1. joelb

    joelb International Pirate ;-D BANNED MEMBER

    I am thinking about opening a company in Estonia to have EU presence because they have 0% corporate tax until I get the money out of the company and it's easy to open a bank account for an Estonian company. Then the Estonian company would transfer 95% of it's profits to the mother company as copyrights etc payment, OR would invest its profits in the company in Belize. So the funds will go offshore, but as I see the 20% Estonian corporate tax won't apply since the profit was not taken out as dividends it was paid against an invoice or as an investment to get shares.

    My concerns:
    1.) Will my home country consider the Estonian company (where I am the director) as CFC?
    2.) Usually, what is the biggest % that the tax authority allows without objection to pay to the mother company in exchange for intellectual properties (copyright, know-how, etc) or with a contract that says the Estonian company does not do anything it's just invoicing clients while the real work is done in Belize?
    3.) As I see the Estonian companies needs bookkeeping audited yearly. How much are those?
    4.) Is this a good idea at all?
    Admin likes this.
  2. Samuel Newman

    Samuel Newman Offshore Desk expert Mentor Group Entrepreneur

    It may work in some cases, but not with Belize
    transfer funds to Belize is the same as take dividends from Estonian company and you will have 20% tax obliations on all funds transfered to Belize
  3. joelb

    joelb International Pirate ;-D BANNED MEMBER

    If I pay against an invoice why is the same?
  4. Samuel Newman

    Samuel Newman Offshore Desk expert Mentor Group Entrepreneur

    according to Estonian taxation system
    if you pay to companies, registered in jurisdictions from Estonian list of offshore zones it is treated as a profit distribution, in some cases you may prove to tax office, that you are REALLY obligated to pay offshores for some services/goods, but it is near to impossible

    also, you need to keep in mind EU VAT obligations if you have partners in EU

    "From 1 July 2009, the standard VAT tax rate in Estonia has been 20% and a reduced rate of 9%. A small number of goods and services are not taxed. Estonian VAT system is based on EU Council directive 2006/112/EC and its basic principles are the same as in other EU countries. As of 2018 annual turnover threshold for mandatory registration as VAT liable person is 40 000 euros"

    P.S. do not forget to talk to tax advisor or accountant before start
  5. fshore

    fshore New Member

    transfer pricing
  6. joelb

    joelb International Pirate ;-D BANNED MEMBER

    Exactly, that is what I was talking about.
    I invoice the clients $1000 for SEO services, but the service is only billed from Estonia, the service is carried out elsewhere. Therefore the Estonian company doesn't do anything, there are no employees, nothing there. That is why it can keep only 5% of the transaction which is a fair piece (arms-length) for the releasing a single invoice to the customer. 95% of the profit goes to the offshore company since the work was done there, or by subcontractors somewhere else, but that should not be the Estonian taxmen's concern where do I hire the people from, who actually carry out the SEO services.

    If there are
    - Real clients.
    - Real service delivered.
    - Real invoice to the client.
    - Real contract between the companies setting the 5% price for the invoicing service in Estonia.
    - Real money transferred to real bank accounts.
    ...then I don't see why would this be problematic.
  7. Admin

    Admin Forum Moderator The Forum Cleaner

    Normally I would not answer a thread initiated by a banned member, anyway, the thread can be helpful for others so it wasn't useless to have you here starting this topic.

    This will require a good tax lawyer in your country in order for the tax auth. to approve the setup. Today it is difficult with such setups to convince the tax auth. that a company without management, real office or real director anything else then just a shelf company used for tax avoidance or maybe we shall call it tax evasion.