Legal business structure - EU

[adventuks]

Hi!

I'm looking for some feedback about the following structure:

1. I'm resident in high taxed EU country and running fully legal online business.
2. I want to register new company structure (Cyprus, Malta, etc) with me being single shareholder and another non-nominee director who is not EU resident. Director will manage the company from his country and I'll do nothing.
3. All revenue will stay in the holding company.
4. I might decide to get some dividends from the holding company and pay taxes on it in my EU country.

I'm not looking to break any laws and want everything to be 100% legal. I don't want to hide this structure from my local tax office.
It does not look like CFC rules will apply in my high taxed EU country if I'm shareholder of the offshore company (I'll double check it with the lawyer).

Is this valid setup?

 

[Martin Everson]

2. I want to register new company structure (Cyprus, Malta, etc) with me being single shareholder and another non-nominee director who is not EU resident. Director will manage the company from his country and I'll do nothing.

So company could be taxed where the non-nominee director is resident. The place of effect control and operation of the company will be where the director is resident outside of EU - unless double tax agreements between both states say otherwise. It could be seen as a CFC from non-nominee directors country. Note some countries CFC rules mean that a company is taxed as if it was personal earnings of director whether profits of CFC are distributed or not.


P.S Maybe your guy is based in a tax free country.

 

[adventuks]

Good point, looks like it will be taxed in the director's country. There is "place of effect control and operation" clause in the director's tax code. Thanks for the reply.

 

[BlueMist]

@Martin Everson How this would work if there would be 3 directors? Local nominee or corporate director, 2nd director EU resident, 3rd director non EU resident?

In Malta you can have local nominee director or a corporate director and you can stay as a UBO behind e.g. Malta or Cyprus holding for effective 5% tax. It looks like that as long as the money is not withdrawn from the holding company, there is no tax to pay if the UBO resides in the EU. But this may depend on the EU country, e.g. I am not sure if it would work in DE/AT for instance...

 

[Fred]

@Martin Everson How this would work if there would be 3 directors? Local nominee or corporate director, 2nd director EU resident, 3rd director non EU resident?

In Malta you can have local nominee director or a corporate director and you can stay as a UBO behind e.g. Malta or Cyprus holding for effective 5% tax. It looks like that as long as the money is not withdrawn from the holding company, there is no tax to pay if the UBO resides in the EU. But this may depend on the EU country, e.g. I am not sure if it would work in DE/AT for instance...

Can confirm it's not working in DE at least. Learned it the hard way.

Hi!

I'm looking for some feedback about the following structure:

1. I'm resident in high taxed EU country and running fully legal online business.
2. I want to register new company structure (Cyprus, Malta, etc) with me being single shareholder and another non-nominee director who is not EU resident. Director will manage the company from his country and I'll do nothing.
3. All revenue will stay in the holding company.
4. I might decide to get some dividends from the holding company and pay taxes on it in my EU country.

I'm not looking to break any laws and want everything to be 100% legal. I don't want to hide this structure from my local tax office.
It does not look like CFC rules will apply in my high taxed EU country if I'm shareholder of the offshore company (I'll double check it with the lawyer).

Is this valid setup?

Make sure to have a very good local agent to get a business bank account if the director is non-EEA resident and you don't have any connection to Cyprus at all beside of the company. Banking on Malta even more worse.

Ask yourself if you can live with banking such a setup on EMI only.

 

[John Andrews]

Learned it the hard way.

can you give a bit more info? have you got a fine or what? I'm interested

 

[Fred]

can you give a bit more info? have you got a fine or what? I'm interested

DE considered MT structure as a local DE company and was taxed with the local tax in DE.

I paid the tax immediately and a relatively small fine.

That's why I nowadays recommend people to go outside the EU when they really want to go offshore.

Malta and Cyprus are at the end of the day inside the EU and if you come from a country like Germany with very strong CFC rules and enforcement - make sure you live 6 months on the island. And even then there are cases you don't believe.

 

[gmbh]

Malta and Cyprus are at the end of the day inside the EU and if you come from a country like Germany with very strong CFC rules and enforcement - make sure you live 6 months on the island. And even then there are cases you don't believe.

I think if he really lives in Cyprus or Malta and cuts his ties to Germany, there is no way German tax authorities can rule that he is tax resident in Germany, or do you have any other experiences?

If he still rents/owns a flat/house in Germany (even if he stays there less than 183 days) he will be tax resident in Germany.

If he stays in Germany in hotels and with friends for several month it depends if tax authorities find out/receive a tip. If they do, he will be tax resident in Germany.

 

[BlueMist]

If he still rents/owns a flat/house in Germany (even if he stays there less than 183 days) he will be tax resident in Germany.

Or not if he is not in a position of keys?

 

[gmbh]

Or not if he is not in a position of keys?

Theoretically maybe, but practically I assume they will just rule that you had a key and you can not proof the opposite. I wouldn't try it.

 

[Martin Everson]

@Martin Everson How this would work if there would be 3 directors? Local nominee or corporate director, 2nd director EU resident, 3rd director non EU resident?

Normally the place of control will be where the majority of directors reside i.e the place of effective control and also operations. This would be one to get a written tax ruling over before going down that path