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Corporate jurisdiction advice

yes but he needs to have a strong CV. This zone is too bureaucratic to get approved
Yes i know spanish bureaucracy and i am well scared about it.
I don't have familiarity with ZEC but it's good to have one more option for brainstorming.
Regardless from the outcome, thank you @Marzio for your suggestion.
And thank you @SCHLOSSFINANZ for yours.

@CyprusLawyer101 I'd be happy to explore malta too, please reach me out if you can
 
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  1. where would you incorporate and why?
  2. would you incorporate an Holding company above? if so, where and why?
  3. what would you do to build local economic substance?
From your requirements Malta is an option combined with a Holding Company. Why? Malta Income Tax Consolidation for Companies:

Malta has recently introduced fiscal unity rules which enable tax groups to be formed for Maltese income tax purposes. This follows the issuance of the Consolidated Group (Income Tax) Rules (L.N. 110 of 2019).

A group of companies can now choose to be treated as a single taxpayer, subject to certain statutory conditions. This will begin with the 2020 assessment year for companies, whose accounting periods started in calendar year 2019. This requires the parent company to choose for itself and its subsidiary/ies to form a fiscal unit, a move which would result in the subsidiary/ies being treated as transparent.

After this choice, each eligible subsidiary will form part of the same fiscal unit of the parent company and will be referred to thereafter as a “transparent entity”. The principal taxpayer will be the company which assumes the rights, duties and obligations under the Income Tax Act, relative to entities forming part of its fiscal unit and which cannot be a transparent subsidiary. No company shall form part of more than one fiscal unit.

A parent company is defined as a company which holds shares in a “subsidiary” that – in the year prior to the year of assessment (as defined by a decision under the terms of rule 3(1)) – meets any two of the following conditions:

The parent company holds at least 95% of the voting rights in the subsidiary company. This is only possible if the accounting periods of all members are the same and are subject to the consent of any minority shareholders

The parent company is beneficially entitled to at least 95% of any profits available for distribution to the ordinary shareholders of the subsidiary company

The parent company would be beneficially entitled to at least 95% of any assets of the subsidiary company available for distribution to its ordinary shareholders if the firm were to be wound up.

When a fiscal unit is established, tax shall be payable by the principal taxpayer on behalf of all members of the group, with only one tax return being filed. All members are jointly liable for the payment of any tax, additional tax or interest. Principal taxpayers are also responsible for the preparation of a consolidated, audited balance sheet and consolidated profit and loss account covering all companies in the fiscal unit

Nevertheless, tax calculations will still be required for each company and also for the fiscal unit as a whole, in order to compare tax liabilities and satisfy the anti-abuse provision.

A company may exit the fiscal unit in the event of it ceasing to be a 95% subsidiary, or if it no longer has the same accounting period as the principal taxpayer. To date, regulations allowing a voluntary exit by companies forming part of a fiscal unit have not been established.

The main benefit of choosing fiscal unity regards cash flow compared to the current regime of partial shareholder tax refunds after the distribution of taxed profits. Thanks to fiscal unity, the group has an identical effective tax rate without a time lag between the payment of the standard corporate income tax rate (35%) and the receipt of the shareholder refund at the level of the shareholder. This is because the new rules immediately reduce the tax due from the principal taxpayer to the lower effective tax rate.
 
From your requirements Malta is an option combined with a Holding Company. Why? Malta Income Tax Consolidation for Companies:

Malta has recently introduced fiscal unity rules which enable tax groups to be formed for Maltese income tax purposes. This follows the issuance of the Consolidated Group (Income Tax) Rules (L.N. 110 of 2019).

A group of companies can now choose to be treated as a single taxpayer, subject to certain statutory conditions. This will begin with the 2020 assessment year for companies, whose accounting periods started in calendar year 2019. This requires the parent company to choose for itself and its subsidiary/ies to form a fiscal unit, a move which would result in the subsidiary/ies being treated as transparent.

After this choice, each eligible subsidiary will form part of the same fiscal unit of the parent company and will be referred to thereafter as a “transparent entity”. The principal taxpayer will be the company which assumes the rights, duties and obligations under the Income Tax Act, relative to entities forming part of its fiscal unit and which cannot be a transparent subsidiary. No company shall form part of more than one fiscal unit.

A parent company is defined as a company which holds shares in a “subsidiary” that – in the year prior to the year of assessment (as defined by a decision under the terms of rule 3(1)) – meets any two of the following conditions:

The parent company holds at least 95% of the voting rights in the subsidiary company. This is only possible if the accounting periods of all members are the same and are subject to the consent of any minority shareholders

The parent company is beneficially entitled to at least 95% of any profits available for distribution to the ordinary shareholders of the subsidiary company

The parent company would be beneficially entitled to at least 95% of any assets of the subsidiary company available for distribution to its ordinary shareholders if the firm were to be wound up.

