Investment vehicle

[AlexGE]

I live in a country that doesn't have a DTA with USA. at the same time US market provides the best exposure to ETFs that cover an entire world.
When I receive any dividends the WHT is 30% , so I'm looking for a way minimize it to at least 15% as if my country had a DTA with US.

Obvious solution would be a Cyprus company - DTA with USA plus no WHT on dividends paid by a company to a non-res.

Are there any cheaper options?

 

[Larin]

Why not buy an Irish-domiciled ETF? The fund pays 15% (DTA with US), but there is no additional WHT so your effective tax rate becomes 15%.

 

[AlexGE]

Why not buy an Irish-domiciled ETF? The fund pays 15% (DTA with US), but there is no additional WHT so your effective tax rate becomes 15%.

Yes, for some ETFs that's a solution but they are sometime not tradable (low or no liquidity, wide spreads and on) and I hold some stocks directly, not through ETFs

 

[Jerry1911]

Obvious solution would be a Cyprus company - DTA with USA plus no WHT on dividends paid by a company to a non-res.

Not going to work due to the LOB clause in the tax treaty between Cyprus and the US.

 

[AlexGE]

Not going to work due to the LOB clause in the tax treaty between Cyprus and the US.

Even thou Cyprus would have a substance and the investment income won't be the main source of income for the company?

 

[Jerry1911]

Even thou Cyprus would have a substance and the investment income won't be the main source of income for the company?

Check with relevant tax advisors, AFAIK it still won't work.

 

[Marzio]

Are there any cheaper options?

Setup a Romanian micro enterprise. You will pay 1% tax on income up to 500K and there are no WHT on non-resident individuals so if you move your tax residency to Cyprus you'll achieve effective 11% effective total taxation.

10% WHT on dividends from US to Romania without LOB + 1% corporate income tax up to 500K

In Cyprus dividends are tax free.

If for some reason you don't like Cyprus you could potentially receive dividends tax free under Portugal NHR or any territorial taxation country or UAE

The only "problem" is that the Romanian company must hire a full time employee.

 

[AlexGE]

Setup a Romanian micro enterprise. You will pay 1% tax on income up to 500K and there are no WHT on non-resident individuals so if you move your tax residency to Cyprus you'll achieve effective 11% effective total taxation.

10% WHT on dividends from US to Romania without LOB + 1% corporate income tax up to 500K

In Cyprus dividends are tax free.

If for some reason you don't like Cyprus you could potentially receive dividends tax free under Portugal NHR or any territorial taxation country or UAE

The only "problem" is that the Romanian company must hire a full time employee.

An employee should be a resident of Romania? Any social taxation \ limits on salary?

 

[Marzio]

An employee should be a resident of Romania?

You are looking for "substance" meaning "somebody" who does "somehing" ideally in an office.

Any social taxation \ limits on salary?

You could simulate the breakdown of costs with this payroll calculator.

 

[alek9898]

Setup a Romanian micro enterprise. You will pay 1% tax on income up to 500K and there are no WHT on non-resident individuals so if you move your tax residency to Cyprus you'll achieve effective 11% effective total taxation.

10% WHT on dividends from US to Romania without LOB + 1% corporate income tax up to 500K

In Cyprus dividends are tax free.

If for some reason you don't like Cyprus you could potentially receive dividends tax free under Portugal NHR or any territorial taxation country or UAE

The only "problem" is that the Romanian company must hire a full time employee.

If the RO company don't have employee its 3% from income up to 500k

 

[Marzio]

If the RO company don't have employee its 3% from income up to 500k

Romania: Summary of recent tax law changes, including VAT and excise tax

Government Ordinance 16/2022

home.kpmg

 

[alek9898]

Romania: Summary of recent tax law changes, including VAT and excise tax

Government Ordinance 16/2022

home.kpmg

Its sounds to be right and I really don't know until now, even after call with my accounting this afternoon xD

 

[AlexGE]

Setup a Romanian micro enterprise. You will pay 1% tax on income up to 500K and there are no WHT on non-resident individuals so if you move your tax residency to Cyprus you'll achieve effective 11% effective total taxation.

10% WHT on dividends from US to Romania without LOB + 1% corporate income tax up to 500K

In Cyprus dividends are tax free.

If for some reason you don't like Cyprus you could potentially receive dividends tax free under Portugal NHR or any territorial taxation country or UAE

The only "problem" is that the Romanian company must hire a full time employee.

Looks like there's an issue with a Romania company: it has to pay 1% of turnover and there's a chance that all the invested amount as soon as I be returned to the company will be taxed ..