Greetings from Sweden, need some advice!

[DavidTheDude]

Hi! I am new to this forum and it seems like an amazing resource for offshore discussion. I am a newbie but I'm willing to listen and learn from the experts here and hopefully be able to gather enough knowledge on what I can do for my situation. I'd also like to join the mentor group gold for further advice/knowledge but I'd first like some advice about my plan and I would be thankful for answers!

I am a Swedish citizen, which means that if I profit around SEK 500 000 (USD 60 437,28) a year, I would have to pay 66.741% of that in income tax. And if I want to spend that money I'd be taxed 25% VAT on the products that I buy. Needless to say, I'm getting taxed to oblivion.

So my question is if it is even worth it to register the company in Sweden, to begin with? (Assuming I make more than 6K dollars a year? See below for more info)

I am going to be running an e-commerce store with 0 employees and only sell virtual goods (3D models for architects/game devs) and declaring VAT is a nightmare if you are registered in the EU and selling to other EU countries because of different VAT rates etc.

Registering an exempted company and bank in the Cayman Islands would cost around 4-5K dollars and then 2600 dollars in annual fees. (From what I've read so far)

So if I only profit 6000 dollars a year from my theoretically registered Swedish company I would only get to keep 3201 dollars. The 2799 dollars that were taxed might as well have been spent on Cayman annual company fees. I think I will be able to make more than 6000 dollars per year, so is there a reason not to register the company offshore when making 6000 dollars profit and beyond?

I already have all the software/equipment + 0 employees so my expenses would almost be 0 and the income would almost be pure profit apart from annual software licenses, without any expenses to declare, my tax burden in Sweden is brutal.

So is Cayman the way to go for profits of around 6000 dollars+ annually? Even though Cayman might be one of the more expensive offshore countries, I'm not interested in any other country because I want to invest in property for Cayman citizenship by investment if the company becomes successful. I'm also not crystal clear about the laws of having an off-shore company and bank account is in Sweden, if it is illegal I would be willing to move to any of the Caribbean Islands but I'm not sure if you are allowed to work there without citizenship etc. I'm pretty sure I read that you can't work in the Cayman Islands if you own an exempted company there without being a citizen, so the other Caribbean islands might be fine, I'll have to do more research on that.

Thanks a lot for reading and I'll soon join the gold club for follow-up questions.
Kind regards, David.

 

[bizniz]

Hey David, welcome to the forum.

I'm not going to try to give you a full answer, but let's get started and see what others have to say. I think your research is on the right track. There is nothing illegal about having offshore companies and accounts (whether or not they are in CRS countries) - but it might be illegal not to declare them. Probably Sweden would have Controlled Foreign Corporation laws that would say the business will be taxed in Sweden since it would deemed to be resident in and managed from Sweden. That's if you live there.

If you move to a tax-free country in the Caribbean then you are fine and will have no problems. I'm not sure Cayman is the best choice. I think you are confused about a Citizenship by Investment program in Cayman. Cayman is a British territory that issues British passports and you don't get them so easily. You should probably look at independent nations that have Citizenship by Investment programs. St Kitts & Nevis is good, as is Grenada. They would be my first choices. For offshore company formation Nevis wins hands down in the Caribbean.

Without a doubt, if you want to go offshore fully legally and successfully these days, it is best to move YOURSELF offshore. If you are willing to do so, the sky's the limit and you can legally wave bye-bye to Swedish taxes for ever.

 

[DavidTheDude]

Hey David, welcome to the forum.

I'm not going to try to give you a full answer, but let's get started and see what others have to say. I think your research is on the right track. There is nothing illegal about having offshore companies and accounts (whether or not they are in CRS countries) - but it might be illegal not to declare them. Probably Sweden would have Controlled Foreign Corporation laws that would say the business will be taxed in Sweden since it would deemed to be resident in and managed from Sweden. That's if you live there.

If you move to a tax-free country in the Caribbean then you are fine and will have no problems. I'm not sure Cayman is the best choice. I think you are confused about a Citizenship by Investment program in Cayman. Cayman is a British territory that issues British passports and you don't get them so easily. You should probably look at independent nations that have Citizenship by Investment programs. St Kitts & Nevis is good, as is Grenada. They would be my first choices. For offshore company formation Nevis wins hands down in the Caribbean.

