Our valued sponsor

3 motives: Tax efficiency/ tax residency status/ residence for Schengen after Brexit

A

averagebloke

New member
Jul 21, 2020
5
1
3
52
#1
Register now
You must login or register to view hidden content on this page.
Hello guys...

3 motives: Tax efficiency/ tax residency status/ residence for Schengen after Brexit

I am Brit, and bought a house in Barcelona this year..However, didn't realise about wealth tax on UK property, so don't fancy Spanish tax residence.

I'd spend some time in UK, but would be useful to have continued freedom to roam in EU for whole year if possible but also tax efficient.

Bulgaria may offer tax residence. So could Montenegro, though maybe Bulgaria is closer to joining Schengen...? When and if they join Schengen, that would allow EU travel

Otherwise, Bulgaria v Montenegro, which would you recommend in terms of combination of corporate and personal tax rates..

Both countries are fine I believe for bidding on EU projects.

If it is true that there is 0% CT on non-Montegrin business, then that's attractive. I have been running a member based company from Hong Kong for consultants around the world, so this would be useful.

I would want to move my tax residence to one of these countries even if I am spending time in say Spain, France or Italy, but I love the Balkans too.

many thanks
 
#2
Why is Schengen residency so important to you? If you only care about being allowed to travel the Schengen area indefinitely, living in an EU country should be sufficient. The only downside with non-Schengen residency would be that entering/leaving the Schengen area would be registered (passport controls). But then again, all flight information is saved anyway.

I know next to nothing about Montenegro, but with territorial taxation, it usually does NOT apply when you work from that country. So running a HK-registered company from Montenegro would most likely be considered Montenegro-sourced income, and thus taxable at the local rates. But then again, many such countries don’t enforce their own rules for foreigners.

Bulgaria, Romania, Hungary are all options that are discussed here from time to time.
Czechia also has relatively low personal income tax rates, at least for sole proprietors.
Then of course you have Cyprus and Malta.
There’s Portugal’s NHR scheme (limited to 10 years) that’s a bit more complex and thus risky - but it’s still very popular. Italy also offers substantial tax incentives to people moving to the South of the country - I think you only pay taxes on 10% of your income for 10 years, or something like that.

Finally Estonia also lets you receive dividends tax-free, provided that corporate income tax has been paid:
https://www.offshorecorptalk.com/threads/tax-free-residency-in-estonia.29531/
But again that wouldn’t apply if the company is run from Estonia and you’d have to work with a good lawyer to make sure it works. But that’s advisable anyway.
 
#3
Sorry maybe i wasnt very clear..

While in practice I'd spend time in Spain, Italy, France, I wouldn't want to be tax resident there...They have wealth tax on global property, held in UK for example. (I've heard too about Southern Italy schemes, and might work for pensioners...I am 53.. it looks like countries are now competing..Greece has also just announced a 7% scheme I think but not clear yet that is any use for companies). So ideally have an EU travel card to roam 365 days rather than 183 days but not be hit by wealth tax etc..

I would close my HK company and run the same thing in Europe.

The other Q is whether such companies can hold property in other countries, eg in EU.

cheers
 
#4
I understood your motivation.
I just don’t understand why you want a Schengen residency when EU residency is enough for free EU wide travel. As you are aware, the UK was never a Schengen country, but you could move around freely in the EU anyway. So if you only want to be able to travel to France without a visa, having residency in Cyprus (EU, but not Schengen) should be just as good as residency in Italy.

Yes, many countries have schemes for pensioners, but often also for regular income.
Also you may qualify as a “pensioner” if you can convince them that you’re not actively managing your offshore business from their country and that you just live off dividends.

But I have to admit I don’t know how if they have wealth taxes and how you could avoid them.

Hope my first reply made more sense now.
 
#5
averagebloke said:
I would close my HK company and run the same thing in Europe.
Click to expand...
You have a HKID? Get yourself a salary, proof of address and declare taxes in Hong Kong. Don't stay more than 183 days in the same country and you can live tax free.
 
  • Like
Reactions: CaptK
#7
JustAnotherNomad said:
I understood your motivation.
I just don’t understand why you want a Schengen residency when EU residency is enough for free EU wide travel. As you are aware, the UK was never a Schengen country, but you could move around freely in the EU anyway. So if you only want to be able to travel to France without a visa, having residency in Cyprus (EU, but not Schengen) should be just as good as residency in Italy.

Yes, many countries have schemes for pensioners, but often also for regular income.
Also you may qualify as a “pensioner” if you can convince them that you’re not actively managing your offshore business from their country and that you just live off dividends.

But I have to admit I don’t know how if they have wealth taxes and how you could avoid them.

Hope my first reply made more sense now.
Click to expand...
of course, that's the issue . UK won't have EU residence.

HK's image is going down the drain and I don't mind paying some tax...I had a co once in Cyprus...had all that hassle of getting money out in 2008...to me doesnt have a great reputation...(If I wanted to have a similar HK structure again in Asia, I'd probably go for Singapore).

So the Q is people's experience of banking in Bulgaria v Montengro...(in Serbia it's not easy to transfer out of the country from a euro account, so that rules that out..Montenegro could be similar..In Bulgaria you can transfer out..)

re the Italy option, i would wonder if the Govt could just change it the scheme....I think in Bulgaria their flat tax has been around a lot longer....
 
#8
Lots of people move to Bulgaria. They even have local accountants with support in native languages like Dutch, I think. Not relevant for you, but I doubt you’d find those in Montenegro. So I think it would probably work just fine. It would most likely be a much more “tested” solution than Montenegro.
I know someone who moved to Bulgaria, he’s happy. Haven’t heard about any problems.
 
#11
As effectively you are an Expat, your property in the UK(residence) is exempt from CGT. Any investment properties would be liable. There are many was to structure this to be as efficient as possible.

