Is it possible to avoid the 33% social tax in Estonia for non-residents?

Isn't that something that is paid by Local Estonian companies only?

wonder if @Don will shimming in

climbwave said:

Hi, I'm wondering if there is a chance to avoid the 33 % tax for LLC, for national insurance.

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Social tax is paid by the company generally when it hires staff in Estonia.
What exactly do you mean? Can you have people work for you without social tax?

Don said:

Social tax is paid by the company generally when it hires staff in Estonia.
What exactly do you mean? Can you have people work for you without social tax?

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Can you get paid dividends or a salary to your self as the director of the company resident in Estonia, while avoiding completely to pay this atrocious 33% extra tax?

banafinfodafuggiano said:

Can you get paid dividends or a salary to your self as the director of the company resident in Estonia, while avoiding completely to pay this atrocious 33% extra tax?

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Yes, in fact a lot of people take salary from Estonian company without paying any tax (as non tax residents in Estonia)

Don said:

Yes, in fact a lot of people take salary from Estonian company without paying any tax (as non tax residents in Estonia)

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I mean, if you are a Tax resident in Estonia, the Dividend tax is only 7% right?

So would a set up like: Hong Kong company (not Tax on dividends and no corporate tax) + Estonian Tax personal residency = only 7% income tax if all dividends are taken out the HK company?
Or even f*****g Estonia classifies foreign companies as local resident entities?

banafinfodafuggiano said:

I mean, if you are a Tax resident in Estonia, the Dividend tax is only 7% right?

So would a set up like: Hong Kong company (not Tax on dividends and no corporate tax) + Estonian Tax personal residency = only 7% income tax if all dividends are taken out the HK company?
Or even f*****g Estonia classifies foreign companies as local resident entities?

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Estonia doesn't have management and control test for tax residency so its impossible for it to classify foreign companies as local tax resident.

Dividend tax would be 10% for natural person and 0% for company (based on EE-HK treaty)

Even if the Hong Kong company has PE in Estonia the profits attributed to PE are not taxed before they are withdrawn from Estonia.

Don said:

Estonia doesn't have management and control test for tax residency so its impossible for it to classify foreign companies as local tax resident.

Dividend tax would be 10% for natural person and 0% for company (based on EE-HK treaty)

Even if the Hong Kong company has PE in Estonia the profits attributed to PE are not taxed before they are withdrawn from Estonia.

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That's interesting, not many people talk about this, does that mean that by having a UAE or HK corporation to do business, and living full time (365 days a year) in Estonia,
you can only pay 10% personal income Tax if 100% of your income derives from Dividends issued by your own offshore company? (being the only Director).


Sounds too good to be true?

banafinfodafuggiano said:

That's interesting, not many people talk about this, does that mean that by having a UAE or HK corporation to do business, and living full time (365 days a year) in Estonia,
you can only pay 10% personal income Tax if 100% of your income derives from Dividends issued by your own offshore company? (being the only Director).


Sounds too good to be true?

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10% tax on dividends is with HK only based on the tax treaty.
Same way you could run a Georgian VZ company which has 0% CIT and only 5% tax on dividends.
With UAE there is a higher WHT, but you can pay tax free directors fees.

What you are saying could theoretically work, but then again for tax residency physical presence is not required in Estonia.

Don said:

10% tax on dividends is with HK only based on the tax treaty.
Same way you could run a Georgian VZ company which has 0% CIT and only 5% tax on dividends.
With UAE there is a higher WHT, but you can pay tax free directors fees.

What you are saying could theoretically work, but then again for tax residency physical presence is not required in Estonia.

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If you're a resident in Estonia receiving dividends from a US LLC, such as one based in Delaware, would the tax on distributions be limited to just 10%?

Additionally, are there other countries where residency does not require a lengthy physical presence? For instance, in Slovakia, you can keep a resident without spending 180 days per year, you could stay for example 6 months in spain and 5 months in portugal without issue. Are there similar options in other EU countries or nearby regions where physical presence is not mandatory? In Estonia?

Thank you.

stivemoose said:

If you're a resident in Estonia receiving dividends from a US LLC, such as one based in Delaware, would the tax on distributions be limited to just 10%?

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US SMLLC doesn't distribute dividends.
Such distributions could be treated as personal income and taxed with the flat income tax 22%.
Alternatively US SMLLC could operate as a PE in Estonia if you get local tax number which would not be taxed before assets are taken out of the PE (tax on distribution only).
And theres also a scenario where PE is registered but not considered as a PE for tax purposes, so Estonia wouldn't tax the corporate income.

stivemoose said:

Additionally, are there other countries where residency does not require a lengthy physical presence? For instance, in Slovakia, you can keep a resident without spending 180 days per year, you could stay for example 6 months in spain and 5 months in portugal without issue. Are there similar options in other EU countries or nearby regions where physical presence is not mandatory? In Estonia?

Thank you.

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Yes, Latvia and Bulgaria as well.
And in more countries, like Germany, but you probably won't aim for tax residence there.

Don said:

US SMLLC doesn't distribute dividends.
Such distributions could be treated as personal income and taxed with the flat income tax 22%.
Alternatively US SMLLC could operate as a PE in Estonia if you get local tax number which would not be taxed before assets are taken out of the PE (tax on distribution only).
And theres also a scenario where PE is registered but not considered as a PE for tax purposes, so Estonia wouldn't tax the corporate income.


Yes, Latvia and Bulgaria as well.
And in more countries, like Germany, but you probably won't aim for tax residence there.

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If I were to establish residency in Slovakia, would 22% of my income from the LLC be allocated for taxes? So if I bring 100.000€ from LLC to me I'd pay only 22.000€, that is corrects?

In Estonia, is a minimum of 183 days of residence required to be considered a tax resident? If so, what would be the tax implications for the distribution of LLC income in such a case?

For Latvia, what steps must be taken to become a tax resident? Is renting a sufficient requirement, and what would be the tax rate for LLC distribution? Are there alternative setups within the EU or nearby regions that offer favorable taxation?

stivemoose said:

If I were to establish residency in Slovakia, would 22% of my income from the LLC be allocated for taxes? So if I bring 100.000€ from LLC to me I'd pay only 22.000€, that is corrects?

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I don't know exactly how Slovakia treats US LLC-s.

stivemoose said:

In Estonia, is a minimum of 183 days of residence required to be considered a tax resident? If so, what would be the tax implications for the distribution of LLC income in such a case?

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You just need registered address (as EU citizen)

stivemoose said:

For Latvia, what steps must be taken to become a tax resident? Is renting a sufficient requirement, and what would be the tax rate for LLC distribution?

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Same like Estonia.

stivemoose said:

Are there alternative setups within the EU or nearby regions that offer favorable taxation?

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Yes, there are. Many structures.
Depends on what you consider favorable.

stivemoose said:

For Latvia, what steps must be taken to become a tax resident? Is renting a sufficient requirement, and what would be the tax rate for LLC distribution? Are there alternative setups within the EU or nearby regions that offer favorable taxation?

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Keep in mind Latvia has quite strict CFC rules for individuals, there are no exemptions for income derived from trading.

Don said:

I don't know exactly how Slovakia treats US LLC-s.

You just need registered address (as EU citizen)

Same like Estonia.

Yes, there are. Many structures.
Depends on what you consider favorable.

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I didn't get it, Latvia and Estonia you must stay there 180 days for keeping residence or can be outside?

stivemoose said:

I didn't get it, Latvia and Estonia you must stay there 180 days for keeping residence or can be outside?

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Its enough if you have residence in the country. As EU citizen, register your address and obtain local id.