Without a doubt, if you want to go offshore fully legally and successfully these days, it is best to move YOURSELF offshore. If you are willing to do so, the sky's the limit and you can legally wave bye-bye to Swedish taxes for ever.

Thanks a lot for the answer, I'll have to look further into the Swedish Corporation laws since I am managing the business in Sweden. My business can be managed from anywhere since only a laptop and camera equipment is required. The business could even be managed in international waters on a boat.

Indeed, I am not crystal clear about the Cayman investment program, I would not mind changing citizenship but I was just unsure whenever
I would need to pay taxes to Sweden even if I was operating outside the country while still having Swedish citizenship. Most of the Caribbean Islands will work well for me, Cayman was
the first one I heard about and researched.
I'll do some research on the nations you mentioned! Thanks again.

 

[Sols]

The short of it is that if you live in Sweden, any company that you control is subject to Swedish tax law. Information about the company and its bank accounts is reported to the Swedish authorities under CRS.

If you're making 500,000 SEK profit per year, the Cayman Islands are not a great fit. Even at 0% tax, the costs of living are so much higher that it might end up feeling like a downgrade in quality of life — although the weather will certainly be better most of the time.

As an EU national, the easiest step to legally lowering your tax burden is to relocate to Malta or Cyprus, and run your business from there. Tax won't be zero but it'll be a massive drop from Sweden. Costs of living are a bit lower, especially compared to big city regions of Sweden. Stay there for a few years and grow your business and your personal wealth, and then invest in Cayman Islands?

 

[BlueMist]

The Swedish people I came across usually do not mind paying so high taxes, as they seem to believe (and which I guess is true) to have a superior pension system in place. Those who mind however are in Malta, there are plenty of Swedish entrepreneurs there.

Have a look at this blog of Swedish person living in Malta, although the article is a bit dated, not much has changed. You can look up his newer blog entries too:

Living in Malta - Pros & Cons After 5 Years Experience

Moving to Malta? I was living in Malta for more than 5 years: here’s my experience and the pros & cons so that you can figure out if you should move (or not).

johanneslarsson.com

 

[DavidTheDude]

The short of it is that if you live in Sweden, any company that you control is subject to Swedish tax law. Information about the company and its bank accounts is reported to the Swedish authorities under CRS.

If you're making 500,000 SEK profit per year, the Cayman Islands are not a great fit. Even at 0% tax, the costs of living are so much higher that it might end up feeling like a downgrade in quality of life — although the weather will certainly be better most of the time.

As an EU national, the easiest step to legally lowering your tax burden is to relocate to Malta or Cyprus, and run your business from there. Tax won't be zero but it'll be a massive drop from Sweden. Costs of living are a bit lower, especially compared to big city regions of Sweden. Stay there for a few years and grow your business and your personal wealth, and then invest in Cayman Islands?

Ah, I see, so I would essentially have to pay Swedish tax along with Cayman fees? Might as well go full Marvin Heemeyer at that point.

Jokes aside, Malta or Cyprus seem interesting, I'll have to look for info on banking and the ease of running e-commerce for both Cyprus and Malta. Depending on the time and headache it might or might not be worth living there as a means to my road to the Caribbean.

The main goal is the was Cayman, but most other Caribbean islands are more than good enough. I like the Caribbean mainly because of the culture, low tax, and it also fits my work great because I have great experience in plant morphology and 3D so most of my 3D production work is niche and related to plants. My work is niche but I've developed a workflow and quality that I believe blows my competitors out of the window in that particular category of 3D work. The Caribbean also has a huge variety of flora which opens up more opportunities for more work.

I looked up the cost of living in Cayman and it seems like you'd have to make more than 100K USD per year to live decently. While that's possible it feels like a reach.

St Kitts and Nevis seem appealing with citizenship by donation for $150,000 or by investing in real estate for $400,000. It's a lot more doable than Cayman.

I do not care about my Swedish citizenship or "free" healthcare. I might have to bite the bullet in taxes until I can afford St Kitts without emptying my entire bank account. I'll also have to learn more about the cost of living in St Kitts. If I like that place I might settle for it and ditch Cayman altogether. Otherwise, Sweden to St Kitt's to Cayman is a lot better than Sweden to Cayman.

