Non-EU National with Danish Resident Looking to Open a Company in Low Tax Jurisdiction

[sub0]

Hey All

I seek advice regarding a particular situation and would appreciate any guidance you can provide.

The Family Reunification with Temp Danish PR program approved my residence in Denmark three years ago. It will be up for renewal in one year, extending for another four years. However, I want to establish a business in low-tax jurisdictions such as Bulgaria, Cyprus, or Portugal. (although low in taxes, Dubai incurs high expenses, so it is not a viable option for a family)

I have contemplated two possible scenarios:

Scenario 1:
I would continue to reside in Denmark with my family (including two children) while operating a business in another low-tax country.

Scenario 2:
I would relocate entirely to another country, and my family would join me once things had settled.


My Concerns:

• I have concerns regarding the unique healthcare and welfare systems in Denmark. Are similar facilities available in low-tax countries?
• I have paid a significant amount in Danish taxes, which could help me obtain a Permanent Resident card leading to Danish Citizenship. I would like to know if low-tax countries can provide me with a Permanent PR status or offer better prospects for citizenship.

Here are a few relevant facts:

1. I have two children under 13, and their health and education are my primary concerns. I hope to find comparable education options in Denmark's unique schooling system in another country.
2. Over the past two years, my income has averaged around $200k annually. While not a substantial amount, I am looking to save as much as possible by investing in properties in Denmark and elsewhere. However, I couldn't invest in Denmark due to the requirement of completing a five-year residency in Denmark.
3. I am still determining tax implications and need a comprehensive understanding of the subject. I rely on my accountant's advice and trust that he is optimizing my tax payments. Unfortunately, I do not have an alternative option.

I realize this is quite a lot of information to process, and I sincerely thank you for taking the time to read through it. I would appreciate any guidance you can offer, as it will significantly impact my family's future. Thank you for your assistance.

 

[bountymounty]

Get out of Denmark if you want any tax benefits. Sooner or later they will come after you as your income increase. You get taxed from worldwide income! Regardless what the damn tax advisors tell you or the tax lawyers, if you don't have millions in position you will loose and the tax office win.

Pay whatever tax you have to pay in Denmark! If you want to check if it is possible to lower your tax, do it inside Denmark. Don't let you be fooled into any solution from the so called "specialists" Denmark is the wrong country to safe taxes! You have to pay for everyone there and you will go to pay. It is like the Moon sect. Everything you earn you have to give to the society!

 

[Gediminas]

Hey All

I seek advice regarding a particular situation and would appreciate any guidance you can provide.

The Family Reunification with Temp Danish PR program approved my residence in Denmark three years ago. It will be up for renewal in one year, extending for another four years. However, I want to establish a business in low-tax jurisdictions such as Bulgaria, Cyprus, or Portugal. (although low in taxes, Dubai incurs high expenses, so it is not a viable option for a family)

I have contemplated two possible scenarios:

Scenario 1:
I would continue to reside in Denmark with my family (including two children) while operating a business in another low-tax country.

Scenario 2:
I would relocate entirely to another country, and my family would join me once things had settled.


My Concerns:

• I have concerns regarding the unique healthcare and welfare systems in Denmark. Are similar facilities available in low-tax countries?
• I have paid a significant amount in Danish taxes, which could help me obtain a Permanent Resident card leading to Danish Citizenship. I would like to know if low-tax countries can provide me with a Permanent PR status or offer better prospects for citizenship.

Here are a few relevant facts:

1. I have two children under 13, and their health and education are my primary concerns. I hope to find comparable education options in Denmark's unique schooling system in another country.
2. Over the past two years, my income has averaged around $200k annually. While not a substantial amount, I am looking to save as much as possible by investing in properties in Denmark and elsewhere. However, I couldn't invest in Denmark due to the requirement of completing a five-year residency in Denmark.
3. I am still determining tax implications and need a comprehensive understanding of the subject. I rely on my accountant's advice and trust that he is optimizing my tax payments. Unfortunately, I do not have an alternative option.

I realize this is quite a lot of information to process, and I sincerely thank you for taking the time to read through it. I would appreciate any guidance you can offer, as it will significantly impact my family's future. Thank you for your assistance.

Hey,

I believe that changing of tax residency country would be too complex in your case, in the light of the requirements and income you described.

However, you could set up a company somewhere where taxes are lower than in Denmark. For income you would receive in the form of dividends you would pay DK taxes, but part of income might be used for further investments without paying tax in DK. The most important is to avoid two main “anti–tax avoidance” rules: CFC or PE.

In the end, it means that it should not be zero tax country, it should have DTT with Denmark and have some level of substance.

 

[bountymounty]

Even though you will have to fight it if you hit some certain unknown threshold! Don't say you didn't get warned. They are total crazy in this country. I lived there for 25 years and moved out 2 years ago. Seek my freedom.

Either relocate or pay your taxes, they will come after you sooner or later.

 

[jafo]

Get out of Denmark if you want any tax benefits. Sooner or later they will come after you as your income increase. You get taxed from worldwide income! Regardless what the damn tax advisors tell you or the tax lawyers, if you don't have millions in position you will loose and the tax office win.

Pay whatever tax you have to pay in Denmark! If you want to check if it is possible to lower your tax, do it inside Denmark. Don't let you be fooled into any solution from the so called "specialists" Denmark is the wrong country to safe taxes! You have to pay for everyone there and you will go to pay. It is like the Moon sect. Everything you earn you have to give to the society!

This is SOLID altruistic advice GAINED from "battle-field" wisdom with hindsight wounds & scars!

Buy this man a drink!

PS. Thank you! Even though I know this too and gained this knowledge by getting "wounded", it's nice to hear it again. It reinforces REALITY as opposed to propaganda and sales pitches.

