Danish Company Structuring - Investment firm

[Wildefox]

Hello, I have a rather complex situation I would like some guidance on.

I am currently living in Denmark, with no interest in relocating at the moment.

I’d like to open an investment firm/family office offshore for myself and some clients, at first just trading stocks, but potentially purchasing real estate.

At the moment, there would be quite low cashflow, but we have some major things in the pipeline and it could quickly pick up, but besides that the main benefit I’d like would be the elimination of capital gains tax, which means that I’d be able to reinvest a larger amount of equity.

The tax rate on capital gains in Denmark is an extortionate 42%, eliminating that, hallelujah.

Compound that for a couple years, and that makes a major difference.

I do not intend to pay out the gains, just continually reinvest, and if i, or a client, would want to pay out the gains, we’d be fine paying danish taxes, or relocate to somewhere else at that point.

Anyone have an idea whether this is legally possible without relocating (possibly using a nominee director + power of attorney in a Bahamas or Cyprus company?), any ideas on structuring?

Also if anyone has a good recommendation for a firm specialising in this I’d love to hear it.

 

[Sols]

From the description, this is not possible. At least not in a legal, sustainable way.

If you're not comfortable with Danish tax and Danish law, don't live in Denmark.

As for why it's not possible, you immediately run into problems with tax residence, which nominees do not solve. The Danish tax office isn't going to look at your company and see that you are effectively calling the shots from your cozy Copenhagen apartment (telling the nominees what to do/sign), and somehow not consider the company subject to Danish tax law. The only way you'd be successfully evading Danish tax is if you're somehow never caught. Nowadays with heaps of exchange of information mechanisms (most notably CRS/AEOI), Denmark will be informed about your company one way or another — now or in the future.

Things were different when all we had were TIEAs, but these days you're taking a huge risk.

If you're taking funds from other people, you are very likely engaged in activities that are regulated in one way or another. So add a few more years to your prison sentence for tax evasion.

If you have deep pockets (millions or tens of millions), it could make sense to set up a proper structure in a zero/low tax jurisdiction, establish sole tax residence there (not through just nominee directors), and in such case act as just a shareholder. You'd still have to pay taxes on dividends but you could likely avoid corporate income tax and other hassles.

 

[Marzio]

The tax rate on capital gains in Denmark is an extortionate 42%, eliminating that

You are talking about capital gains at 42% at individual level.

You can reduce it to 27% by paying you up to DKK 57,200 (114,400 if you are married) + DKK 55,000 as a salary that will be taxed at 8%.

In that way you can minimize taxes paid in Denmark but if you plan to leave to cash out in UAE there's bad news for you because Denmark has an exit tax on the market value of the assets as the date of exit.

This means that if you foresee cashflow picking up leave now.

 

[CyprusLaw]

Hello, I have a rather complex situation I would like some guidance on.

I am currently living in Denmark, with no interest in relocating at the moment.

I’d like to open an investment firm/family office offshore for myself and some clients, at first just trading stocks, but potentially purchasing real estate.

At the moment, there would be quite low cashflow, but we have some major things in the pipeline and it could quickly pick up, but besides that the main benefit I’d like would be the elimination of capital gains tax, which means that I’d be able to reinvest a larger amount of equity.

The tax rate on capital gains in Denmark is an extortionate 42%, eliminating that, hallelujah.

Compound that for a couple years, and that makes a major difference.

I do not intend to pay out the gains, just continually reinvest, and if i, or a client, would want to pay out the gains, we’d be fine paying danish taxes, or relocate to somewhere else at that point.

Anyone have an idea whether this is legally possible without relocating (possibly using a nominee director + power of attorney in a Bahamas or Cyprus company?), any ideas on structuring?

Also if anyone has a good recommendation for a firm specialising in this I’d love to hear it.

The first important note here is that, as Sols has mentioned, the activities you describe are regulated. In Cyprus you would have to create a company and apply to the Cyprus Securities and Exchange Commission for the company to become licensed as an alternative investment fund. This comprises of a number of requirements, for example: (i) at least four directors, executive and non executive, (ii) offices in Cyprus; (iii) prospectus and internal manuals; (iv) capital requirements etc. These are only some examples of the requirements. If you are interested I can PM you to discuss