Exploring Relocation Options in the EU (Possibly Without Time Limits)

[iraris]

Hello everyone,

I am an Italian resident currently considering a relocation within the European Union. I have been managing an LLC in Delaware for the past few months, indulging in the excitement of business operations and bureaucracy. However, it's time to contemplate my personal residence, as the LLC in Delaware is proving incompatible with my current living situation.

I specialize in selling IT services in Italy, and my primary objectives are:

1) Avoiding VAT as a significant cost. While this may seem straightforward, the inclusion of VAT in IT consultancy poses a challenge, considering it adds an extra layer of cost to the service. I offer Zoom calls managed by me, eliminating the need for any software downloads or similar requirements so it should be better for the VAT issue. My clients are 80% from Italy, 10% from EU, 10% worldwide. Both 30% B2B and 70% B2C.

2) Residing in a country with an acceptable taxation rate (ideally between 0% to a maximum of 20%).

3) Preferably relocating within the EU.

My current focus is on Slovakia, which appears interesting. Dividends (I understand that LLCs distribute profits rather than dividends, but they could be declared as such) are taxed at only 7%, and there is no obligation to physically reside in the country.

I am contemplating a lifestyle where I can travel globally (up to 6 months in any single state) while maintaining my residence in Slovakia or any other state that allow being resident without being there.

I've also heard positive things about Estonia, but I'm unsure about its feasibility.

I welcome any recommendations, suggestions, or insights you may have. Additionally, I am open to the idea of dissolving the LLC I recently formed and relocating it to a more suitable location in corporation.

Thank you!

 

[JohnnyDoe]

Of course you are aware of CFC rules, right?

 

[Jerry1911]

How much are you making? Is limited liability important for you or would a sole proprietorship work?

 

[iraris]

How much are you making? Is limited liability important for you or would a sole proprietorship work?

Both works, I'm making 250k per year

 

[alexx999]

I'm Italian, and I'm not sure it would work; the main issue is not the country where you might eventually become a resident, but the Italian IRS.

The only way I could see this working is by actually moving to that country, residing there, and living there. That 'Digital Nomad Taxes' idea is risky and won't work. Do you own a house, have a family (wife, daughters, sons), an office, a car, a motorbike, or a domicile in Italy? Do you have any genuine reason to move to another country besides tax optimization?

The only way this could work is by effectively cutting ties with Italy. This is unlike what many people attempt, maintaining their residency in Italy, moving to a better country, and hoping not to get caught. With all the CRS, CFC, and other regulations in the EU, it won't be long before they catch you. Then, you'll have to prove that you have a strong reason to be in that country, not just an Airbnb there or a postbox where you receive letters.

Remember, the 183-day rule is somewhat misleading when it comes to Italy. If any of the above conditions apply, those rules take precedence over the 183-day rule. Also, remember that you need to register with AIRE beforehand. You can't take advantage of healthcare without paying taxes in the country.

The room for rent (in Malta,Slovenia or wherever you prefer) is okay if you need an address for accounts/companies/cards. However, if you're considering registering with AIRE to cease being a resident of Italy, it's not a good idea at all.

Be aware that AIRE might accept your application, but during any future verification, your entire arrangement could fall apart.

A rented room from friends or relatives can easily be challenged as a sham, a loophole, as it is not conducive to supporting the normal life of an adult.

In any case, probably the best option for you would be Malta or Cyprus, but you would need to actually live there, for real, and be able to prove it with substantial evidence

Sure, 50% of the country evades taxes and i understand why but it's also a bet and the IRS is well known to be a pain in the a*s to deal with.
Why is the US LLC not okay with your setup? it's probably the best setup you could use while being Italian

 

[Don]

Apart from Slovakia, countries like Hungary, Bulgaria, Romania, Malta, Cyprus could be worth looking into.

In Slovakia the company should pay also CIT of 21% if the place of effective management is in Slovakia, and on top of that the WHT of 7% on dividends.

 

[Liam13]

I am quite happy with Cyprus, but you need to reside there for 2 months at least, and not reside more than 6 months elsewhere...

 

[iraris]

Apart from Slovakia, countries like Hungary, Bulgaria, Romania, Malta, Cyprus could be worth looking into.

In Slovakia the company should pay also CIT of 21% if the place of effective management is in Slovakia, and on top of that the WHT of 7% on dividends.

Italy requires Bulgarian citizenship, so I am excluding Bulgaria. Romania, Hungary, Malta, Cyprus, Estonia, and Latvia seem interesting. In this scenario, would it be similar to Slovakia with only withholding tax (WHT)? How much would be?

Also, is it necessary to spend 180 days in these places, or can one live outside without any issues, similar to Slovakia?

Regarding Cyprus, I am aware that it might work, but it requires the establishment of a company there, resulting in a 12.5% tax on what you receive from, for instance, the LLC.

 

[Don]

Italy requires Bulgarian citizenship, so I am excluding Bulgaria. Romania, Hungary, Malta, Cyprus, Estonia, and Latvia seem interesting. In this scenario, would it be similar to Slovakia with only withholding tax (WHT)? How much would be?

