Company in Estonia. I live in Greece. Company Tax residency?

[FriendlyFace]

Hi, guys...

Let's say I become an e-resident of Estonia and start a company there.

Meanwhile, I will live in Greece.

Where will the company be tax-resident?

Thanks in advance!

 

[James Blake]

Hi,

There will be no corporate income tax in Estonia, as it is 0%, since the profit is not taken out. If dividends are paid out to the e-resident owner, then corporate income tax of: amount_of_dividends x 20 ÷ 80 has to be paid by the company (obviously in Estonia),
The resident country of an e-resident will also tax the same income.

Dividends rate in Greece is 10 percent (from 15 percent, effective from January 2019).

 

[fshore]

Hi,

There will be no corporate income tax in Estonia, as it is 0%, since the profit is not taken out. If dividends are paid out to the e-resident owner, then corporate income tax of: amount_of_dividends x 20 ÷ 80 has to be paid by the company (obviously in Estonia),
The resident country of an e-resident will also tax the same income.

Dividends rate in Greece is 10 percent (from 15 percent, effective from January 2019).

You are not answering his question.

The company will likely be tax resident in Greece.

http://taxsummaries.pwc.com/ID/Greece-Corporate-Corporate-residence

 

[Compirate]

Hi,

There will be no corporate income tax in Estonia, as it is 0%, since the profit is not taken out. If dividends are paid out to the e-resident owner, then corporate income tax of: amount_of_dividends x 20 ÷ 80 has to be paid by the company (obviously in Estonia),
The resident country of an e-resident will also tax the same income.

Dividends rate in Greece is 10 percent (from 15 percent, effective from January 2019).

FriendlyFace is asking about where his company is tax resident. Company will have permanent establishment in Greece. According to the DTA the company is tax resident in Greece. Greek taxes are to be paid and Estonian rules do not apply.

The question is how to register in Greece and do it right....

 

[James Blake]

Company will have permanent establishment in Greece.

Where did you see this one??

Short answer:

Company will have permanent establishment in Estonia and is a tax resident in Estonia. Greece is the place that he lives. That's exactly the case of 'e-resident'.

Long answer:

Estonia has a simple rule which says that a company is a tax resident in Estonia if it is incorporated under Estonian laws. If you have registered your Estonian OÜ, then this means your company is an Estonian tax resident and subject to tax in Estonia.

However, some countries have different rules for deciding if a company is tax resident. It is common that in addition to the place of incorporation, the place of effective management triggers tax residence. If you run your company from a country with such rules, then the company might end up having dual tax residence – this happens when two states believe that the company is tax resident in their jurisdiction and will want to tax the company’s profits.

In case business activities of this company are carried out elsewhere or the company is managed from outside of Estonia, the income received in a foreign state will be taxed in this foreign state and Estonia will ensure avoidance of double taxation.

From a personal experience, as I live in Greece as well, if activity of your company is software development services or consulting or other digital services and many other, is a tax resident in Estonia.

 

[fshore]

Where did you see this one??

Short answer:

Company will have permanent establishment in Estonia and is a tax resident in Estonia. Greece is the place that he lives. That's exactly the case of 'e-resident'.

Long answer:

Estonia has a simple rule which says that a company is a tax resident in Estonia if it is incorporated under Estonian laws. If you have registered your Estonian OÜ, then this means your company is an Estonian tax resident and subject to tax in Estonia.

However, some countries have different rules for deciding if a company is tax resident. It is common that in addition to the place of incorporation, the place of effective management triggers tax residence. If you run your company from a country with such rules, then the company might end up having dual tax residence – this happens when two states believe that the company is tax resident in their jurisdiction and will want to tax the company’s profits.

In case business activities of this company are carried out elsewhere or the company is managed from outside of Estonia, the income received in a foreign state will be taxed in this foreign state and Estonia will ensure avoidance of double taxation.

From a personal experience, as I live in Greece as well, if activity of your company is software development services or consulting or other digital services and many other, is a tax resident in Estonia.

You might have experience on how Greece tax authorities handle this. But if you look at the law the company will be tax resident in Greece (in addition to and Estonia) as management is in Greece. The dta says that the authorities shall decide where the company is tax resident. I would assume they will decide that it is Greece (if it ever comes to that).

 

[lavel]

You want ot read here about e-resident in Estonia, we have had the conversation many times on the forum already:
https://www.offshorecorptalk.com/threads/estonia-e-resident-company-vs-freezone-uae.24079/https://www.offshorecorptalk.com/threads/estonia-e-residence.23205/https://www.offshorecorptalk.com/threads/about-estonian-e-residency.17292/

 

[FriendlyFace]

Hi guys...

