CFC rules in Europe by Country: Can someone clarify the following image?

[HeinzKetchup69]

So from what I read here, some countries tax all foreign companies, some countries only tax the passive income portion, and others artificial set ups.

What does it even mean? Does it mean that if you manage an offshore company from the Netherlands or Germany, as the director of the company, you get to keep all company profits
untaxed in Germany/Netherlands as long as it's not passive income and as long as there is a double tax treaty with that offshore company? (e.g: UAE)

 

[daniels27]

Please not that more often than not, PE rules are much more important for small setups. If you manage any company from Switzerland, it is being taxed in Switzerland as if it was a Swiss company. It is needless to say that this goes for pretty much all other companies listed above.

Now, you think ok, no problem. Then I just hire a director in the BVI and I am out. And that's where CFC rules come into play. If you own more than a certain amount of any companies shares or have a certain percentage of a companies voting power, you still get taxed on income from that company. Say if you are in Germany and set up a company in the BVI with local management, the Germans tax your dividends as if it was a German company.

 

[HeinzKetchup69]

Please not that more often than not, PE rules are much more important for small setups. If you manage any company from Switzerland, it is being taxed in Switzerland as if it was a Swiss company. It is needless to say that this goes for pretty much all other companies listed above.

Now, you think ok, no problem. Then I just hire a director in the BVI and I am out. And that's where CFC rules come into play. If you own more than a certain amount of any companies shares or have a certain percentage of a companies voting power, you still get taxed on income from that company. Say if you are in Germany and set up a company in the BVI with local management, the Germans tax your dividends as if it was a German company.

It literally says Switzerland does not have CFC rules.

The Germans may tax my dividends on a personal level but what about corporate profit tax? That's what I'm talking about. It says only passive income is taxed.
Not active income (e.g: sale of products and services).

 

[daniels27]

Again. The PE rules are what most likely matters in your case. You write that you manage an offshore company from Germany, which even in Switzerland would imply that the company is taxed at the place of effective management. It is not about CFC but about PE and place of effective management that matters in your case.

If you do not (yes not as otherwise PE rules apply) manage a BVI company from Germany but you own it, its passive income (interest and dividend income) will be taxed when earned, and not only when distributed as dividends to you:
https://de.m.wikipedia.org/wiki/Hinzurechnungsbesteuerung

 

[HeinzKetchup69]

Again. The PE rules are what most likely matters in your case.

If you do not manage a BVI company from Germany but you own it, it will still be taxed as German company.
https://de.m.wikipedia.org/wiki/Hinzurechnungsbesteuerung

Do you have any official references for that? that link isn't directed to any specific country. The sources I read from clearly say only some countries tax some types of income, while others tax the whole thing for foreign companies.

 

[daniels27]

Yes.

For CFC rules about companies not managed from Germany it is AStG.
https://www.gesetze-im-internet.de/astg/

§ 7 Beteiligung an ausländischer Zwischengesellschaft
(1) Beherrscht ein unbeschränkt Steuerpflichtiger eine Körperschaft, Personenvereinigung oder Vermögensmasse im Sinne des Körperschaftsteuergesetzes, die weder Geschäftsleitung noch Sitz im Inland hat...

For companies managed from Germany, it is not CFC and in KStG
https://www.gesetze-im-internet.de/kstg_1977/__1.html

§ 1 Unbeschränkte Steuerpflicht
(1) Unbeschränkt körperschaftsteuerpflichtig sind die folgenden Körperschaften, Personenvereinigungen und Vermögensmassen, die ihre Geschäftsleitung oder ihren Sitz im Inland haben...

 

[HeinzKetchup69]

Yes.

For CFC rules about companies not managed from Germany it is AStG.
https://www.gesetze-im-internet.de/astg/

For companies managed from Germany, it is not CFC and in KStG
https://www.gesetze-im-internet.de/kstg_1977/__1.html

Thanks.

What about all other EU countries in the map above? What about those ones in gray such as Hungary and Romania? I don't find any info online other than vague responses from forums.

Not my interest to move to Germany anyway

 

[daniels27]

Thanks.

What about all other EU countries in the map above? What about those ones in gray such as Hungary and Romania? I don't find any info online other than vague responses from forums.

Not my interest to move to Germany anyway

But what are we talking about? PE or CFC? Are you planning to manage the company from Europe?

 

[Marzio]

Are you planning to manage the company from Europe?

Here's his plan: Romania: Does it have CFC rules? What's the current Tax situation?

He is playing "fantasy tax optimization" at home edition.

 

[daniels27]

Here's his plan: Romania: Does it have CFC rules? What's the current Tax situation?

He is playing "fantasy tax optimization" at home edition.

He could partner with this guy:

Y

Thread 'Advice on new company formation jurisdiction'

Sep 18, 2024

I’m currently providing consultancy services with a monthly revenue of around €15k. Both my client and I are based in Germany.

I’m considering setting up either a UK LTD or an Estonian OU, as the corporate taxes in both countries are lower than in Germany. The main goal is to avoid withdrawing dividends to my personal account in order to sidestep dividend taxes in Germany. I plan to keep the earnings within the company for future expenses, as the amounts aren’t significant at the moment.

Do you have any suggestions for structuring this? The challenge with a German company is the high...

• Yeskou
• Replies: 25
• Forum: Offshore Company

 

[Sols]

Tax fraud charges speedrun (any %).

@daniels27 nailed it. PE/tax residence is your main worry.