NHR Portugal & Ltd where EU?

[AnnaLena76]

Hi everyone. I'm a German freelance, who thinks about moving to Portugal for family reasons. I do coaching and create courses, I have to pay Vat on. I read about NHR, but due to social security payments, which I think are around 30%,this does not make sense.

I understand having a biz in the EU, pay low wage (for me) and as much as possible in dividends, are the way to choose, bc

1) companies only pay flat (150 euros or so) in social security per month
2) only wages are taxed
3) dividends are not.

Questions:

1) Is this correct?
2) If not, which other way do you suggest?
3) If yes, which country / way of doing so you recommend and why (eg Malta, Georgia, Rumania?)
4) Is there anything to consider in Germany (as I am a freelance, I don't have a company, but I do own 10% of a flat, I don't live in).

Thank you so much, folks.

Anna

 

[Vampp]

1) There is no single place in this world where dividends are not taxed ( maybe if you do a Belize IBC, or other offshore haven ). But still when you start using the money you normally will have to pay taxes on that.

2) If you want to keep your business in the EU, you can open a Romanian company. This is taxes 1% if you are hiring yourself ( minimum wage is about 400 euros monthly and taxes is about 130 on it ), otherwise it's 3% . You can do your own math depending on your income.
The dividends on this combination is about 5% and if your clients are VAT registered European companies you can work without VAT.
Please remember as this is up to 1M a year. Afterwards it's 16% on profits / 5 % dividends and you can't really deduct anything.

3) You can always make a Wyoming LLC. If you do not work with the US, they won't charge you a dime and the yearly costs are 50 bucks (in some cases you can even work with US clients and still not be taxed on income). This is because a Wyoming LLC is taxed as a individual, but you are not a US resident so normally you would have to pay taxes in your resident country. Yet you can hook up the company card to a Transferwise account and there you go, Bob's your uncle. You can also invest, buy property, buy art with the Us based company.

The above explanations are oversimplified. If you want more tips, you can find by researching or if you want to outsource your problems, I will gladly take it of your chest, for a % of what I'm saving you.

 

[PhantomOf ThePits]

Hi everyone. I'm a German freelance, who thinks about moving to Portugal for family reasons. I do coaching and create courses, I have to pay Vat on. I read about NHR, but due to social security payments, which I think are around 30%,this does not make sense.

I understand having a biz in the EU, pay low wage (for me) and as much as possible in dividends, are the way to choose, bc

1) companies only pay flat (150 euros or so) in social security per month
2) only wages are taxed
3) dividends are not.

Questions:

1) Is this correct?
2) If not, which other way do you suggest?
3) If yes, which country / way of doing so you recommend and why (eg Malta, Georgia, Rumania?)
4) Is there anything to consider in Germany (as I am a freelance, I don't have a company, but I do own 10% of a flat, I don't live in).

Thank you so much, folks.

Anna

Hi Anna,

yes there are ways to reduce it, but that mostly makes sense if the income would be high enough to pay for the structure.

Basically, as a EU citizen you could move to Malta.

Then setup a Maltese Ltd which is fully owned by a Cyprus Holding.
Dividends received from the Cyprus Holding OUTSIDE of Malta are tax free.

With the new Maltese group taxation scheme you'd set it up as a 'fiscal unit', would need to do the audit as such and only pay 5%.

Meaning for you on an individual level, max tax with corporate/individual tax is 5%.

However, to setup and run a structure like that with audits etc will cost you easily around 8-10k/year.

Therefore, its a trade-off what eventually will cost you less -- to setup/run a structure vs just paying the taxes in a country where could also imagine living.

 

[JustAnotherNomad]

There are lots of companies in Portugal that can help with such setups. They typically use Malta/Cyprus companies, so you pay very little taxes.
However, this is not a safe setup as the Portuguese authorities could claim that you're managing the company from Portugal, so it's not "foreign" income.
So far, they have not done that, but they could change their practice at any time. Then it's game over. Too risky if you ask me.
It would be a different story if you were a rich (retired) owner of a factory in China who isn't involved in the business anymore at all. Those are the kinds of people Portugal wants to attract with the NHR regime.

