EU jurisdiction with lax transfer pricing requirements

[Jerry1911]

I need to setup a company in the EU with a VAT ID in order to handle business with EU suppliers. Plan is to then invoice my main offshore company for all expenses incurred.

However, I'm having a hard time figuring out which EU jurisdiction has the least amount of transfer pricing documentation requirements.

For example, Estonia seemed like a decent option until I found out that the SME exemption doesn't apply to transactions with companies in low tax jurisdictions.

So, any suggestions?

 

[Marzio]

On top of my head i would say Hungary.

According to PwC Transfer pricing documentation is not required to be prepared if the value of the transaction does not exceed HUF 50 million during the tax year.

HUF 50 million = $150k

 

[Jerry1911]

Still looking for a solution and planning to incorporate within the next 2 months.

Thanks for the suggestion but I would like to avoid Hungary due to language issues and bureaucracy.

Estonia is a no-go due to no exemption for SMEs.

Seems like Latvia and Lithuania are good options. Would be great if someone could double check and confirm and let me know which of the two is easiest/cheaper to set up a company in... Both have SME transfer pricing exemptions as far as I can see.

 

[JohnnyDoe]

Still looking for a solution and planning to incorporate within the next 2 months.

Thanks for the suggestion but I would like to avoid Hungary due to language issues and bureaucracy.

Estonia is a no-go due to no exemption for SMEs.

Seems like Latvia and Lithuania are good options. Would be great if someone could double check and confirm and let me know which of the two is easiest/cheaper to set up a company in... Both have SME transfer pricing exemptions as far as I can see.

Do you think Latvian and Lithuanian languages are easier than Hungarian?
I would avoid such small countries. In Latvia they will happily confiscate money based on groundless suspicions and you will never see it again. The judiciary is a joke. As for Lithuania, some say it’s a worse, slower version of Latvia…

 

[Jerry1911]

Thanks for info about Lithuania. Will avoid it then.

Do you think Latvian and Lithuanian languages are easier than Hungarian?

Hungarians from my experience either don't speak English at all or speak it very poorly. Not sure about Latvia but it sure can't be worse than Hungary... Maybe I'm wrong? Maybe Hungarian lawyers speak English good enough?

In Latvia they will happily confiscate money based on groundless suspicions and you will never see it again.

I wouldn't be banking in Latvia that's for sure. I just need an EU company with a VAT ID and no transfer pricing bulls**t so that I can deal with EU suppliers.

 

[JohnnyDoe]

Thanks for info about Lithuania. Will avoid it then.


Hungarians from my experience either don't speak English at all or speak it very poorly. Not sure about Latvia but it sure can't be worse than Hungary... Maybe I'm wrong? Maybe Hungarian lawyers speak English good enough?

Latvia is worse. If you speak Russian no problem, but English is an issue.
You really can’t compare the two countries, Hungary is full of good English speaking lawyers.

I wouldn't be banking in Latvia that's for sure. I just need an EU company with a VAT ID and no transfer pricing bulls**t so that I can deal with EU suppliers.

Latvia desperately needs money, and they will take it wherever can be found. They will not think twice to indict you…

 

[Jerry1911]

You really can’t compare the two countries, Hungary is full of good English speaking lawyers.

Ok lets say I settle on Hungary.

The company would buy hardware from EU suppliers (VAT ID is a requirement), it would enter into contracts with different EU datacenters and lease the hardware out to one of my other companies. It would just be used to cover operational costs within the EU so corporation tax and dividends WHT is irrelevant.

What would be the best holding structure so that the Hungarian Kft is not in my own name? STAK Stichting? UK LBG company?

Privacy would not be needed mostly because I assume Hungary has a public UBO register anyway and it also wouldn't be a customer facing company so no problem there.

 

[JohnnyDoe]

Ok lets say I settle on Hungary.

The company would buy hardware from EU suppliers (VAT ID is a requirement), it would enter into contracts with different EU datacenters and lease the hardware out to one of my other companies. It would just be used to cover operational costs within the EU so corporation tax and dividends WHT is irrelevant.

What would be the best holding structure so that the Hungarian Kft is not in my own name? STAK Stichting? UK LBG company?

Privacy would not be needed mostly because I assume Hungary has a public UBO register anyway and it also wouldn't be a customer facing company so no problem there.

Cyprus, Denmark, Netherlands… plenty of options to discuss with your advisor

 

[JustAnotherNomad]

Denmark?! Why would Denmark be a good place for a holding company?!

 

[Marzio]

https://www.lawyersdenmark.com/denmark-holding-company

 

[JustAnotherNomad]

But they have withholding tax?
https://taxsummaries.pwc.com/denmark/corporate/withholding-taxes

 

[Marzio]

But they have withholding tax?

They do have a holding regime (that i haven't checked), i guess it's a regime like the spanish ETVE where dividends from subsidiaries are tax exempt and there are no witholding taxes on dividends distributed to foreign shareholders.

https://www.strongabogados.com/property-etve.php

 

[JustAnotherNomad]

Yeah, but seems like there are quite a few restrictions, so in many cases, WHT would still apply?

 

[Marzio]

Yeah, but seems like there are quite a few restrictions

I honestly don't know much about the Danish holding so i'm not aware of the restrictions are you referring to

 

[JustAnotherNomad]

I don't really understand the PwC article either, but it seems that you can only avoid the WHT if there is a tax treaty. So for dividends to most tax-free locations, there still is 22-27% WHT.