EU Country that doesn't Tax Company profits?

[BerlusconiSchmidt]

is there any EU country that doesn't Tax, or minimally Taxes, profits that are distributed to the Director and employees of the company that are based in a 0% Income Tax country (UAE) ?

For example:

Citizen of Austria
Living in the UAE
Collecting funds through a company based in the EU and distribute these profits to my self and to my UAE company

The reason why a EU company is required is to comply more effectively with VAT and payment gateways purposes.

Business revenue: $1m a year (profit approx $400K and Director salary of $80K).

I'm not wealthy enough for ultra-complicated set ups Amazon style. I'm also not interested in the UK, don't even mention it, I have past experience with it and it's an unprofessional country to do business with.

 

[Sols]

At a quick glance, Malta at 5% fits the bill. It's a little expensive but‌ at your scale, I think it works out favorably.

What does the EU company do?‍ What do you mean by "collecting funds"? If you're selling a product or service, are⁠ they sold by the EU company or by the UAE company?

If you're selling a⁤ digital service or product and the sale is done by the UAE company, you can⁣ use the EU company just as a payment agent (commercial agent, has different times). The⁢ EU company doesn't generate a profit from each sale. Instead, its profit is a small︀ margin on top.

Cyprus is very, very common for such arrangements.

 

[cornball5326]

Taxes on profit have nothing to do with distribution, that comes afterwards. What is the‌ purpose of the EU entity? If it's just about VAT handling, there exist companies that‍ take care of everything for you, e.g. Paddle or LemonSqueezy (payment processing, VAT, etc.), but⁠ they come with a huge commission (5%+ per transaction).

 

[ilke]

If you want to pay effective tax only on distribution (which would be 0% for‌ you as PIT in UAE with a transparent entity), maybe you can consider setting up‍ an LP or LLP in pretty much any EU jurisdiction. That way, the actual entity⁠ is only a partnership and does not have its own tax residency.

Otherwise, you can⁤ consider a generic Cyprus Ltd. IIRC, unlike most other EU companies, the Cyprus Ltd. can⁣ actually lose its tax residency if it proves it has PE/CFC and already pays tax⁢ in another jurisdiction. A Cyprus-incorporated company is by default considered a tax resident of Cyprus︀ provided it is not tax resident in any other jurisdiction. You could therefore have︁ an EU company that would instead be paying the UAE 9% tax (or 0% if︂ it doesn't meet the requirements to pay CIT).

Lastly, you could, as @Sols said, go︃ for a payment agent approach (if you want to use it solely for funds collection).︄ This can also be achieved with a Cyprus Ltd. (most common) or some CEE companies.︅ In this case, the EU company would be owned by the UAE company and contractually︆ act as its payment processor (more specifically agent). It would then keep a small fee︇ and pay local taxes solely on that.

 

[Don]

You can potentially use an unincorporated partnership managed by an EU company.
This would need to be registered for CIT in UAE, but it can qualify for Small︂ Business Relief, which gives you up to 3M AED (750k USD/year tax-free), so the partnership︃ pays no tax with such turnovers and profits.
The partnership manager can be an Estonian︄ company, which will not be taxed until its profits are distributed as dividends. At the︅ same time, this Estonian company can pay you a tax-free salary.
This Estonian company will︆ deal with VAT, banking, payment processors, etc.
So, you allocate a small percentage of partnership︇ profits to an Estonian company; the rest will be distributed to you in UAE as︈ partnership income.
In most circumstances, an audit is not needed (neither in the UAE nor︉ Estonia), which helps to reduce fees (in the UAE, an audit is only required if︊ turnover is at least 50M AED for such unincorporated partnerships).

From 2027, the Small Business︋ relief might be changed, ended, or extended. You can then consider setting up an incorporated︌ partnership on top, e.g., a Dutch partnership managed by an Estonian company. In such a︍ case, however, you need to re-assess the PE risk in UAE and whether the foreign︎ partnership should be registered for CIT, which could be avoided provided certain conditions are met.️

 

[BerlusconiSchmidt]

Sounds interesting. Why did you mention a Dutch Partnership managed by the︈ Estonian company? Are there benefits of running a Dutch company/partnership over other EU countries?

 

[Don]

The point of partnership is that its tax transparent.
Scottish LP could be a⁠ better choice since it has its own legal personality.

 

[JustAnotherNomad]

I believe︃ this is how Xolo Go works? But then who is the customer's contract with? It︄ can't be the partnership, I guess (since it is unincorporated, does not have its own︅ legal personality)?
But it can't be the payment partner either - then the partner would︆ likely be liable, but then you would have to attribute higher profits to them to︇ account for the risk?
So probably you would have to show the UAE entity to︈ the client? Only payment processing would be done by the Estonian partner?

 

[Don]

Kind of,‌ but I believe they don't operate as PE-s in other jurisdictions.
Legal entity
Liability is a separate matter, but xolo pushes all liability to its service user.

 

[JustAnotherNomad]

How does that work? You have a contract with A, but if there is an‌ issue, you cannot hold A liable, you are told to go to B?

 

[lacomaco]

Don, are you sure that the CIT tax-free threshold is not AED︈ 375,000 but 3m?

 

[daniels27]

There are two things. Taxable income below 375k AED is‍ taxed at 0%, while the small business relief threshold is 3M AED.
https://taxsummaries.pwc.com/united-arab-emirates/corporate/taxes-on-corporate-income
https://taxsummaries.pwc.com/united-arab-emirates/corporate/tax-credits-and-incentives

 

[lacomaco]

So we are talking about two different thresholds

 

[daniels27]

Yes, two‌ different things.