Experiences from Greeks having companies abroad

[lionheart]

Hi

I would like to hear from Greek citizens, the experiences they had with the Greek taxes, after they have formed and operated a company abroad.

I live in Greece and I was ready to form a Romanian SRL, but I am getting too much contradicting info (pros and cons).

 

[tasos]

Hello there,

I do live in Greece.

What are the pros and cons for you if you don't mind sharing?

I have a meeting with a consultant tomorrow for the exact same reason, Romanian company.

 

[lionheart]

Well, the 2 big pross are:
a) No VAT charge for up to 300.000 LEI (about 65.000 euros).
b) 3% tax on the revenue.

What is still not clear is this: I take the profit as divident and Romania taxes me 5%. I bring this home to Greece.
a) One theory is that due to double tax avoidance rules I do not pay the 5% tax in Greece. Basically I do not pay much on this money.
b) The other theory is that I pay 20-26% income tax on this money.

 

[tasos]

Romania and Greece have DTT, therefore, given that Romania does have a 5% tax on dividends and Greece has the same rate, you will pay only the difference in Greece, which in this case is 0%.

b) The other theory is that I pay 20-26% income tax on this money.

Where does this income tax come from?

 

[lionheart]

Romania and Greece have DTT, therefore, given that Romania does have a 5% tax on dividends and Greece has the same rate, you will pay only the difference in Greece, which in this case is 0%.



Where does this income tax come from?

I will still live in Greece, the company will be managed from Greece. So I am afraid that the entire income from the Romanian SRL will be taxed as personal income.

 

[Sols]

There are questions you should be asking a Greek tax adviser/attorney.

As a general principle, any company which is managed and controlled from Greece is tax resident in Greece. This means that your Romanian company will be subject to full Greek corporate tax. If you have already paid tax in Romania, you might be able to use the DTT to only pay the difference in Greece. So if you've paid 3% corporate income tax in Romania, you'd have 24%-3%=21% left to pay in Greece. Since we're talking about 3% tax on revenue in Romania and 24% tax on profits in Greece, the exact calculation works out a little differently.

To get around this, you need to move real and effective control and management of the company to someone in Romania, so that you become purely a passive investor.

 

[lionheart]

There are questions you should be asking a Greek tax adviser/attorney.

As a general principle, any company which is managed and controlled from Greece is tax resident in Greece. This means that your Romanian company will be subject to full Greek corporate tax. If you have already paid tax in Romania, you might be able to use the DTT to only pay the difference in Greece. So if you've paid 3% corporate income tax in Romania, you'd have 24%-3%=21% left to pay in Greece. Since we're talking about 3% tax on revenue in Romania and 24% tax on profits in Greece, the exact calculation works out a little differently.

To get around this, you need to move real and effective control and management of the company to someone in Romania, so that you become purely a passive investor.

It is the Greek advisors that give me contradictory info. On how easy or impossible it is to move my tax residency to Romania etc.

The reality is that I will stay in Greece, and I will run the company from here. Maybe I can find a nominee director. Would this be viable?

This is why I am looking for real experiences

 

[tasos]

I am in the same position but I will move there.

The Greek advisor is not advising you correctly. It doesn't matter if you have a nominee director or not, the banks want to know the UBO and under the CRS, the banks will report the UBO, aka you, to Greece.

So unless you move there, cut all ties with Greece, is not worth the risk

 

[Sols]

The reality is that I will stay in Greece, and I will run the company from here. Maybe I can find a nominee director. Would this be viable?

A local director doesn't change anything if it's just a nominee. It might add some nuance but you're ultimately the UBO and have control, so as @tasos says, it won't work out.

This is why I am looking for real experiences

Fully understand why you're asking for real experiences and hopefully someone shares theirs. In my experience, while there is interest in Romanian micro companies, I have never seen one formed. It never ends up being the best choice. So you may have more success if you extend your search for comparisons to include any foreign (or at least EU) company controlled from Greece.

The principles and laws are quite clear on this. The company becomes a Greek tax resident when it is controlled from Greece. Any experience to the contrary is contrary to Greek law and the people involved are at a constant risk of being caught. How big is that risk? Hard to tell exactly but since we're talking about intra-EU exchange of information, it's high and getting higher.

 

[tasos]

In my experience, while there is interest in Romanian micro companies, I have never seen one formed. It never ends up being the best choice.

@Sols May I ask why you think so?