Wouldn't it be nice if you could just wire transfer the undeclared PayPal profit straight to St Kitts citizenship? I'd hear knocks on the door real quick hahah

You guys are extremely helpful and I cannot thank you enough. I'll be joining the gold club when things will take off.

 

[DavidTheDude]

The Swedish people I came across usually do not mind paying so high taxes, as they seem to believe (and which I guess is true) to have a superior pension system in place. Those who mind however are in Malta, there are plenty of Swedish entrepreneurs there.

Have a look at this blog of Swedish person living in Malta, although the article is a bit dated, not much has changed. You can look up his newer blog entries too:

Living in Malta - Pros & Cons After 5 Years Experience

Moving to Malta? I was living in Malta for more than 5 years: here’s my experience and the pros & cons so that you can figure out if you should move (or not).

johanneslarsson.com

I'll take a look, thanks! The pension system is mediocre at best, most elders are poor and we lack a lot of resources. I always go for private over public healthcare because the waiting times are too long.

 

[NicolasMaduro]

declaring VAT is a nightmare if you are registered in the EU and selling to other EU countries because of different VAT rates etc.

Its actually quite simple paying VAT in the EU. And relocating to outside of EU won't remove you of that burden. You are still obligated to pay VAT.

 

[DavidTheDude]

Its actually quite simple paying VAT in the EU. And relocating to outside of EU won't remove you of that burden. You are still obligated to pay VAT.

I saw that the government developed something called Mini One Stop Shop (MOSS). "MOSS means you don't need to register with tax authorities in every EU country you sell to, instead, you can register for VAT, file VAT returns and make payments in one single place." So that would make things easier. Because declaring the customer's VAT to their respective countries would take forever. I'm however not sure if I would have to charge sales tax for non-vat counties like the US. I spoke to Swedish tax authorities for this issue and they said that there is no common system for declaring sales for private citizens outside the EU and I would have to contact their country for the rules on what to do. I am obviously not going to contact every single country in the world that I sell to about the laws.

And relocating to outside of EU won't remove you of that burden. You are still obligated to pay VAT.

I see, I still have a lot to learn. Feels like the rabbit hole is endless. I've been confused about VAT for the longest time and my mistake has been that I've spent 97% on my business and 3% studying tax laws. So even I had citizenship in for example Grenada I would still have to charge VAT and give the VAT to each customer's government? Normally it would be easy if I had a lemon stand in Sweden and only sold to people inside Sweden because then I would charge 25% VAT and give it to the Swedish authorities.

You'll have to excuse my lack of knowledge, I am currently learning bookkeeping as we speak. Thanks for the reply. I feel like the government is very far behind when it comes to e-commerce.

 

[NicolasMaduro]

I saw that the government developed something called Mini One Stop Shop (MOSS). "MOSS means you don't need to register with tax authorities in every EU country you sell to, instead, you can register for VAT, file VAT returns and make payments in one single place." So that would make things easier. Because declaring the customer's VAT to their respective countries would take forever. I'm however not sure if I would have to charge sales tax for non-vat counties like the US. I spoke to Swedish tax authorities for this issue and they said that there is no common system for declaring sales for private citizens outside the EU and I would have to contact their country for the rules on what to do. I am obviously not going to contact every single country in the world that I sell to about the laws.



I see, I still have a lot to learn. Feels like the rabbit hole is endless. I've been confused about VAT for the longest time and my mistake has been that I've spent 97% on my business and 3% studying tax laws. So even I had citizenship in for example Grenada I would still have to charge VAT and give the VAT to each customer's government? Normally it would be easy if I had a lemon stand in Sweden and only sold to people inside Sweden because then I would charge 25% VAT and give it to the Swedish authorities.

You'll have to excuse my lack of knowledge, I am currently learning bookkeeping as we speak. Thanks for the reply. I feel like the government is very far behind when it comes to e-commerce.

Yes doesn't matter where you incorporate. You still have to pay VAT to each country, but trough the MOSS system its a breeze. That said many companies don't pay digital VAT, and bypass this by pretending that the customer is Outside EU.

The European Countries are now getting access to credit card details, so they can see how much money their citizens are using in a foreign shop and then sent demands to these foreign companies and demand VAT to be paid.

 

[DavidTheDude]

That said many companies don't pay digital VAT, and bypass this by pretending that the customer is Outside EU.