US SM LLCs can't access double tax treaties since they are normally not tax resident in the US, so generally, you need to consider the domestic rates where you are resident and how the country treats US SM LLCs managed there (e.g., tax resident, so exposed to corporate tax and WHT)

Also, is it necessary to spend 180 days in these places, or can one live outside without any issues, similar to Slovakia?

As discussed above.. there is no time you need to spend in some countries to be able to qualify as a tax resident as a natural person.

 

[Liam13]

Italy requires Bulgarian citizenship, so I am excluding Bulgaria. Romania, Hungary, Malta, Cyprus, Estonia, and Latvia seem interesting. In this scenario, would it be similar to Slovakia with only withholding tax (WHT)? How much would be?

Also, is it necessary to spend 180 days in these places, or can one live outside without any issues, similar to Slovakia?

Regarding Cyprus, I am aware that it might work, but it requires the establishment of a company there, resulting in a 12.5% tax on what you receive from, for instance, the LLC.

12.5% on profit and 2.5% on dividends yes for non dom residents. In any case, be careful not to be seen as "tax resident" by other jurisdictions, in your case Italy...that's the big problem. Cyprus is happy as long as you pay taxes and they won't really annoy you about the "minimum" but Italy is not getting paid... and might annoy you...

 

[gyorgy]

Apart from Slovakia, countries like Hungary, Bulgaria, Romania, Malta, Cyprus could be worth looking into.

In Slovakia the company should pay also CIT of 21% if the place of effective management is in Slovakia, and on top of that the WHT of 7% on dividends.

In Slovakia as of 2024:
CIT is 21% for local company,
25% for foreign co. from cooperative countries and
35% from noncooperative (however only above 100k eur).

DIVIDEND TAX goes to 10% !!!

 

[Don]

Italy requires Bulgarian citizenship, so I am excluding Bulgaria. Romania, Hungary, Malta, Cyprus, Estonia, and Latvia seem interesting. In this scenario, would it be similar to Slovakia with only withholding tax (WHT)? How much would be?

US SM LLCs can't access double tax treaties since they usually are not tax resident in the US, so often, you need to consider the domestic rates where you are resident and how the country treats US SM LLCs managed there (e.g., tax resident, so exposed to corporate tax and WHT)

Also, is it necessary to spend 180 days in these places, or can one live outside without any issues, similar to Slovakia?

As discussed above.. there is no time you need to spend in some countries to be able to qualify as a tax resident as a natural person.

Regarding Cyprus, I am aware that it might work, but it requires the establishment of a company there, resulting in a 12.5% tax on what you receive from, for instance, the LLC.

Some constructs using multiple companies might be more interesting.
Take, for example, a Romanian micro company - the jurisdiction perhaps does not have the best reputation.
But using a Delaware LLC as a front of the business could put things in a different light.

 

[iraris]

12.5% on profit and 2.5% on dividends yes for non dom residents. In any case, be careful not to be seen as "tax resident" by other jurisdictions, in your case Italy...that's the big problem. Cyprus is happy as long as you pay taxes and they won't really annoy you about the "minimum" but Italy is not getting paid... and might annoy you...

In this scenario, should I integrate a company in Cyprus with 100% ownership by a Delaware-based company, or is it advisable to keep the two entities distinct?

If I provide digital services through platforms like Zoom, do I need to apply VAT (19%) in Cyprus, where the company is established, or in Italy, where the services are being sold?

Additionally, are there any strategies to optimize the VAT implications when dealing with the sale of digital products?

US SM LLCs can't access double tax treaties since they usually are not tax resident in the US, so often, you need to consider the domestic rates where you are resident and how the country treats US SM LLCs managed there (e.g., tax resident, so exposed to corporate tax and WHT)

As discussed above.. there is no time you need to spend in some countries to be able to qualify as a tax resident as a natural person.

Some constructs using multiple companies might be more interesting.
Take, for example, a Romanian micro company - the jurisdiction perhaps does not have the best reputation.
But using a Delaware LLC as a front of the business could put things in a different light.

In this case, is it acceptable for the Delaware LLC to be the shareholder of the Romanian micro company? Can this arrangement be implemented even if I am a non-resident? And VAT?

 

[Don]

In this scenario, should I integrate a company in Cyprus with 100% ownership by a Delaware-based company, or is it advisable to keep the two entities distinct?

If I provide digital services through platforms like Zoom, do I need to apply VAT (19%) in Cyprus, where the company is established, or in Italy, where the services are being sold?

Additionally, are there any strategies to optimize the VAT implications when dealing with the sale of digital products?


In this case, is it acceptable for the Delaware LLC to be the shareholder of the Romanian micro company? Can this arrangement be implemented even if I am a non-resident? And VAT?

If you would involve a Delaware SMLLC it would be good to know where you willl be based since the entity could be treated as transparent in certain jurisdictions, or you could be exposed to additional taxes, so it could change the tax implications.

Its a complex topic so best would be to speak with an international tax adviser involving some local experts, unless you choose some commonly used setup keeping things simple.

 

[Liam13]

Also banks are not huge fans of such shell over shell structures