Best setup for side hustle (consulting business)

[Laurentz]

Hi Guys,

There are a lot of posts that go in the direction of what I am about to post, but many of them always have a small factor that varies, so I prefer to create a clean thread.
Hope that's okay

Context:
>> 9-5 jobs as employee in Germany
>> Doing consulting on the side each months (fintech / online marketing). The clients are in western Europe (Germany / Austria / Switzerland)
>> Consulting activities (~15k€ per year)
>> For now I am using a personal holding (UG in German) to invoice for those consulting gigs.

I would like to optimise for the following two goals:
>> I am the UBO of my holding and I could run into trouble if I get fired from my 9-5 job in case I wanna claim unemployment money.
>> I would like to pay 0-5% taxes on my consulting activities. In Germany ~30% go away after costs.

I was thinking about the following setup:
>> Register company in Estonia with their e-residency. Tax free from what I read.
>> Invoice my European clients from Estonia. Won't be a problem for them, still EU, IBAN friendly
>> After the money is paid to my Estonia account, I would loan the money to my German holding that would use this cash to do Angel investments in Startups.
>> There is only 1.5% tax in capital gain in Germany if you hold there shares as a business.

What do you guys think about this setup ?
Any alternative to Estonia ?
If Estonia, any service to recommend to incorporate? Any bank to recommend ?

Have a great rest of the day take care.

 

[Sols]

This answer will probably not be what you're looking for.

>> Doing consulting on the side each months (fintech / online marketing). The clients are in western Europe (Germany / Austria / Switzerland)
>> Consulting activities (~15k€ per year)

That's an excellent start. You're clearly skilled and valuable on the market in your field. Focus on growing that.

But it's nowhere near enough to make any kind of international tax saving scheme viable. Unless you also relocate.

>> For now I am using a personal holding (UG in German) to invoice for those consulting gigs.

Good.

>> I am the UBO of my holding and I could run into trouble if I get fired from my 9-5 job in case I wanna claim unemployment money.

If you don't like German law, don't live in Germany.

>> I would like to pay 0-5% taxes on my consulting activities. In Germany ~30% go away after costs.

Then move to a place where the tax rate is 0–5%.

>> Register company in Estonia with their e-residency. Tax free from what I read.

It is tax free to register a company but it is not tax free to take profits out of an Estonian company. E-residence is rather pointless.

The Estonian company becomes tax resident in Germany, though, and has to also comply with German tax law.

>> Invoice my European clients from Estonia. Won't be a problem for them, still EU, IBAN friendly

OK.

>> After the money is paid to my Estonia account, I would loan the money to my German holding that would use this cash to do Angel investments in Startups.

I'm not sure if you're triggering CFC, Transfer Pricing, BEPS, or all three here, but this is something tax authorities are prepared for. It would probably be seen as dividends or personal income by the Germans, depending on how closely those transactions mimic salary payments.

What do you guys think about this setup ?

The only way it would work without backfiring is if despite fully automated exchange of information going to the efficient German tax authorities, no one looks into your case.

It would be a walk in the park to prosecute you and win, if you haven't been declaring and paying full German taxes.

Any alternative to Estonia ?

Germany. Or relocate.

 

[Cetme308win]

Do you wanna know the legal way or the less legal way?

 

[RDuke]

Less here

 

[Cetme308win]

Less here

For consulting services a US LLC if your customers are not in the US and for those in the US you can use an UK LLP owned by 2 US LLC

 

[RealDude]

Do you wanna know the legal way or the less legal way?

Both.

 

[Cetme308win]

Both.

Legal way is moving out from your country or paying the taxes.... Or setting up a company offshore with enough economic substance to bypass the CFC rules

About the less legal way I said in the very same thread a setup for that

 

[Jerry1911]

Alternative is to find a rent a company service like Winglio or Xolo which pays you out in crypto. Not sure if there is one though.

 

[bonox]

>> Consulting activities (~15k€ per year)

simply not sufficient, it is what I make every months and even than it's not enough to do any tax planning!

 

[GringoPapi]

For consulting services a US LLC if your customers are not in the US and for those in the US you can use an UK LLP owned by 2 US LLC

Curious about this. I have a virtual mailbox in the US handling mail and for tax purposes. I’m living in LatAm though and getting paid USD. Why is the UK LLP the best move?

 

[Cetme308win]

Curious about this. I have a virtual mailbox in the US handling mail and for tax purposes. I’m living in LatAm though and getting paid USD. Why is the UK LLP the best move?

If your customers are americans and you wanna remain tax free in your home country it's better not to deal with them through an US LLC because your LLC may be liable for paying US taxes so better to use an UK LLP

 

[Laurentz]

Thanks everyone - So probably best is to accept the tax and focus on growing the business.

Also use as much costs as I can to reinvest.

 

[DBeker]

With regards to your 9-5 and risk of losing unemployment benefits: in France it's similar, however being the UBO does not disqualify you from unemployment benefits, as long as you paid into the system through your employment. It is only if you are the UBO AND a salaried employee of your consulting company where you might get disqualified. I guess one way around it, would be to set up an LLC in another country and let that be the owner of your German company where on paper anyways the foreign llc will be on the company registrar in Germany. The unemployment office is unlikely going to dig too deep into the paper trail and will likely just stop by simply verifying that you paid into the system and that you are not employed elsewhere.