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Low tax burden life plan suggestion for freelancer

jackfrost

Active Member
Also if you think well i will just fly to X country for a few days every week or whatever and then declare that i did my work there and during my stay in Portugal i just bum around at the beach... that is not going to work either. Double taxation treaties will shift the taxation onto Portugal and there are even provisions where those treaties do not exist and you are not getting taxed at least the PT amount that PT can/will just tax you. Forget about PT with active income.
 

JustAnotherNomad

Entrepreneur
Yes, that was my impression as well. I would be really surprised if this worked.
For it to work under the NHR, the other country has to have the right to tax that income. Only then would it be exempt from Portuguese taxation. But which country would not tax employment income?
I think it would only work like you said, you would have to say you only lie at the beach in Portugal, you travel around for work (never enough to trigger tax residency), but as you said, the DTA would probably assign the right to tax that income to Portugal. And in that case, it would NOT work, because the NHR rules say the OTHER country must have the right to tax that money.
There are so many hoops with the NHR system that I decided to stay far away. The risk that something will go wrong simply seemed to high.
If you really want to live in Portugal, it can be a nice bonus if it works, but I wouldn’t go there only because of the taxes.
 

jackfrost

Active Member
Yes exactly thats the provision. The other country (which must not be on the -long- blacklist and must adhere to OECD) must have the right to tax you but decline to do so and it must be passive income. Only then will PT not tax you on those foreign sourced earnings or tax you on a lower bracket according to the exemptions list.

Pretty much all legit countries have DTAs with PT and pretty much all of those DBAs work the same way as in as long as you dont stay in the other country for too long / work too much there / sometimes certain $$$ tresholds - the taxation will shift to your tax residency country -> PT. And if you stay longer etc those countries will have the right to tax you for that amount and so on but you never want to trigger any of that anyways as you are pretty much fucked at that point once multiple countries taxation rules are triggered. The accounting / filing alone would be worthy of a multi national.
 

JustAnotherNomad

Entrepreneur
Actually the black list isn’t an issue, as long as there is a DTA. The DTA has precedence over the black list.
There was a NHR with a UAE company who won in court. The UAE is (was?) on the black list, but there is a DTA. So he could legally pay no tax on the dividends in Portugal.
 

anotherone

Active Member
Actually the black list isn’t an issue, as long as there is a DTA. The DTA has precedence over the black list.
There was a NHR with a UAE company who won in court. The UAE is (was?) on the black list, but there is a DTA. So he could legally pay no tax on the dividends in Portugal.
I have asked a Portuguese lawyer, he told me that If I was a director of a foreign company living in Portugal I had to pay 20% income tax (flat tax). I kept telling him, that my customers were foreigners and that the company was foreign and he kept answering 20%

So... forget portugal.
 

jackfrost

Active Member
Yes that is what i wrote above concerning PT, foreign sourced income vs physical location and strict CFC etc. The 20% is also correct. The lowest you will get in PT legally is about 22% or so including everything. (2017 legal enquiries)
 

JustAnotherNomad

Entrepreneur
It is completely irrelevant where the customers are located. I don’t know why people keep believing “but it must be a foreign company since my customers are abroad” - no, that’s not how it works.
Where the company is incorporated isn’t very relevant either.
What matters (not just for Portugal), is where the company is managed and the work is carried out.
The tax lawyer I spoke to told me that yes, it is possible to pay 0% tax in Portugal. But you can’t manage your company from Portugal or work in Portugal.
So you would either need substance or you might be able to get away with it by spending little time in Portugal. Portugal has residency-based taxation. He said if you have nominee directors and fly to your foreign “office” a couple of times per year, you could get away with it.
It’s very similar then to this setup:

But the thing is that Portugal has so many hoops they make you jump through, it just seemed way too risky in the end. And it’s also limited to 10 years. Who knows, maybe after 9 years they decide to audit you and decide you were running your business from Portugal after all? Not a situation I’d want to find myself in.
 

BlueMist

Entrepreneur
Again, if you want to stay in Poland, there is (most likely) no way for you to save taxes by registering a company in France, the UK, Cyprus, Malta, whatever.
[...]
There is no way to save on taxes but there is a way to defer the taxes in order to not pay them through the holding company for as long as it remains the property of the company. Then such holding company can do investments as I understand. Also this tax deferral could work great should somebody wish to change the residence later on (to more tax friendly) and withdraw the profits...
 

JustAnotherNomad

Entrepreneur
It’s extremely unlikely that it would work, at least not with a simple/cheap structure. Maybe if you somehow build a structure that isn’t linked to you, but even then it would probably still only work because you can hide the facts. Unless of course there are some loopholes in the Polish tax code.

It never ceases to amaze me how stupid you all seem to think the people writing the tax laws are.
 