First of all, thanks for all the answers.

The question is how to register in Greece and do it right....

Agreed. The problem is that Greece has extremely high taxes. And even some loopholes that existed have been closed and new loopholes that get discovered keep getting closed.

In case business activities of this company are carried out elsewhere or the company is managed from outside of Estonia, the income received in a foreign state will be taxed in this foreign state and Estonia will ensure avoidance of double taxation.

Well, in that case, I will be required to pay taxes in Greece. I'm not worried about the dividends tax in Greece (which will become 5% within two years) - but I'm concerned Greece will tax my entire company as a Greek company (30-40% taxes on profits as well)

From a personal experience, as I live in Greece as well, if activity of your company is software development services or consulting or other digital services and many other, is a tax resident in Estonia.

I will be offering instantly downloadable software.

But I'm not sure what the type of product has anything to do with the company's tax residency.

Remember: I will still be living in Greece and managing the business from there.

I doubt Greece will let me off the hook just because my products are digital.

You want ot read here about e-resident in Estonia, we have had the conversation many times on the forum already:

Thanks for the links. Even though I didn't find the answer to the question I'm asking in this specific thread, the links are useful.

 

[James Blake]

Remember: I will still be living in Greece and managing the business from there.

Its a common case that raises concerns. But remember that Estonia created e-resident program for people around the world like you (and me). For sure they didn't create it for actual residents in Estonia.

the type of product has anything to do with the company's tax residency.

The type of products (activity) will always have to do with the company's tax residency. Thats why we prefer to sell intangible goods / digital services, as they do not take place in a certain country.
(such as downloadable music, mobile apps, software etc)

 

[FriendlyFace]

Its a common case that raises concerns. But remember that Estonia created e-resident program for people around the world like you (and me). For sure they didn't create it for actual residents in Estonia.

I understand. Of course Estonia will want me as an e-resident, so money from my company will go in their banks. The problem isn't Estonia. It will be Greece challenging the company's tax residency.

The type of products (activity) will always have to do with the company's tax residency. Thats why we prefer to sell intangible goods / digital services, as they do not take place in a certain country.
(such as downloadable music, mobile apps, software etc)

I understand this too. But the effective management of the company will still be done in Greece.

 

[Sols]

Where did you see this one??

Do you see the part where FriendlyFace wrote "Meanwhile, I will live in Greece"? That's the exact moment his company became tax resident in Greece.

If the company qualifies as tax resident in Greece, it doesn't matter if it's incorporated in Estonia.

From a personal experience, as I live in Greece as well, if activity of your company is software development services or consulting or other digital services and many other, is a tax resident in Estonia.

Who told you this? The Greek tax authority?

The type of products (activity) will always have to do with the company's tax residency. Thats why we prefer to sell intangible goods / digital services, as they do not take place in a certain country.
(such as downloadable music, mobile apps, software etc)

Have you ever run a business that's been audited?

 

[Tax Cow]

Weren't you asking similar questions before, i.e. moving to Cyprus to improve your tax situation?

You must move your a*s, there's no other legal way to evade tax. If you want to set up an offshore structure that lets you evade Greek tax legally while living there full-time; a solution passes the test of tax investigator's visit, then assume at least 50,000 euros per year for offshoring costs. A minimum-wage hipster slav working in a potato field will not be perceived as legitimate business management operation in Estonia. Tax investigators do have a little more than one brain cell.

Paying tax in Greece could be cheaper in your situation.

@ Estonia

1. "Estonian E-residency" has nothing to do with residency. It's an oxymoron and it only means that Estonia did some basic due diligence and background checks on an individual. You may find that some banks and EMIs appreciate that E-resident status while others couldn't care less. In any case, it will get you access to Estonia's digital realm through the digital signature. All business affairs can be managed remotely which in of itself is worth something.

2. According to DTA, all corporate taxes would be payable in Greece according to Greek tax rates. Permanent Establishment definitions include "Place of Effective Management" - where your a*s is located.

James Blakes' quote about Estonian corporate residency through place of incorporation holds true, but it's entirely redundant according to agreement Greece and Estonia signed. There is no dual corporate tax residency and all corporation taxes are due in Greece according to Greek rates. If he lived in, and managed his corporation in Afghanistan, then there would be dual corporate tax residency that would require further cooperation between tax authorities to settle where (and how much) tax is to be paid.