 

[Forester]

1) I agree at 100% with @bountymounty and @jafo.

2) Having said that, just my 2 cents re: some of your concerns and questions that remain unanswered.

However, I want to establish a business in low-tax jurisdictions such as Bulgaria, Cyprus, or Portugal.

Could you share your citizenship? It might influence the another possible options a little bit...
Generally, in the framework of EU (where your citizenship does not matter much if you are EU resident), check also Hungary and Romania.

I would continue to reside in Denmark with my family (including two children) while operating a business in another low-tax country.

Just have in mind @Gediminas 's warning »The most important is to avoid two main “anti–tax avoidance” rules: CFC or PE.«

I have concerns regarding the unique healthcare and welfare systems in Denmark. Are similar facilities available in low-tax countries?

Honestly, I am not well familiar with the current status quo in Denmark, my knowledge of this country is a little bit outdated. Nevertheless, I am afraid that the answer is NO. Of course, e.g. in the UAE you can – AFAIK – easily pay for the premium healthcare but it is another game.

I have two children under 13, and their health and education are my primary concerns. I hope to find comparable education options in Denmark's unique schooling system in another country.

With the same disclaimer as above, I am afraid that the answer is again NO. Again, in some countries you can easily pay for the top quality education but it is not the Danish system.

 

[JustAnotherNomad]

Forget about it. Stay in Denmark, pay your taxes and get citizenship. Once you have citizenship, you could reconsider moving to another country.
In my opinion, it really doesn't make sense to put your kids through an international relocation now and have to start over with getting EU citizenship in another country.
Use deductions in Denmark, keep money in the company instead of paying it out to yourself (maybe you can get it out later without paying taxes by selling the company to a holding company in Cyprus or Estonia and moving to that country, or something like that). All that should help to lower your tax burden in DK.

You can't just set up a company in a low-tax country, but stay in DK without paying taxes in DK. That would only work if there was a lot of substance (=office, employees) in the other country.
But unless you need employees to do work for you, what would be the point? What you'd be paying less in taxes in DK, you would pay for substance in the other country (+additional costs for accounting and so on), and even then, you might still have to fight the DK tax authorities. It really doesn't make sense for 200k.

 

[Alonzo]

Oh lord, Denmark. The pinnacle of tax hell in Europe. Why Denmark may I ask???

Scenario 1:
I would continue to reside in Denmark with my family (including two children) while operating a business in another low-tax country.

Unless that company is managed daily outside Denmark, your company will be treated as a Danish company no matter it is located. Pretty much pointless unless you move out of EU (+ Norway)

The Family Reunification with Temp Danish PR program approved my residence in Denmark three years ago. It will be up for renewal in one year, extending for another four years. However, I want to establish a business in low-tax jurisdictions such as Bulgaria, Cyprus, or Portugal. (although low in taxes, Dubai incurs high expenses, so it is not a viable option for a family)

• I have paid a significant amount in Danish taxes, which could help me obtain a Permanent Resident card leading to Danish Citizenship. I would like to know if low-tax countries can provide me with a Permanent PR status or offer better prospects for citizenship.

Getting citizenship in Denmark is very hard. The difficulty is comparable to Switzerland. It will take much longer than what you would think. You only have a temporary residence permit to begin with... You will definitely spend more than a decade in this country for citizenship.
https://ec.europa.eu/migrant-integration/news/denmark-tightens-rules-citizenship-once-again_en
And after the horribly very very long process to Danish Citizenship, you decide to leave the country. Guess what? Exit tax!
https://taxsummaries.pwc.com/denmark/individual/other-taxes
exit tax for individuals leaving with shares, bonds, claims, and financial contracts only applies if the individual has been subject to full Danish taxation (resident or resident and tax treaty resident) for at least seven out of the past ten years at the date of departure (date on which resident taxation ceases).

The rules apply to both Danish and foreign assets, shares, investment funds, financial contracts, deposit accounts, etc.

If comprised by the exit tax rules, the assets, etc. comprised will be considered as realised on the date of departure, and the individual will be liable to pay the Danish tax due on this unrealised gain (this is so-called exit tax, 'fraflytterskat' in Danish). It may be possible to file for postponement of payment of the exit tax, provided a number of conditions are met and recurring obligations fulfilled. The possible postponement agreement will be different depending on the assets/investment type in question.

So: Do you really want to spend more than 10 years getting taxed at like 55% on 200k average income, get citizenship then leave to a low tax country but Danish tax authorities wants your unrealised gains (likely taxed at 42%) from your financial assets and investments?

In my opinion: Move out ASAP

 

[JustAnotherNomad]

If it's indeed that difficult to get citizenship, maybe moving might make sense overall. But then I would still think about citizenship first (if you want to stay in the EU) and taxes second - I believe the Netherlands are good option for that. Exit tax can usually be avoided, as long as one stays in the EU. There may be other ways like holding companies for avoiding it as well.
200k really isn't that much money. If I had kids, they would always come first. Not worth living in a shitty place just to save some taxes.
Otherwise you could of course consider Dubai, good quality of life, good healthcare, little tax.
Or Switzerland - not EU, but high quality of life and top tier healthcare, with lower taxes than most EU countries. Very high cost of living though.
I doubt that Cyprus or Malta offer good quality of life and healthcare for families.

 

[Alonzo]

Exit tax can usually be avoided, as long as one stays in the EU.

In some EU countries it is indeed but some will just postpone the exit tax payment for generally 5 years.

Many years ago in France you could move to another country and not pay exit tax for 15 years. And if you come back to France within that period you won't pay any exit tax.

I see that in Denmark it depends if this other country has DTT but still unclear about other conditions that must be met.