Best low tax place to start a company for service providers?

[MrPepper]

Greetings all. This is my first post here and I like the content, a great forum!

Anyways, let me get straight to the point.

I live in Croatia, which is a living hell when it comes to taxes (like most EU countries are).

My business is offering services for clients like advertising etc. and I've been doing pretty good for years mostly for US clients.

I'm being paid by performance, so if I make a profit for a client I get paid %. In this example, let's hypothetically say I get paid $10 000. I can not send an invoice to my client to $10 000 + 25% VAT, but $8000 and 25% VAT which makes me at a loss even when I write an invoice.

Out of these $8000 I'll be happy if I manage to get $4000 out for myself after all the corporate, income, etc. taxes which are ridiculous. So, yeah I give away like 60% or even more... These numbers are just hypothetical but you get my point.

Which country would you suggest I start a company with low or 0 VAT and low/zero corporate taxes?

Dubai free zone seems promising. I was also looking at Cyprus but as it looks like, I won't get much out of it since their VAT is like 19% or so and corporate tax similar to croatian? Have in mind, I barely have any expanses, it's a service and I can make money with laptop and internet which are basically my only expenses (and office but that's not much).

Some people also suggested BVI but I also heard it's getting harder there so not sure. Geographically, Dubai and Cyprus are the closest and like 3-5 hours by plane if that means anything.

Any suggestions are welcome

 

[CyprusLaw]

Which country would you suggest I start a company with low or 0 VAT and low/zero corporate taxes?

Dubai free zone seems promising. I was also looking at Cyprus but as it looks like, I won't get much out of it since their VAT is like 19% or so and corporate tax similar to croatian? Have in mind, I barely have any expanses, it's a service and I can make money with laptop and internet which are basically my only expenses (and office but that's not much).

Assuming that your services are to non EU companies the Cyprus Company will not charge VAT on the invoice to be issued to the non EU Company provided that it has information that the non EU Company is an active company with a registered address and/or a website etc. If the Cyprus Company does not have any information about the non EU Company and its substance or activities then it must charge Cyprus VAT on its invoice. It's better to get advice from a Cyprus advisor depending on your activities and jurisdictions you deal with.

If you are also willing to relocate to Cyprus and therefore take advantage of the non-dom status this would be the most cost-effective scenario, as you will be limiting your taxes and at the same time you will remain in the EU.

 

[glengoolie]

this might help a bit https://upload.wikimedia.org/wikipedia/commons/3/38/Individual_Taxation_Systems.svg
no tax is green, citizenship tax is purple, residence tax is dark blue and territorial tax is light blue.

in your case, UAE makes most sense to move to, since if you would live abroad, the company would be taxed there. possibly cribbean countries or bahamas...depends on your taste. UAE will only require you to be there once a 6 months so you do not actually have to live there to keep tax residency.

 

[Jerry1911]

1. Corporate income tax in Croatia is 10% if your revenue is below 1M EUR. That is lower than most EU countries.

2. You aren't supposed to charge VAT to US customers, not sure where you got that from.

3. Cyprus, Dubai, BVI, etc... you will need substance to run a foreign company tax free, and that costs. What is your revenue again?

 

[CY123]

Hello kidnico

Indeed Cyprus is a good place to incorporate your business and you can take advantage of the benefits provided.

You should seek professional advise before your decide to relocate, to properly explain your business and get accurate information. The fees of incorporating and maintaining a company in Cyprus are fair and high quality services are offered.

 

[orangekangaroo]

I think @kidnico needs to be more specific about numbers and the willingness to move to another country for taxation purposes. If the client mix is mainly geared to the US outside EU then VAT is no issue. I am sure as a community here we can suggest excellent structures but without more spefics that is difficult.

 

[glengoolie]

if you want to stay in europe, andorra is not bad choice. Tax rates in Europe - Wikipedia

you have to take few factors into consideration:
- corporate tax
- personal income tax
- social security, healthcare, ...
- CGT

since you need a company, your first filter is corporate tax. that will take away from your profits first. then you have to pay yourself a salary because you will be doing the actual work and without employing yourself it would be illegal to do so without a contract if taxman would come and check you out. from this salary you will pay personal income tax and you can count on the social security and healthcare "taxes" as well. you could limit this loss by paying yourself the minimum allowed salary and pay the lowest "contributions" into the healthcare and social security scam and take profit from the company via dividend, in which case you would be looking at jurisdiction with minimum or no CGT and you would have to set up a join equity type of company, not just basic llc.

taking the dividend route is the "smart and rich people" way but the overhead might get pricey, depending on the country. also don' forget that you tax where you control the company from so setting up in tax heaven but living in ....germany, would tax the company in germany, not in tax heave(IoM).

so in the end, you have to also consider the "do i want to live there" factor.

as i have said, UAE is the best setup, worldwide, no contest.

 

[clemens]

as i have said, UAE is the best setup, worldwide, no contest.

well as FRED already pointed out in some other threads UAE has to be taken advantage on before it is to late, so don't waste your time get on it.

 

[glengoolie]

what do you mean? isn't UAE now opening up even more with citizenships? i know that right now they promote only the "valued individual" citizenships but just the mere fact of the promotion seems they are heading to the direction of opening up to more "expats" rather than closing down. especially today when human capital is being valued more and more.

 

[mleong]

1. Corporate income tax in Croatia is 10% if your revenue is below 1M EUR. That is lower than most EU countries.

2. You aren't supposed to charge VAT to US customers, not sure where you got that from.

3. Cyprus, Dubai, BVI, etc... you will need substance to run a foreign company tax free, and that costs. What is your revenue again?

agree. @kidnico if you are in the EU, and you are invoicing your client outside of EU, you do not need to charge VAT.
only invoices issued within the EU, you will need to charge VAT.

 

[lacomaco]

agree. @kidnico if you are in the EU, and you are invoicing your client outside of EU, you do not need to charge VAT.
only invoices issued within the EU, you will need to charge VAT.

Half-knowledge is a very dangerous thing, especially with VAT matters. There are services where the residential address/place of business of the user of the services will decide whether VAT must be charged or not to the individual/legal entity (such as consultancy, engineering services), there are services (mainly property related) where the place of the propertyand not its user will decide whether to charge VAT or not, and there are services where separate exceptions apply, such as sports and cultural events, international transportation etc. So: "if you are in the EU, and you are invoicing your client outside of EU, you do not need to charge VAT" could be true or could be false, depending on the service. "only invoices issued within the EU" is a very simply meaningless expression without indicating , you will need to charge VAT." is simply inaccurate in itself.

VAT is the most strictly enforced tax law in the EU, so be careful. ANd we do not even know exactly what kind of service kidnico is charging for €10,000