I am conducting some research on this, talking with consultants, and considering moving there.

 

[Sols]

@Sols May I ask why you think so?

Each situation is different but the commonly brought up drawbacks for Romania are lack of familiarity, lack of precedence, language, bureaucracy, corruption, poor banking, difficulties attracting foreign talent, and the local currency being rather useless.

In every situation, jurisdictions like Malta, Cyprus, and Ireland (and non-EU alternatives) have been more attractive choices.

The 3% tax on revenue is great if you're small business with small ambitions. If you grow your business to above 1 million EUR turnover, the tax burden shifts to 16% on profits, which is still quite low but higher than for example Malta, Cyprus, and Ireland which are far more popular jurisdictions in most other regards.

 

[lionheart]

The Greek advisor is not advising you correctly. It doesn't matter if you have a nominee director or not, the banks want to know the UBO and under the CRS, the banks will report the UBO, aka you, to Greece.

But I do not want to hide from being the owner.

Sols said that I need to have a REAL manager in Romania and me to be just the investor. The banks will report me anyway.

I don;t understand how the banks will know the difference between a real manager and a nominee director.

 

[Sols]

Sols said that I need to have a REAL manager in Romania and me to be just the investor. The banks will report me anyway.

I don;t understand how the banks will know the difference for a real manager to a nominee director.

The bank will report to Greece because you are the UBO and you live in Greece. The Greek authorities might investigate the company and send you a tax bill (exactly how this works varies). You can then try to fight it (in court) and point to the local director in Romania, and claim that you are just an investor.

That's a bit simplified, but it's basically how it would go.

 

[lionheart]

The bank will report to Greece because you are the UBO and you live in Greece. The Greek authorities might investigate the company and send you a tax bill (exactly how this works varies). You can then try to fight it (in court) and point to the local director in Romania, and claim that you are just an investor.

That's a bit simplified, but it's basically how it would go.

I understand.

Now suppose I am a real investor and the company has substance, office, employees and a director in Romania. How would the scenario change?

 

[Sols]

Now suppose I am a real investor and the company has substance, office, employees and a director in Romania. How would the scenario change?

Then the board of directors of the Romanian company can decide to distribute dividends to you as the shareholder/investor. You will then need to pay income tax on dividends received in Greece.

If tax was applied in Romania, you might be able to use the DTT between Romania and Greece to reduce your tax burden in Greece. So if it's 5% tax in Romania and 5% in Greece, they would cancel each other out and you wouldn't have to pay more.

But discuss that with a licensed tax adviser.

 

[lionheart]

@Sols, I still do not understand what will triger an investigation, if I have a nominee director. How can the banks or any authorities know the difference between a real management and a nominee one?

 

[Sols]

When you open an account for your Romanian company, the bank will see that you are the UBO (Ultimate Beneficial Owner). Whether you have a nominee does not affect that. You are still the UBO. There is no such thing as a nominee UBO. You can have a nominee director and a nominee shareholder. But you remain UBO.

The bank will eventually send a report to the relevant authority in Romania, which will then share the information with the Greek authorities. The report will state that there is a business account in Romania for which you are a UBO. It is then up to the Greek authorities to take action.

 

[lionheart]

When you open an account for your Romanian company, the bank will see that you are the UBO (Ultimate Beneficial Owner). Whether you have a nominee does not affect that. You are still the UBO.

Yes, I understand this. And this is true wether I have a nominee director or a real substance company. Correct?

Without further investigation from the authorities, they could not know if the company has real or nominee director in Romania. Am I correct?

 

[Sols]

Yes, I understand this. And this is true wether I have a nominee director or a real substance company. Correct?

Correct.

Without further investigation from the authorities, they could not know if the company has real or nominee director in Romania. Am I correct?

Correct.

The report the Greek authorities receive will just say that "Mr. Lionheart of Xyz Street, Athens, Greece is a beneficial owner of bank account 123 held by Abc Limited with a balance of ### euro". It is then up to them to decide whether to take any further action.

 

[lionheart]

The report the Greek authorities receive will just say that "Mr. Lionheart of Xyz Street, Athens, Greece is a beneficial owner of bank account 123 held by Abc Limited with a balance of ### euro". It is then up to them to decide whether to take any further action.

Thank you so much for the clarification. There is so much misconception around.

@Sols, and this brings me the question: Would a nominee director really help me? Does he appear anywhere? He signs some papers? Is there some superficial check from the authorities that he can pass?