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Estonian E-residency and taxes

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silvana

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Hi there! I've just found this forum and I'm super excited about the things I'm reading. Can't believe there's such a community and so much info available.

I have a company in Estonia under the e-residency program. I'm not distributing dividends so far, but have been transferring "employee salary" to an EU account. The accountants that advice me said that if I can justify that I'm a "digital nomad" (showing a certificate that says I don't need to pay tax in the latest country I "used to live"), I would be fine, and nobody would question this move. I presented such certificate and everything is fine so far.

I understand this is quite a gray area so I'm looking to properly register and pay what needs to be paid, in Europe.

If I start paying taxes in an European country, let's say Italy, would you say I will be investigated in the future for those years where I didn't declare the income? If so, what are the consequences?

Anybody with a similar experience? Thanks!
 
Then you may owe taxes where you were resident unless your a non-dom‍ in some situations or offshore income falls under CFC threshold of where you were resident.⁠ The idea of "digital nomad" is a nonsense term when it comes to tax. You⁤ need to look at each countries tax law where you were resident and working from.⁣ You have given no details on the countries or time spent in each etc.

Italy won't investigate you if you just moved there and︁ started paying taxes. As Italy will gain nothing from investigating foreign tax offenses were no︂ income is due to them.
 
Thanks. So it's safe to assume that if I didn't declare the income all these‌ years, and if today I move my fiscal residency to Italy I would be in‍ theory starting from zero and not at risk of being investigated?
 
When you arrive in Italy all your money you bring with you is considered⁤ capital so in theory you should get no issues. However I have seen issues with⁣ some EU countries where when registering they ask for the prior countries you were living⁢ in for last few years. Only in worst case if you were being investigated i.e︀ by Germany and they can ask Italy for what you declared when registering then you︁ would be screwed if you declared yourself to Italy as living previously in Germany. But︂ I don't know what they ask when you register in Italy so maybe nothing to︃ concern yourself about and again this wont just randomly happen.
 
@berlinerrr Could you elaborate the "employee salary" in Estonia?

I'm planning to open a company‌ there, so I want to know if an owner can also be an employee and‍ if the money paid as an employee counts as dividend or not.
 
Congratulations, you have committed both tax evasion and social security fraud.
The Estonian company has⁤ to pay tax where you live, like a local company.

When you move to Italy,⁣ you will also have to pay exit tax in Germany on your Estonian company, the⁢ payment of which may or may not be deferred for as long as you live︀ in the EU.
So if you don't declare that when you move, you're committing even︁ more tax evasion.

In Italy, it will be the same situation. So you're planning to︂ just move to Italy and keep committing a crime?

No, it's a salary, not a dividend. So it is taxed as income,︅ not as a dividend.
But the company will be taxable where you live. It most︆ likely won't be taxable in Estonia at all.

It almost never makes sense to have︇ a company in Estonia, as long as you live in a country with high taxes︈ and strict enforcement (=another EU country).
 
"The Estonian company has to pay tax where you live, like a local company."

No, the company pays taxes in Estonia. You as an individual are required to pay tax‌ wherever you live, if you get a salary or dividends from the company. Otherwise there's‍ no point of creating a company in Estonia under the e-residency program if the company⁠ needs to pay taxes wherever you live. It defeats purpose.

"In Italy, it will be⁤ the same situation. So you're planning to just move to Italy and keep committing a⁣ crime?"

Quite harsh to put it that way, no? I'm happy to pay all tax⁢ that's due.
 
This is not necessarily true as some countries have CFC thresholds‍ where only over a certain amount of income the company is considered a CFC. You⁠ need to examine the CFC rules of each country and take into consideration ATAD.
 
Estonia e-residency is not residency. It's just digital signature. It does not give permission to‌ live in Estonia or declare tax residence.
You have to have real place to live‍ in Estonia and register. And if you are not EU citizen you will have to⁠ get EU visa.
 
So, one could actually imagine first moving to a country outside the EU, giving up︂ one's fortune there, and betting on them not asking in Germany - and then moving︃ to Italy and telling them that you come from a non-EU country, which might make︄ them indifferent?
 
Except this has nothing whatsoever to do with CFCs, so your argument is besides⁤ the point.

Even if it worked, what would︁ this solve when it is Germany that is after you?
 
In theory you could do this. But you⁤ need to examine each countries laws you are moving to in Europe.
 
Imagine if you are not running a corporation but an association. I haven't heard⁤ about the rules of controlled foreign associations.

Actually, with the HNWI residence scheme, you can get a residence permit without needing a︂ place to live. This means you can also avoid tax residency but have legal residency︃ in the EU/Schengen.

Substance over form. In some︋ cases the Estonian company might pay all taxes abroad and zero to Estonia.
 
Damn, you are too smart for the German tax authority with your IQ‍ of 1000. You are the only person who ever thought of this, nobody in the⁠ German administration ever could imagine such a smart move, so they are completely powerless and⁤ they certainly don't have any laws in place to thwart your plans.

Hint: Yes, you⁣ are right, there is no point in creating a company in Estonia. This was the⁢ first correct thing you have written in this thread.

You have an obligation to report to the German tax authority that you have incorporated︂ a company in Estonia, which you are managing from Germany.
Have you done that? If︃ not, you have most likely already committed tax evasion (depending on how long you have︄ had the company and how much taxes you have evaded).

Please also tell them that︅ you don't intend to pay corporate and trade tax for the company in Germany (︆Germany - Corporate - Taxes on corporate income ), since you're an IQ 1000 e-resident︇ who keeps all the profits in the Estonian company. Please post their reply here.

When you move out of Germany, you also have to disclose the value of your Estonian︈ company, are you going to do this? If not, that will be tax evasion as︉ well.

Dude, in all seriousness, talk to a tax lawyer. You might be better off︊ reporting yourself before they catch you and make your life hell. Hopefully it will be︋ a lesson to you to not f**k around with stuff like this.
 
I am just highlighting the fact that CFC rules are quite often irrelevant, and people‍ tend to overestimate their impact at times.
More important are the domestic tax laws for⁠ determining the corporate tax residence and the concept of permanent establishment.
The end result is⁤ largely the same though, so there is little point to nitpick about it.
 
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