Current structure: LV+SC. Looking for new structure ideas please

[bilderberger]

I'm looking for structure suggestions.

I'm a tax resident in Latvia, originally from UK. I'm doing marketing and advertising consulting services.

I have a local micro-company that employs me and other family members and pays my local taxes and can receive payments from other companies. Effective taxation rate is a little more than 15% based on turnover - so I deliberately keep local turnover only to salaries.

I currently have a Seychelles company with a nominee that receives payments from clients, pays expenses and pays invoices for wages to the local company. I have a paypal account and EMI banking but Paypal fee's are high and I'm concerned when revenue grows that any issues with our EMI would basically cripple or sink our business. Also, our EMI doesnt support bank cards for SC companies. And there's a small potential risk of the local tax office alleging that I'm the ultimate beneficiary and trying to tax me for undistributed profits from the SC company, though admittedly there isn't a lot of money there, but this would be a huge hassle.

There's a good chance I'll do 100k revenue before year end, so I'm looking at options for a new or alternate structure to the SC formation. I'd be really grateful to hear ideas on what might work best for parking earnings until its convenient to earn it and pay tax, or to invest into Crypto, as well as paying business related expenses and reducing CFC risks.

Ideal criteria being (I realize some of these are potentially big asks)

• low or no tax jurisdiction.
• Low maintenance costs and relatively simple admin.
• Low formation & renewal costs.
• Possibility to have robust non-EMI banking with cards, without exorbitant transaction fee's.
• Possibility to open Crypto accounts in company name.

Option 1: using a Winglio arrangement and receiving dividends from the Irish company - in Latvia, dividends are tax free if CIT has been paid in EU. this would mean effective tax is <10% (based on Winglio fee's of 6.6%+3%) edit: not applicable, apparently Winglio pay dividends from Malaysia. No other costs. downsides are: no control, could be, or become, a scam. Can't pay for certain expenses from the company, only good for income, no good for crypto, no banking etc.

Option 2. a US LLC + Foundation structure, combined with my SC as committee member. Concerned about administration, EIN, Form 5472 etc.

Option 3. Andorra - 10% corporate tax. No dividend withholding. expensive setup. slow process.

Other ideas: UAE RAK? - seems a credible option, concerned about formation costs, vat accounting & operating costs, CFC rules etc.

Really... looking for ideas and suggestions, and very grateful for any input that can be given.

 

[JustAnotherNomad]

Hasn’t Latvia copies Estonia’s model of deferred corporate taxation? Can’t you just keep the money in the company and pay 20% on what you pay out?
I don’t see any other options that would be both legal and cheap, unless you want to move to a different country.
15% of 100k is just 15k. Doesn’t really make a lot of sense to pay 10k for an illegal setup then, does it? Or 30k for a legal setup...

 

[bilderberger]

Yes you're right - I hadnt thought of that and it would make a lot of sense for "parking" capital... an LV company would also give me access to Crypto accounts for the company and bank cards for business expenses. Can't see the forest for the tree's eh?

When you say 30k for a legal setup - what sort of structure are you thinking about?

 

[JustAnotherNomad]

30k was just a random figure I made up to demonstrate it would be more expensive.
For a legal setup you need substance. That is, staff who get paid at market rates and who can work autonomously, without you being involved in the daily operations of the business.
You could set up a company in the UAE, rent an office, hire 2-5 marketing consultants including one who’d be the director of the company and have them work for you. Your company in Latvia would then pay the UAE company for the services it provides. But you can expect that the Latvian tax office would check this in great detail to make sure you’re not overpaying for the services. They would probably rather demand that you pay less than what you’d pay a competitor since the UAE company gets all of its business “for free” (no sales cost to win your Latvian company as a client). You would also need a good business reason (other than tax) to justify why you set up the company in the UAE - maybe you’re trying to enter the middle eastern market. And you should fly there several times per year to demonstrate that you’re not secretly controlling the company from Latvia. Then you could legally keep the profits from that business in the UAE, tax free. But as soon as you pay them out to yourself, they would again be taxable in Latvia. But you could save the money in the UAE company and in 10 years, you could move there and cash out. Maybe. But probably not because Latvia would apply exit tax. You may be able to lower your taxes on money received from the UAE company by getting a second residency there, but I’m not sure, it would depend on the tax treaty. Maybe it would work better with Malta or some other EU country, but then you’d be looking at at least 5% taxes in Malta.
And depending on the Latvian CFC rules, even if everything is set up correctly, Latvia might STILL tax the profits of the UAE company, simply because they think it’s unfair that that company doesn’t pay any taxes.
I guess it’s easy to see why the costs for such a setup would go up very quickly. When you have billions in profits, you don’t care, but at 100k, it’s not really worth it when you’re already in a low-tax country.

Just go for a company with deferred taxation and try to claim as high business expenses as possible. Travel expenses, restaurant visits with prospects and business partners, a company car... Try to find a good accountant who will help you find loopholes. Everything will be perfectly legal and you will be paying almost no taxes if you keep most of the profits in the company.

 

[NicolasMaduro]

With relatively a small business income its never worth it trying a fancy setup. And its not like the old days. Now you need an office and employees etc. Also Latvia is not that bad. Pay out average salary and rest tax free dividend(20% cit). Thats a pretty good Low cost tax setup already!!

 

[bilderberger]

Agreed. Thanks everyone for your input, this has been very helpful!