BlueMist

Entrepreneur
It’s extremely unlikely that it would work, at least not with a simple/cheap structure. Maybe if you somehow build a structure that isn’t linked to you, but even then it would probably still only work because you can hide the facts. Unless of course there are some loopholes in the Polish tax code.

It never ceases to amaze me how stupid you all seem to think the people writing the tax laws are.
But I am not into darks or anything and usually writing from either personal or very close to personal experience. It is absolutely legal to have a Malta company with small office and employee, have this Malta company being owned by a holding company to take advantage of the 5% effective tax and be a full time resident in Poland. Once the dividends are paid out from the holding company, they would still be fully taxed as per the polish tax law but the dividends do not have to be paid out, they can wait for better times or for investments through the holding company.
 

JustAnotherNomad

Entrepreneur
Sure, but: Setting up an office in Malta costs money (rent, salaries, accounting services, ...) and you’d need a good business case for why you need that office in Malta. Transfer pricing restrictions will also have to be met. So you’ll need an experienced accountant/tax lawyer for that. It’s what I would call a simple/cheap structure.

And even then it’s unlikely you’d be able to escape the Polish exit tax. Because like I said, that’s the whole point with exit tax.
Of course what I’m writing is just on a general level, I don’t know how Poland would handle a case like that specifically.
 

JustAnotherNomad

Entrepreneur
I have found the wikipedia page about NHR, They mention 0% tax. I am lost myself:
I have contacted a Portuguese tax lawyer about this. He said the 0% tax on foreign salaries only applies when the salary has been taxed at the source (in the other country).
What makes this a bit of a joke because that would be the case with every other country as well when there is a DTA, unless I am misunderstanding this.
Long story short, he said there is NO WAY this would work (paying 0 tax) with an Estonian company.
 

anotherone

Active Member
I have contacted a Portuguese tax lawyer about this. He said the 0% tax on foreign salaries only applies when the salary has been taxed at the source (in the other country).
What makes this a bit of a joke because that would be the case with every other country as well when there is a DTA, unless I am misunderstanding this.
Long story short, he said there is NO WAY this would work (paying 0 tax) with an Estonian company.
thank you very much because now, it makes sense. It means it is not possible at all in my case. You saved me a flight to portugal. thank you again.
 

JustAnotherNomad

Entrepreneur
I have asked him again for clarification because this 0% seems so strange.
He explained that usually, Portugal applies a credit method for foreign tax in its DTA’s.

So say you are regular tax resident in Portugal, but you also worked for a company in Spain as an employee and the salary was taxed in Spain. Usually, you would still have to pay the Portuguese tax on that salary, but you would receive credit for the Spanish tax paid. So if the Spanish tax is less, you would still have to pay the difference to the Portuguese tax on top! (Even other bloodsucking high-tax countries rarely apply this logic in their DTA’s, but in Portugal, it’s the norm!)
So as an NHR, Portugal wouldn’t charge you that difference on top of the taxes you have already paid. That’s all.
Which again proves that it’s not enough to read some stuff on the internet...
 

blockchain4ever

Active Member
Usually, you would still have to pay the Portuguese tax on that salary, but you would receive credit for the Spanish tax paid. So if the Spanish tax is less, you would still have to pay the difference to the Portuguese tax on top! (Even other bloodsucking high-tax countries rarely apply this logic in their DTA’s, but in Portugal, it’s the norm!)
This is called the credit method and is by far the most common AFAIK! Actually I have been trying to compile a list of DTAs that use the exemption method for wages. Big corp only cares about capital gains, CIT etc, but when getting to your first millions, utilizing DTAs that have the exemption method for wages is really interesting.

Sometimes it is not even in the DTA. Some countries will exempt foreign sourced income for the first years after you take up tax residency in the country as a way to attract wealthy foreigners (such an exemption has no effect on the less wealthy of course). Being tax-resident in such a country can be good because as far as the rest of the world knows, you're resident in a high-tax country.
 

blockchain4ever

Active Member
Yeah that’s exactly what Portugal’s NHR is about...
Some other examples:

Argentina: 5 years foreign-source income exempt
Chile: 3 years (+ 3 year possible extension)
Cyprus: non-domiciled tax exempt on dividends and interest
Italy: 6-13-year 90% exemption for Italian-sourced income for professors and researchers. 5-year 70% exemption otherwise.
Malta: foreign-sourced income can be exempt
Uruguay: exemption for foreign sourced income for 5 years is possible.
 

blockchain4ever

Active Member
It would be interesting to collect exemption examples from DTAs as well. I know high-tax countries without any special regimes that have specific DTAs with exemption resolutions. So you can do surprising things that are specific only for transfer of income between two specific countries.
 

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