Im not sure on the Spanish tax but I would assume a structure will need to be set up for that.

The EU will not impose a visa system for UK citizens as it would kill many sectors of business, most importantly tourism.

If France and Germany out of spite impose a visa for tourists the southern nations will not agree. Portugal, Spain, Italy, Malta, Croatia Greece and Cyprus who depend heavily on British holidays will revolt.

In any case keep the HK company and pay yourself a salary and declare it. You are the Head of European Operations. Your company will expense your accommodation and travel.
 
  • Like
Reactions: Clip
#12
One important mistake in this thread.

UK citizens from next year will be limited to 90 days in a rolling window of 180 in the overall Schengen zone. No visa needed. No use of EU citizen queue so it will be slower to get in and out of Schengen and there may be interviews, you should really have a return ticket, etc.

You can also stay up to 90 days in any non-Schengen EU state.

So for example you could stay 90 in one of Croatia, Cyprus, Bulgaria or Romania, and 90 in Schengen, and alternate this way. (Croatia will join Schengen imminently, it's a top priority for the government).

A workaround is to take legal residence in one Schengen state before the end of the year. So for example if resident in Italy time there won't be counted.

For now you could be resident in Italy but just roam around Schengen for most of the year. However, as soon as they introduce ETIAS (probably 2022), that's unlikely to work. Also, there are residence requirements for UK citizens taking residence before the end of the transition period and roaming around Schengen pretty much nukes these. It would be a lot safer to spend the required 6 months per year.

Note also that there is no longer a right to work. So the dodgy digital nomad situation that applies to those with laptops in Thailand and Indonesia now applies to UK citizens in Schengen. Something to be aware of.

Probably some countries will sign bilaterals allowing more days for UK citizens; Portugal and Spain for example; but it's important to realise just how much work the UK has to do so signing bilaterals for holiday homes may be low priority.

Overall, the UK bombed its passport back to the stone age, and has spent as much trying to implement Brexit as it spent on all its EU contributions. I really struggle to see how it will be worth it, but who knows.
 
#13
The Mediterranean countries will definitely do their own agreements as the Brits are a big earner for them and they will wrap it up soon.

If they begin to make it difficult for Brits on holiday and work then they will push them to go to North Africa as it's only an extra 30 mins by plane.
 
#14
CaptK said:
The Mediterranean countries will definitely do their own agreements as the Brits are a big earner for them and they will wrap it up soon.

If they begin to make it difficult for Brits on holiday and work then they will push them to go to North Africa as it's only an extra 30 mins by plane.
Click to expand...
Some countries, very heavily reliant on British tourism. I mentioned Spain and Portugal, one could add Cyprus and Malta. But they cannot treat Brits better than EU citizens, or not without leaving the EU which Brexit has made a very unlikely prospect. For example there's absolutely no legal way Brits can get prioritised ahead of EU citizens for jobs, and other features of bilaterals will run into these constraints. How useful is a holiday home if you can't work remotely there?

For other countries, a simple logical question is: why haven't they done this already for the many other first-world citizens that own holiday homes and would love to spend longer in France/Italy/etc.? Brits don't have more cash to spend than Americans.
 
#15
heliotrope said:
Some countries, very heavily reliant on British tourism. I mentioned Spain and Portugal, one could add Cyprus and Malta. But they cannot treat Brits better than EU citizens, or not without leaving the EU which Brexit has made a very unlikely prospect. For example there's absolutely no legal way Brits can get prioritised ahead of EU citizens for jobs, and other features of bilaterals will run into these constraints. How useful is a holiday home if you can't work remotely there?

For other countries, a simple logical question is: why haven't they done this already for the many other first-world citizens that own holiday homes and would love to spend longer in France/Italy/etc.? Brits don't have more cash to spend than Americans.
Click to expand...
Agree but it's a lot to lose, so something will be done to release France and Germany's grip on power.
 
#17
CaptK said:
The Mediterranean countries will definitely do their own agreements as the Brits are a big earner for them and they will wrap it up soon.

If they begin to make it difficult for Brits on holiday and work then they will push them to go to North Africa as it's only an extra 30 mins by plane.
Click to expand...
Are you kidding? who would go to north africa nowadays? it's going to be a fraction of today's traveling to southern europe.
More likely south-east asia, as what matters is not the geographical vicinity but living convenience once you land.
 
  • Like
Reactions: heliotrope
#19
CaptK said:
Proximity, Brits are only 2 hours away and I guarantee they contribute more money in those countries than all 4 combined.
Click to expand...
Disproportionately in favour of Spain; Travel trends - Office for National Statistics

But e.g. more US visitors to Italy than there were UK visitors in 2019. They have a stronger currency and spend more. So I'm not sure how your statement would hold up.

As for proximity, I don't see why they care whether you had to fly 2h or 10h, as long as you bust out your wallet once you're there.
 
#20
heliotrope said:
Disproportionately in favour of Spain; Travel trends - Office for National Statistics

But e.g. more US visitors to Italy than there were UK visitors in 2019. They have a stronger currency and spend more. So I'm not sure how your statement would hold up.

As for proximity, I don't see why they care whether you had to fly 2h or 10h, as long as you bust out your wallet once you're there.
Click to expand...
Spain gets the majority but don't forget the massive communities in Cyprus, Greece, Portugal and I'm not just talking visitors I'm talking contribution via business and actually living there.

Brits want good weather ( 23'C +), ease, short flight time, value for money and convenience. These are the holidays they have twice a year especially during school holidays.
These are holidays that these families have been having for 60 years since package holidays started.
 
Register now
You must login or register to view hidden content on this page.
You must log in or register to reply here.

Forum Announcement

Latest Threads

Offshore Bank Accounts
Top Bottom
Back