Give me your feedback on this tax-free setup

[UndividedNomad]

Hello,

After building an online business from a EU country for the past few years, I am ready to make some significant changes to go abroad and improve my quality of life. To find better quality of life, this starts with getting out of lockdown, but also to optimize all areas of life, including taxes.

So I've been consulting with a few tax advisors, and I wanted to share this setup to optimize taxes & run an online business to get feedback.

A few points:
-> I have a EU passport
-> For 2020, I've been a resident of a high-tax EU country (not passport country) and managing an online business from there.
-> I've been self-employed and paying taxes in this high-tax EU country at normal tax rates of this country
-> As the business is under my own name, I was taxed at personal income tax rates (roughly 50% of profits)
-> Since the business is fully online and I want to relocate to a more favorable country tax-wise
-> Turnaround is 500K USD per year with profits of 200K USD per year. No employees, just 10 contractors in developing countries.
-> i am getting hammered with 100K in taxes in 2020 so this needs to change.

Here's the setup:
-> Corporate: incorporating a company in Estonia, It's nice, banking is easy via EMI, access to Stripe is easy too. I will have a contract between my company and myself so I am an employee of my own company. This way I don't have to pay board member salary, and only employee salary which would be tax-free in Estonia. Even if I need to pay myself a board member salary, tax on it (social taxes) remain quite low at 10-15% of the overall salary amount.
-> Personal: relocating to territorial tax country such as Panama, Uruguay. Panama still has Friendly Nations Visa which is easy to get with my passport. The Estonian company would be managed from Panama.

A few discussions I had so far:
-> Estonian tax advisor said I can justify to not pay any board member salary if I am the only employee, hence just taking the employee salary. The amount can be variable.
-> A tax advisor from Panama assured me that the salary from the Estonian company wouldn't be considered Panama-sourced income because the effects of my work would have no impact in Panama, hence it would be tax-free in Panama.

Would this setup work?

Thanks!

 

[Martin Everson]

From an Estonian point of view if your the director and you are not resident in Estonia then pay yourself an employee salary which maybe tax free depending on country your resident in. Also as you know corporate tax on distribution of profits still applies for Estonia companies so setup is not entirely tax free. However you can draw income out slowly over time as employee salary while preserving your profit untaxed in company to achieve the same result. Therefore only issue is whether what that Panama tax advisor says is true. Panama is not a country I pay any attention to in order to confirm any of what he said.

 

[CaptK]

If the need to keep a company in the Europe to access Stripe then I would look at a UK LLP. Register a limited company as the General partner and yourself as the limited partner. The limited company will stay dormant or file very little income.

Profits from the LLP are taxed in the country of residence. If the country is territorial or tax free, c'est voila.

 

[Marzio]

Would this setup work?

No because you could use Stripe with your OU company only if you relocate in a Stripe supported country. The LLP is a better solution