 

[user9823671]

My understand of the CFC (controlled foreign company - Controlled foreign corporation - Wikipedia ) laws mean, that as the company is controlled from Greece, it is a Greek tax resideny company.

 

[Tax Cow]

My understand of the CFC (controlled foreign company - Controlled foreign corporation - Wikipedia ) laws mean, that as the company is controlled from Greece, it is a Greek tax resideny company.

You're technically wrong although the conclusion happens to be correct. The reason it's a Greek tax resident company is not accurate.

CFC statutes are "if all else fails" safety nets to prevent tax revenue from escaping. CFC rules do not matter in EU resident + EU foreign corporation situations. In EU, they are generally aimed at "50% of our tax burden or less" non-EU jurisdictions, i.e. tax havens in the Carribean and middle-east.

It's a Greek tax resident company because of Estonia-Greece bilateral agreement (inclusion of PoEM as PE in DTA).

 

[James Blake]

Have you ever run a business

4 companies mate. (Cyprus, Bulgaria, UK, Estonia)

that's been audited?

None of them.
Audited in the country of managing? No, they don't know even that company exists.

Estonia-Greece bilateral agreement (inclusion of PoEM as PE in DTA)

Very interesting. Even if they exchange information, I suppose they do, I can't believe that Greece will ever consider an Estonian company as Greek tax resident, so then demand taxes (for cases < $1m).

anyways...

What about xolo.io? They offer a virtual Estonian company. (Great service btw)
Where will the company be tax-resident?

 

[Tax Cow]

anyways...

What about xolo.io? They offer a virtual Estonian company. (Great service btw)
Where will the company be tax-resident?

Xolo Go | Xolo - This product?

From their website:

"When you create a Xolo Go account, you enter into a partnership with Xolo. So you won't own an actual company, but we'll provide you with everything you need to do business as if you had a company. Virtually, like owning a company."

With their "Go" product you offer your services through Xolo which is tax resident in Estonia. This is contractor umbrella service not "virtual company". A clever but misleading branding choice.

Tax-wise, the client is then obliged to report income earned (from Xolo, not the end-client) on his personal tax return, in his country of residence.

Also from their website:

"You can get Xolo Go if: You will earn less than €36 000 per calendar year"

This is only viable if you make peanuts. With that said, 5% fee for all-in-one contractor umbrella service seems very attractive. A Typical umbrella service provider in the west EU asks 8-15%. Same market access, same rules, but for much less.

 

[user9823671]

You're technically wrong although the conclusion happens to be correct. The reason it's a Greek tax resident company is not accurate.

CFC statutes are "if all else fails" safety nets to prevent tax revenue from escaping. CFC rules do not matter in EU resident + EU foreign corporation situations. In EU, they are generally aimed at "50% of our tax burden or less" non-EU jurisdictions, i.e. tax havens in the Carribean and middle-east.

It's a Greek tax resident company because of Estonia-Greece bilateral agreement (inclusion of PoEM as PE in DTA).

^ What he said

 

[Sols]

4 companies mate. (Cyprus, Bulgaria, UK, Estonia)

That wasn't my question.

None of them.
Audited in the country of managing? No, they don't know even that company exists.

Then what qualifies you to give advice that's contrary to what the law seemingly says?

Very interesting. Even if they exchange information, I suppose they do, I can't believe that Greece will ever consider an Estonian company as Greek tax resident, so then demand taxes (for cases < $1m).

Famous last words.

While enforcement does vary between and even within jurisdictions, the structure does not hold up if it's ever audited. And that risk should be highlighted, rather than dismissed with a casual "It works for me". A lot of things work in individual cases, which can end up being court cases for someone else.

 

[Compirate]

Since we are discussing the topic I have a question for you guys (@Sols @xzars)

If someone from country A lives in country A, has a company in country B, company has PE in country A and therefore tax resident in country A (if the DTA states so).

1. Now - how does the company that knows for sure that it is tax resident in country A, notify country A about this? I am asking because this might make it easier later on and in some countries (I have read) changing tax residency (redomiciliation) of a company is treated as a liquidation for tax purposes..

2. What accounting rules and laws need to be followed? Those of country of incorporation or tax residency of the company

3. What rules regarding financial statements (it being public) apply?

 

[GrumpyMess]

4 companies mate. (Cyprus, Bulgaria, UK, Estonia)

Audited in the country of managing? No, they don't know even that company exists.

How are you hiding from the AEOI ?