Interesting, for now, I've set up individual VAT rates for every EU country so that I can use MOSS for customers inside the EU.

So customers outside the EU do not have to pay any VAT/sales tax? In that case, I would just set the VAT to 0% for US customers, etc. Because the VAT is based on the customers' location so I assume I would not need to charge any VAT to the customers outside the EU.

 

[NicolasMaduro]

Interesting, for now, I've set up individual VAT rates for every EU country so that I can use MOSS for customers inside the EU.

So customers outside the EU do not have to pay any VAT/sales tax? In that case, I would just set the VAT to 0% for US customers, etc. Because the VAT is based on the customers' location so I assume I would not need to charge any VAT to the customers outside the EU.

This is how Kinguin for example is doing it:

So as you can see they set their customers default tax location to "Outside EU 0% Tax" despite they obviously know most of
their customers are based in the EU.

Gamivo did the same thing before, but they are now in compliance. Probably the only reason Gamivo is in compliance with VAT now is because they are incorporated in Malta.

Kinguin is incorporated in Hong Kong.

G2A is not better themselves. They are also incorporated in Hong Kong.

I can't really encourage this behaviour though. European Countries now are getting access to credit card data and will sent out letters and demand payment of VAT to foreign shops.

 

[DavidTheDude]

So as you can see they set their customers default tax location to "Outside EU 0% Tax" despite they obviously know most of
their customers are based in the EU.

Thanks for the reply. But if the customer claims to be outside the EU, VAT would not be applied for the customer, and if the company got caught they would have to pay the VAT to the correct government that was never paid by the customer in the first place (If the government found out via credit card info). Is there any advantage for the company to set the VAT outside the EU?

The only advantage I could think of is if the company got paid from for example a Swedish customer with 25% VAT and just claimed that the customer was outside the EU to keep the extra 25% for themselves.

 

[uplana]

I can't really encourage this behaviour though. European Countries now are getting access to credit card data and will sent out letters and demand payment of VAT to foreign shops.

where did you read about that?

 

[JimBeam]

I see, I still have a lot to learn. Feels like the rabbit hole is endless. I've been confused about VAT for the longest time and my mistake has been that I've spent 97% on my business and 3% studying tax laws. So even I had citizenship in for example Grenada I would still have to charge VAT and give the VAT to each customer's government? Normally it would be easy if I had a lemon stand in Sweden and only sold to people inside Sweden because then I would charge 25% VAT and give it to the Swedish authorities.

You'll have to excuse my lack of knowledge, I am currently learning bookkeeping as we speak. Thanks for the reply. I feel like the government is very far behind when it comes to e-commerce.

If I'm wrong - somebody please correct me... If you are selling goods/services to the end user (person not a company) you need to charge VAT.... If your company is VAT registered and are selling goods/services to other VAT registered company within EU - then you do not charge VAT. So, it all depends on who your clients are...

Some general advice:

Find out more about Swedish tax system and how much would it cost to run your company in taxes. The most important things to consider are what things you can buy for a company but use personally too. I'm talking about everything from car, gas and cell phone subscription down to toilet paper. The more things you can buy that way - the more you'll save. Good accountants will know all these things...

I am a Swedish citizen, which means that if I profit around SEK 500 000 (USD 60 437,28) a year, I would have to pay 66.741% of that in income tax. And if I want to spend that money I'd be taxed 25% VAT on the products that I buy. Needless to say, I'm getting taxed to oblivion.

I guess you're talking about personal income tax. What you need to look into is corporate income tax is about 20%. So if you can buy things as your company (and use personally) with that money you will lower your corporate tax and also not pay VAT on all these goods (you'll claim VAT). So, unless you need cash (dividends or salary) it will be acceptable for a small business.

About Malta, there are a LOT of Swedish people there. I worked for one Gambling company there for a short period of time... and from 150 people at the time - more than 100 Swedish and another 20 from Norway, Finland etc. (Gambling company). It was easy for them to get new people on board... Many young people would come to Malta to 30C for couple of years to escape the cold north. And I don't blame them Malta is great for young people. The question is - can you live there... No matter how beautiful it is - it's still so small that I felt like in a jail. My advice would be to go there in September and try to spend a month there (as a tourist). If you "survive" than you can think more about it...