 

[PhantomOf ThePits]

There are lots of companies in Portugal that can help with such setups. They typically use Malta/Cyprus companies, so you pay very little taxes.
However, this is not a safe setup as the Portuguese authorities could claim that you're managing the company from Portugal, so it's not "foreign" income.
So far, they have not done that, but they could change their practice at any time. Then it's game over. Too risky if you ask me.
It would be a different story if you were a rich (retired) owner of a factory in China who isn't involved in the business anymore at all. Those are the kinds of people Portugal wants to attract with the NHR regime.

absolutely agree on that.

I looked into the Portugal NHR regime some years ago and it looked great at first sight.
However, as @JustAnotherNomad correctly wrote, anything which is considered NonPassive can eventually lead into problems down the road.

Then it can easily flip into a 'tax hell' depending what kind of business you do.

Specially with EU trying to push other EU countries into implementing exit-taxes what countries like in Scandinavia or Germany quite harshly implement more and more...

 

[Vampp]

Personally if it ain't Banana Land like Romania/Bulgaria, I would stay away from Europe.
Eventually Socialism will kill any tax optimization scheme in the EU.

Even if you get to Malta / Cyprus, depending on how much you earn annually (I've been approached by people earning 60k a year ) these 2 can easily get you to 5-10k a Year in operating costs, audits, etc.
Banana Land on the other hand has a low % of dividends and some shitty monthly taxes.

 

[CyprusLaw]

Hi everyone. I'm a German freelance, who thinks about moving to Portugal for family reasons. I do coaching and create courses, I have to pay Vat on. I read about NHR, but due to social security payments, which I think are around 30%,this does not make sense.

I understand having a biz in the EU, pay low wage (for me) and as much as possible in dividends, are the way to choose, bc

1) companies only pay flat (150 euros or so) in social security per month
2) only wages are taxed
3) dividends are not.

Questions:

1) Is this correct?
2) If not, which other way do you suggest?
3) If yes, which country / way of doing so you recommend and why (eg Malta, Georgia, Rumania?)
4) Is there anything to consider in Germany (as I am a freelance, I don't have a company, but I do own 10% of a flat, I don't live in).

Thank you so much, folks.

Anna

Hi Anna,

I would suggest to consider Cyprus. 12.5% corp tax and no sdc/tax on dividend.

The cost for operating the company, together with accounting and audit fees will be approximately Euro 5,000 per year.

 

[cinquepalli]

I am in a similar situation being a single man operation with most clients in USA.

From what I understand under NHR dividends from outside Portugal are tax free.
However having a single person company abroad while living in PT could lead to CFC trigger (e.g. the company be deemed as Portuguese tax resident since that is where most of the operations are being carried from).

Reading through the CFC rules for Portugal it seems that if the company is inside EU and that country corporation tax is not >50% the Portuguese one (e.g. not higher than 10.5%) the business would not be considered a Portuguese tax resident.

E.G. Business set up in Ireland (12.5%) and owner/director living in PT with NHR status, only corporatation tax would be paid since all the profits would be withdrawn as dividends and not taxable in PT.

Relevant docs:

Portugal - Corporate - Group taxation

Detailed description of corporate group taxation rules in Portugal

taxsummaries.pwc.com

Portugal transposes the EU ATAD into Portuguese Tax Law

Law n. 32/2019, of 3 May 2019, introduced amendments to the Portuguese Tax Law in line with the European Union (EU) Anti-Tax Avoidance Directive (ATAD) provisions.

www.ey.com

Am I reading this correctly or not?

 

[JustAnotherNomad]

However having a single person company abroad while living in PT could lead to CFC trigger (e.g. the company be deemed as Portuguese tax resident since that is where most of the operations are being carried from).

