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Lithuanian e-Residency vs Estonian e-Residency?
- Thread starter MoonMan
- Start date
I guess because it's newer and not as smooth set up (yet). Has anyone experience with the Lithuanian e-residency and corporate system?
I see there is a 15% withholding tax on dividends paid from a Lithuanian company to a personal shareholder (also foreigners). So you would probably need a holding company, not in a blacklisted location to avoid this.
I see there is a 15% withholding tax on dividends paid from a Lithuanian company to a personal shareholder (also foreigners). So you would probably need a holding company, not in a blacklisted location to avoid this.
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Estonia is best for legal and tax residence.
No physical presence is required for tax residence, and its also possible to be legal resident, but not tax resident.
Its the only non-island jurisdiction in EU with no WHT by default.
Yes, there is 20% CIT on distributed profits, but there are exemptions and possibilities for structuring your income at 0% effective tax.
+ You can manage everything digitally.
With Lithuania small business regime you pay 5% CIT + 15% WHT.
For tax residence based on domestic law its enough to register your address in Estonia, meaning you only need to retain a place to live in Estonia.
For remaining legal resident but avoiding tax residence you either need to:
- Rely on double tax treaties (e.g. have your centre of vital interests abroad). UAE is probably most interesting as you can get 0% tax residence
- Obtain major investor residence permit (investing EUR 1M) - this permit exempts you from the requirement for registering your address in Estonia, thus making it easy to avoid tax residence
Yes. There are only a few jurisdictions where local companies are not tax residents by default
Yes. Estonia was actually one of the first countries to regulate cryptocurencies. It is even possible to buy a property through an online notary without ever visiting the country (just saying).
Additionally, Estonia has one of the most favorable tax treatment for properties:
- As a resident you can sell the property that is considered your home at the moment of the sale totally tax free
- Property that is your home is free from any tax
- Property tax applies only to the value of land, rather than to the value of real property or capital (its low)
- Almost no restrictions for non-citizens/residents for buying properties
- Not saying its a good idea to buy now, but Estonia has biggest real estate and rental price increases in EU
There are many reasons to like Estonia and it got my interest through posts you made. For starters it seems like a prime candidate to bank on the trend of Europeans vacationing in colder countries, the prices are still low, its close to St Petersburg and if the Siberian shipping route keeps opening up it could be increasingly busy in the ports there (thinking long term).
I might visit Tallinn to take a closer look, what is your take on the current trend in the housing market? Is Tallinn off-limits due to the increases if you want to get a "fair" price?
This is not really true, Estonian market is experiencing a lot of problems at the moment. Many expats are leaving due to the insane inflation, creating a lot of vacancies on the rental market. Estonian promoters have been building sub-par stuff lately and there's a lot of stock on the market : Estonian real estate developers increasingly cautious about projects
Real estate boom has been fueled by investment from foreigners (Russian, Finnish, Swedish mainly), and many have exited at the top, so further growth is not warranted. As a side note, Tallinn is one of the most badly managed capitals in the EU, with great amounts of dubious things happening behind the curtains.
There is no zoning, or even planning, so depending on your neighborhood, you may lack basic services. For instance, the neighborhood of Kalamaja is the densest in Tallinn and has only one small supermarket, very few shops, restaurants or schools as promoters only built housing there. Also, the city does not spread salt or even clears the snow in winter (yes you read this right), so you'll need a car as it's almost impossible to walk during the icy season.
As a last note about Tallinn, bear in mind that because the promoters favored residential housing heavily, commercial space is hard to come by and expensive. This leads to a great lack of office space and high costs associated. Which is kind of strange for a country that likes to boast about its startups.
In general, I'd suggest being cautious when reading stuff online about Estonia. They are very good at storytelling, while the reality is much different.
Unless you have a pure holding company, you'll need to pay yourself a salary of around 1500€ in order to be let in peace. Ah, and the CIT will be 22% next year. VAT is also 20% on everything, even medication or food. I wouldn't call Estonia a fiscal haven.
Fair points. Im also sceptical that right now would be the best time for investing, but I believe there are always opportunities for good deals! Just basing your investment decisions on some macro analysis is clearly not enough to make profit.
That being said you hardly have any investment funds investing into Estonian residential properties and there must be a reason for this.
I agree its not necessarily a pure tax haven on its own, but could work amazingly well in combination with other jurisdictions. You can still live in this country with zero income taxes paid. Tax structuring is somewhat tricky though.
What you are saying about the salary could be true in certain cases, while in others you could as well get away with paying no salaries at all or paying just around 200 EUR/month in social taxes to be covered with public health insurance all over the EU.
In general there is so much wrong/outdated information out there about this country.
A wise man once said: always structure your business with minimum of 3 entities from the get go, dividing assets, liabilities and profits.
From the perspective of Flag Theory, Estonia offers vast benefits as a business haven to establish one of your entities in, but is indeed not much of a playground to spend most of your time and money in (countries with no VAT, and better climate tend to be more appealing).
Estonia is one of the jurisdictions that could be interesting for Legal Residence - to obtain a second residence to get all the benefits of living in a place without the tax obligations.
If you own a restaurant with staff its indeed normally not taxed outside its jurisdictions borders.
Taxes you usually need to pay when you are a tax resident, have income (and in some cases assets).
Hiding UBO doesn't mean you can avoid paying tax, but this lack of transparency can indeed facilitate illegal tax evasion.
Failing to disclose UBO-s is usually subject to (criminal) penalties, and can be considered money laundering as it obscures the true source and control of funds, enabling illicit funds to be integrated into the financial system without detection.
In international tax, "substance over form" ensures tax obligations are based on the economic reality, not just legal structures. The OECD's BEPS initiative counters tax strategies lacking real economic substance, examining factors like genuine activities in low-tax jurisdictions and ensuring transfer prices reflect true economic value. Anti-avoidance rules in many countries can indeed re-characterize or disregard transactions that don't have genuine substance.
If you look closer into AML laws you'll realize how broadly they could be applied (they are designed so on purpose), thus they should be evaluated more on the basis of what is actually enforced in practice.
If "IF variable x => THEN = result y" logic would apply then I can imagine one could get imprisoned for money laundering simply for giving an apple to a starving child (if such child happens to be a relative of a sanctioned terrorist, as financing family members of terrorists is also considered money laundering even if its non-financial assistance).
This is going a bit off topic and I believe we have another thread regarding enforcement.
Estonias relative benefit is also the statute of limitations.
As a general rule, the statute of limitations is three years. In case of intentional tax evasion, it is five years. (Compare this to HMRC with its 12 to 20 years)
One should also consider the criminal threshold of tax evasion to understand their risks. This also varies a lot between jurisdictions. In Estonia the criminal threshold is for the damage above 400 000€, and 40 000€ if they can prove it was intentional.
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