NL tax resiedent, Estonian company with local director to avoid corporate tax- good idea?

[osz90]

Hi,

ended up joining the mentor group, hoping to find a solution to my situation.

I live in the Netherlands and am unable to leave for the next few years due to personal ties.

I would like to continue reporting some of my income to NL but also open a company in a low-tax country, ideally one where there is 0% corporate tax on invested profits. I would like to use that as a "savings account" -- invoice a bulk of my work there and directly reinvest the money (where to invest is another matter, stocks? real estate?).

The issue is of course if I am a NL tax resident, they will also consider my company to be tax resident since I am the sole owner and director. Therefore my idea is to find a local director (be that in Estonia or elsewhere that you recommend) and pay that person a salary for acting as y director and local "substance" which means my company won't be considered a tax resident of NL.

What do you think? is this a workable solution and if so, do you know of a company/person who provides this kind of service? Or is it too risky?

I am fully aware that the best way would be to move to a low-tax country, but as I said right now that is not possible, so I am looking for a second best solution, so any advice welcome. I am of course reading through all the posts but hard to distil whether the solutions presented other cases will also be applicable to mine. I would also be very interested in an end to end service of advice and set up.

 

[CaptK]

What is your line of business?

 

[osz90]

CaptK said:
What is your line of business?
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digital consulting services

 

[Martin Everson]

osz90 said:
The issue is of course if I am a NL tax resident, they will also consider my company to be tax resident since I am the sole owner and director. Therefore my idea is to find a local director (be that in Estonia or elsewhere that you recommend) and pay that person a salary for acting as y director and local "substance" which means my company won't be considered a tax resident of NL.

What do you think? is this a workable solution and if so, do you know of a company/person who provides this kind of service? Or is it too risky?
Click to expand...

Well your concerns are covered by the European Directive 2016/1164 that is in force. Where you are sole director and shareholder and duties are performed in NL this makes the Estonia place of Permanent Establishment NL. It hence is a CFC and must pay taxes in NL according to how NL implements its CFC rules under this European Directive....which are not friendly at all.

In order to avoid this you will need to have in Estonia for the Estonian company staff, assets, equipment, premises and substantive economic activity.

Otherwise the following from the Estonian company will be added to your tax base:

(a) the non-distributed income of the entity or the income of the permanent establishment which is derived from the following categories:

(i) interest or any other income generated by financial assets;

(ii) royalties or any other income generated from intellectual property;

(iii) dividends and income from the disposal of shares;

(iv) income from financial leasing;

(v) income from insurance, banking and other financial activities;

(vi) income from invoicing companies that earn sales and services income from goods and services purchased from and sold to associated enterprises, and add no or little economic value;

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Please note my posts should not be taken as financial or tax advice. Please seek professional advice in that respect.

 

[osz90]

Martin Everson said:
Well your concerns are covered by the European Directive 2016/1164 that is in force. Where you are sole director and shareholder and duties are performed in NL this makes the Estonia place of Permanent Establishment NL. It hence is a CFC and must pay taxes in NL according to how NL implements its CFC rules under this European Directive....which are not friendly at all.

In order to avoid this you will need to have in Estonia for the Estonian company staff, assets, equipment, premises and substantive economic activity.

Otherwise the following from the Estonian company will be added to your tax base:

(a) the non-distributed income of the entity or the income of the permanent establishment which is derived from the following categories:

(i) interest or any other income generated by financial assets;

(ii) royalties or any other income generated from intellectual property;

(iii) dividends and income from the disposal of shares;

(iv) income from financial leasing;

(v) income from insurance, banking and other financial activities;

(vi) income from invoicing companies that earn sales and services income from goods and services purchased from and sold to associated enterprises, and add no or little economic value;
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But my whole idea is that I won't be the sole shareholder and director, I would like to appoint someone local in Estonia. Would that solve the problem?

 

[Martin Everson]

osz90 said:
But my whole idea is that I won't be the sole shareholder and director, I would like to appoint someone local in Estonia. Would that solve the problem?
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See what I wrote below:

Martin Everson said:
In order to avoid this you will need to have in Estonia for the Estonian company staff, assets, equipment, premises and substantive economic activity.
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We are talking tangible and substantive presence. Not a 50 euro hooker as shareholder and director and a letter box in Estonia.

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Please note my posts should not be taken as financial or tax advice. Please seek professional advice in that respect.

 

[osz90]

Martin Everson said:
See what I wrote below:



We are talking tangible and substantive presence. Not a 50 euro hooker as shareholder and director and a letter box in Estonia.
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fair enough and what would be a tangible presence then? employees? actual office?

 

[Martin Everson]

osz90 said:
fair enough and what would be a tangible presence then? employees? actual office?
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See below

Martin Everson said:
In order to avoid this you will need to have in Estonia for the Estonian company staff, assets, equipment, premises and substantive economic activity.
Click to expand...

Toggle signature
Please note my posts should not be taken as financial or tax advice. Please seek professional advice in that respect.

 

[CaptK]

You need an office with staff who actively are involved in day to day business. At least 2 on a salary fair in that country.
MTG will give you all the processes you need to take to get there. Plus a plethora of service providers who can hold your hand.

 

[osz90]

CaptK said:
You need an office with staff who actively are involved in day to day business. At least 2 on a salary fair in that country.
MTG will give you all the processes you need to take to get there. Plus a plethora of service providers who can hold your hand.
Click to expand...

MTG?

 

[CaptK]

Mentor Group Gold