When a fiscal unit is established, tax shall be payable by the principal taxpayer on behalf of all members of the group, with only one tax return being filed. All members are jointly liable for the payment of any tax, additional tax or interest. Principal taxpayers are also responsible for the preparation of a consolidated, audited balance sheet and consolidated profit and loss account covering all companies in the fiscal unit

Nevertheless, tax calculations will still be required for each company and also for the fiscal unit as a whole, in order to compare tax liabilities and satisfy the anti-abuse provision.

A company may exit the fiscal unit in the event of it ceasing to be a 95% subsidiary, or if it no longer has the same accounting period as the principal taxpayer. To date, regulations allowing a voluntary exit by companies forming part of a fiscal unit have not been established.

The main benefit of choosing fiscal unity regards cash flow compared to the current regime of partial shareholder tax refunds after the distribution of taxed profits. Thanks to fiscal unity, the group has an identical effective tax rate without a time lag between the payment of the standard corporate income tax rate (35%) and the receipt of the shareholder refund at the level of the shareholder. This is because the new rules immediately reduce the tax due from the principal taxpayer to the lower effective tax rate.
Bottom line, what is the effective tax rate achievable? 5%? and no withholding tax on dividends?
Are there any particular requirements/restriction to take into account (i.e. related to economic activity)?
What are the requirements in terms of substance? (i.e. local office, director, employees, etc)
 
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Dear all,
there are two partners, one living in Spain and one living in Switzerland, who want to incorporate a company which shall trade B2B in a VAT exempt wholesale market.
The only requirement for the company is to be incorporated into the European Single Market (= EU+EFTA) and to have a SEPA bank account with an SDD (SEPA Direct Debit, which EMIs normally don't provide).
The partners don't want to work in the company and pay themselves an employee salary, but they might want to be members of its board of directors and pay some travel expenses for the board meetings.
These two UBOs don't want to pay themselves dividends either for the first five years, they want to retain the earnings in the company and just grow the business.
After that initial growth phase they might think to relocate to the UAE for one or two years and cash dividends out, so it would be better that the company's (or the holding company) jurisdiction doesn't claim taxes on dividends paid to foreign shareholders.
They are willing to pay for local nominee, rent an office space, rent a local server for their IT infrastructure and all those services which can build local economic substance; it doesn't have to be cheap.
Of course they would like the company to paid as less taxes as possible on its earnings.
Having said this, a few questions:
  1. where would you incorporate and why?
  2. would you incorporate an Holding company above? if so, where and why?
  3. what would you do to build local economic substance?
If anything is unclear please ask for further details.
Thanks
I would incorporate in Cyprus for such activity.
so it would be either the partner to relocate there or an hire a local employee as a director
Correct
yes but he needs to have a strong CV. This zone is too bureaucratic to get approved
What is required to get the strong CV ?
 
Bottom line, what is the effective tax rate achievable? 5%? and no withholding tax on dividends?
Are there any particular requirements/restriction to take into account (i.e. related to economic activity)?
What are the requirements in terms of substance? (i.e. local office, director, employees, etc)
Tax rate is 5%, the thing is, you get taxed straight away with it and do not wait years for the tax refund of 30%, no withholding tax on dividends.

No clearance is required by public authority for a Malta Company Formation on the basis that the Maltese company carries no activity, business or service which requires a licence or is otherwise regulated under:
- the Gaming Act
- the Banking Act
- the Financial Institutions Act
- the Investments Services Act
- the Financial Markets Act
- the Insurance Business Act
- the Insurance Intermediaries Act
- the Retirement Pensions Act
- the Trusts and Trustees Act
- the Special Funds Regulation Act
- the Company Services Providers Act.

In terms of substance like everywhere the registered office is the thing which is required. You can appoint local director/s (f.e. your employee) or act yourself as director. Secretary is needed, can be the same person, who will act as director. There are no requirements for. If you want to create a substance, rent a office, hire a secretary or whatever (PE number with company setup required), register your business on this address and beware of local accountants (there are still some left with the foot on the ground) and never mention estimate turnover.
 
Sounds straight forward with a setup in Malta for some that has the budget to get this all sorted out and set up.
 
Tax rate is 5%, the thing is, you get taxed straight away with it and do not wait years for the tax refund of 30%, no withholding tax on dividends.

No clearance is required by public authority for a Malta Company Formation on the basis that the Maltese company carries no activity, business or service which requires a licence or is otherwise regulated under:
- the Gaming Act
- the Banking Act
- the Financial Institutions Act
- the Investments Services Act
- the Financial Markets Act
- the Insurance Business Act
- the Insurance Intermediaries Act
- the Retirement Pensions Act
- the Trusts and Trustees Act
- the Special Funds Regulation Act
- the Company Services Providers Act.

