your company from country A and it's only formally incorporated in country B, then that company has to pay corporate income tax in country A, not country B. The end.
It's also not about Bulgaria.
If you live in country A and you manage your company from country A and it's only formally incorporated in country B, then that company has to pay corporate income tax in country A, not country B. The end.
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