You are correct about this, but it is not due to CFC rules, but rather corporate tax residency/permanent establishment.
Portuguese tax lawyers will usually tell you that they can set up a structure for you that won't have this issue (typically using Maltese/Cypriot companies), but I remain skeptical.

 

[cinquepalli]

You are right, the problem is not CFC but place of effective management rule.

Would lets say a Cyprus/Maltese business, local director, an office space rent in that country and a part time employee (just a few hours a month to show that you have a local employee) work in this case to mitigate the risk?

 

[JustAnotherNomad]

@cinquepalli - You need to talk to Portuguese tax lawyer. I know there are probably thousands of people successfully using such setups. So far, they have been fine.
My worry would be that one day, several years down the road, they will suddenly start investigating, especially if many of these companies share the same address in Malta/Cyprus, and eventually change their application of the law. And then you're screwed. But so far, it seems to working just fine for a lot of people.
But if you want to do it, I wouldn't touch any of it myself. Work with a professional who guarantees you that it will work, and who has lots of experience with this.

 

[AnnaLena76]

There are lots of companies in Portugal that can help with such setups. They typically use Malta/Cyprus companies, so you pay very little taxes.
However, this is not a safe setup as the Portuguese authorities could claim that you're managing the company from Portugal, so it's not "foreign" income.
So far, they have not done that, but they could change their practice at any time. Then it's game over. Too risky if you ask me.
It would be a different story if you were a rich (retired) owner of a factory in China who isn't involved in the business anymore at all. Those are the kinds of people Portugal wants to attract with the NHR regime.

Can you recommend a good tax guy, who could set me up nhr and is into all this online income? Right now I'm considering Bulgaria for the company EOOD. X

 

[AnnaLena76]

You are correct about this, but it is not due to CFC rules, but rather corporate tax residency/permanent establishment.
Portuguese tax lawyers will usually tell you that they can set up a structure for you that won't have this issue (typically using Maltese/Cypriot companies), but I remain skeptical.

I'm sorry, can you explain, what you mean by 'corporate tax residency / permanent establishment'? I think about moving to Portugal, apply for nhr and set up an EOOD in Bulgaria at the moment. But I am a pure beginner.

 

[JustAnotherNomad]

A company has to pay tax where it has a "permanent presence". That could be your own apartment if that's where you run the company from. Those are very basic rules that almost all countries follow.
So if you work for your own company from Portugal, it could become taxable in Portugal.
It has nothing to do with CFC rules.

I would check out a company like this that seems specialized in this NHR stuff: Non-Habitual Tax Resident :: Portuguese NHR Regime
No personal experience with them though.

 

[JohnLocke]

Very good link, have to look further into this interesting information.

 

[JustAnotherNomad]

It has been discussed many, many times before here...

 

[AnnaLena76]

1) There is no single place in this world where dividends are not taxed ( maybe if you do a Belize IBC, or other offshore haven ). But still when you start using the money you normally will have to pay taxes on that.

2) If you want to keep your business in the EU, you can open a Romanian company. This is taxes 1% if you are hiring yourself ( minimum wage is about 400 euros monthly and taxes is about 130 on it ), otherwise it's 3% . You can do your own math depending on your income.
The dividends on this combination is about 5% and if your clients are VAT registered European companies you can work without VAT.
Please remember as this is up to 1M a year. Afterwards it's 16% on profits / 5 % dividends and you can't really deduct anything.

3) You can always make a Wyoming LLC. If you do not work with the US, they won't charge you a dime and the yearly costs are 50 bucks (in some cases you can even work with US clients and still not be taxed on income). This is because a Wyoming LLC is taxed as a individual, but you are not a US resident so normally you would have to pay taxes in your resident country. Yet you can hook up the company card to a Transferwise account and there you go, Bob's your uncle. You can also invest, buy property, buy art with the Us based company.

The above explanations are oversimplified. If you want more tips, you can find by researching or if you want to outsource your problems, I will gladly take it of your chest, for a % of what I'm saving you.

Thank you. But does this work with being a resident in Portugal?