In terms of substance like everywhere the registered office is the thing which is required. You can appoint local director/s (f.e. your employee) or act yourself as director. Secretary is needed, can be the same person, who will act as director. There are no requirements for. If you want to create a substance, rent a office, hire a secretary or whatever (PE number with company setup required), register your business on this address and beware of local accountants (there are still some left with the foot on the ground) and never mention estimate turnover.
Thanks for your message.
If you’re a CSP in Malta I would appreciate to double check with you If my activity (or part of it) might fall under the Financial Market Act, please send me a private message.
If you’re not, can you suggest one?
Thanks
 
The costs to establish a Malta company is high also the maintaining of the company is very high. You need a very profitable business to justify those costs.
The problem is that they are resident of Switzerland and Spain. They would need a director in a low tax country and substance. Otherwise they will tax the hell out of them.

The next problem is that you cannot start with a company in Switzerland as they will tax the hell out of their goodwill if they move the company later.

The best and cheapest way always is to relocate personally first.
 
The problem is that they are resident of Switzerland and Spain. They would need a director in a low tax country and substance. Otherwise they will tax the hell out of them.

The next problem is that you cannot start with a company in Switzerland as they will tax the hell out of their goodwill if they move the company later.

The best and cheapest way always is to relocate personally first.

I think it shouldn't be a big deal to hire a local director (CSP nominee), rent an office space in a shared facility and maybe rent a physical server too (the business is IT intensive so it makes sense). How much we're talking about? For sure less than 15k/year alltogether
In Switzerland, depending on the canton, you get taxed at a corporate level between 12% and 20%; plus your individual marginal tax rate on dividends (if you live in the country) but not less than 10% even if you live abroad in a zero tax jurisdiction.
So, with a Swiss company, in the best case scenario (i.e. you live in Zug and you host the company in your apartment - good luck with renting a place in Zug), you get 22% overall tax rate (corporate + dividends); with a Maltese one 5% (in the best case i.e. you live in UAE - to compare apples with apples); 17% saving with an additional 15k cost.
Bottom line: if your company makes more than 88k/year EBIT it's a no brainer.
 
I think it shouldn't be a big deal to hire a local director (CSP nominee), rent an office space in a shared facility and maybe rent a physical server too (the business is IT intensive so it makes sense).
Yes, and you did not even mention the exit tax.

Why rent an office in Zug? You can just work from home? If you cannot, it will get difficult as you have substance there.

I agree with you. But keep in mind that you cannot get the Malta dividends as long as you live in Switzerland as they would be taxed at the full rate as personal income.

Also, be prepared for the Swiss to question your setup if it looks fake. A server does not do anything. Just use a generic one of a hosting company. It is more important that you have a real director who can handle all day to day business and can do all payments alone. That's what matters.

You can probably get it for very cheap if you go there yourself and know somebody you can trust. They won't even need an office. You can have directors in Switzerland for less than 10k per year that the tax office accepts as well, but it is a question whom you can trust and who wants to handle it. A director at an incorporation agent's address won't pass, at his home probably does pass.
 
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Why rent an office in Zug? You can just work from home? If you cannot, it will get difficult as you have substance there.
It was just an hypothetical example to do the calculations and prove my point


I agree with you. But keep in mind that you cannot get the Malta dividends as long as you live in Switzerland as they would be taxed at the full rate as personal income.
Of course, as I said since the beginning the money would be kept in the company for the next 3-5 years as retained dividends. I will cash out only after relocating my tax residency in a low (or zero) individual tax jurisdiction.
 
The costs to establish a Malta company is high also the maintaining of the company is very high. You need a very profitable business to justify those costs.
depending who you ask for a company formation the fees ranging for a single company from 500 Euro up to 6.000 Euro (without sharecapital and mbr fees), depending on who you ask regarding maintenance, which is accounting and audit, the fees ranging from 1.400 Euro up to 5.000 Euro, a they suggest a "very profitable business" from around 100.000 Euro per year which is nonsens, but the minimum should be above 50.000 Euro
 
Thanks for your message.
If you’re a CSP in Malta I would appreciate to double check with you If my activity (or part of it) might fall under the Financial Market Act, please send me a private message.
If you’re not, can you suggest one?
Thanks
no problem to check for you, but sorry, don't know how to send a private message here
 
no problem to check for you, but sorry, don't know how to send a private message here
You’re already on the verge of getting banned for your hidden advertising here! You need to upgrade to Mentor Group Gold to advertise your services or to send PMs!

Read the forum rules again, one post more like this and you are gone with all your posts:
 
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