Advice on reducing taxes (by residency) within EU for EU citizen?

[europ]

I am EU citizen in a country with high taxes. I started selling on ebay and I will need to start paying taxes soon, but I would prefer to not give away 50% of my revenue to the government!

Do I have any options for getting a residency in any other EU country without making tens of thousands of investment?

I do like where I live and would prefer to live here. However what I don't understand is how somebody would know whether or not I drove my car to another country or took a bus or a train or whatever. The only issue I see with getting a residency where you have to stay for X days is that I would have to double down on rent which would be well worth it if tax rate would reduce from 50% to 10% or something alike.

Any tips or advice? I have been reading whole week but I feel like I just want to talk to someone who knows the laws and get straight up to date answers...

For clarification, I will become a sole trader, I don't theink there is a need to start a company because I will not have any employees for foreseeable future, unless there is another advantage to that which I do not know about yet!

 

[rafeusx]

EU tax-residency law is not homogeneous, so you need to consult your home nations criteria (e.g. is it mechanical or qualitative) to determine whether you can take dividends from a foreign (but within EU) company tax-free and what the limits are, or if the company is de-facto tax resident in your home jurisdiction because you are the sole share holder, controller & director etc. without establishing your own residency in the target country.

But if you have free roam to work and live within the Schengen area it's easy for you incorporate in the target country and establish a paper trail which proves tax residency there, e.g. apartment, cell phone, company, health insurance.

 

[Martin Everson]

I am EU citizen in a country with high taxes. I started selling on ebay and I will need to start paying taxes soon

It may simply not be worth looking at options to reduce tax as a soletrader if your income is minimal right now. This is something you look at when you enter at least a high tax bracket.

 

[Jerry1911]

Do you have a friend or a family member in a low(er) tax country? Which country are you from?

 

[newNomad]

Any solutions for jurisdictions like these: "the company IS de-facto tax resident in the home jurisdiction just because you are the sole share holder, controller & director"
?

 

[rafeusx]

Any solutions for jurisdictions like these: "the company IS de-facto tax resident in the home jurisdiction just because you are the sole share holder, controller & director"
?

The usual term is 'Place of Effective Management'

> In other countries, the residence of a corporation is determined by reference factual criteria such as place of effective management or similar concepts. In Singapore and Hong Kong eg, tax rules test "management and control" to determine whether a corporation should be considered tax resident there. Conversely, rules allow for corporations to be incorporated in Singapore and Hong Kong but be considered non resident companies (and taxed at 0%) because no management and control is exercised there.

 

[newNomad]

The usual term is 'Place of Effective Management'

> In other countries, the residence of a corporation is determined by reference factual criteria such as place of effective management or similar concepts. In Singapore and Hong Kong eg, tax rules test "management and control" to determine whether a corporation should be considered tax resident there. Conversely, rules allow for corporations to be incorporated in Singapore and Hong Kong but be considered non resident companies (and taxed at 0%) because no management and control is exercised there.

The problem is that the high-tax EU country will tax this company the same as it was a local company, so even if the tax is 0% in Hong Kong one legally cannot reap any benefits since is being taxed in the home country
If there was a tax also in HK and no double tax treaty, it would be crazy - paying tax on both sides

 

[CyprusLaw]

I am EU citizen in a country with high taxes. I started selling on ebay and I will need to start paying taxes soon, but I would prefer to not give away 50% of my revenue to the government!

Do I have any options for getting a residency in any other EU country without making tens of thousands of investment?

I do like where I live and would prefer to live here. However what I don't understand is how somebody would know whether or not I drove my car to another country or took a bus or a train or whatever. The only issue I see with getting a residency where you have to stay for X days is that I would have to double down on rent which would be well worth it if tax rate would reduce from 50% to 10% or something alike.

Any tips or advice? I have been reading whole week but I feel like I just want to talk to someone who knows the laws and get straight up to date answers...

For clarification, I will become a sole trader, I don't theink there is a need to start a company because I will not have any employees for foreseeable future, unless there is another advantage to that which I do not know about yet!

Hi,

To begin with - income tax bands are usually higher than corporate tax, hence this is the main advantage of setting up a company.

Cyprus has one of the lowest tax rates in the EU, together with a number of other incentives. My suggestion would be to relocate in Cyprus and set up a company. The corporate tax rate is 12.5% and as you will be considered a non-dom individual (even though you will become a tax resident in Cyprus you will maintain the non-dom status for 17 years) any dividend payment from the company to you will be SDC/Tax exempt. So essentially your tax obligation will be 12.5% plus 2.65% on dividend for the general health system.

 

[GPT]

I do like where I live and would prefer to live here. However what I don't understand is how somebody would know whether or not I drove my car to another country or took a bus or a train or whatever. The only issue I see with getting a residency where you have to stay for X days is that I would have to double down on rent which would be well worth it if tax rate would reduce from 50% to 10% or something alike.

its not just the rent. Most countries have benchmark numbers available to check if your common expenses are also in line with what is to be expected. One of the determining factors (perhaps the most important one even) of personal taxes is where you have your economical interest. Most high tax EU countries follow the above blindly.

Say for instance that your partner and kids live in A and you are from Monday to Friday in country B where you earn your income. Given the days per year one would argue that you are taxed in B. In reality in Europe you are in almost all cases going to be taxed in A. To determine your case specifically, hire an accountant (or maybe even a lawyer depending on which countries are involved) and let them assess the situation. It is very well possible that it can work. Just be sure upfront about the consequences of your decisions.

 

[Ben K]

Hi,

To begin with - income tax bands are usually higher than corporate tax, hence this is the main advantage of setting up a company.

Cyprus has one of the lowest tax rates in the EU, together with a number of other incentives. My suggestion would be to relocate in Cyprus and set up a company. The corporate tax rate is 12.5% and as you will be considered a non-dom individual (even though you will become a tax resident in Cyprus you will maintain the non-dom status for 17 years) any dividend payment from the company to you will be SDC/Tax exempt. So essentially your tax obligation will be 12.5% plus 2.65% on dividend for the general health system.just as

Hi,

To begin with - income tax bands are usually higher than corporate tax, hence this is the main advantage of setting up a company.

Cyprus has one of the lowest tax rates in the EU, together with a number of other incentives. My suggestion would be to relocate in Cyprus and set up a company. The corporate tax rate is 12.5% and as you will be considered a non-dom individual (even though you will become a tax resident in Cyprus you will maintain the non-dom status for 17 years) any dividend payment from the company to you will be SDC/Tax exempt. So essentially your tax obligation will be 12.5% plus 2.65% on dividend for the general health system.

Just wondering. Does a corporate need to pay VAT, too? EU seems to have a quite high VAT.

 

[newNomad]

If an EU company in country A provides SERVICES in EU country B, is VAT charged/invoiced?
What if company B is a non-EU company, is VAT charged?

 

[GPT]

If an EU company in country A provides SERVICES in EU country B, is VAT charged/invoiced?
What if company B is a non-EU company, is VAT charged?

Short answer is; no. The reverse charge principle is applied.

From EU to non EU is effectively also zero. The exact why on how to account for it depends on the "outside of the EU" country.