Opening an LLC in either Estonia or Latvia and living there. Please help me decide.

[rust3964]

I am an EU citizen considering moving to either Estonia or Latvia, open a LLC (OU/SIA) as an investment vehicle, and live in the country full time. My sole source of income is trading publicly traded securities (not crypto). Given the 0% tax rate on profits and 25% on dividends, the compounding effects could be incredible. Latvia copied Estonia's tax system in 2008 but there do seem to be some differences, and I am trying to figure out what those are and how they may impact me.

The experience in this forum seems vast and I ask for your help in crowdsourcing which of the two (or neither) would be a better choice given my circumstances.

Estonia Positives:

• Less bureaucracy and everything can be done online.
• High level of English in people under 40.
• Lowest crime rate in the Baltics.
• No tax on real estate.

Estonia Negatives:

• Tallinn is the smallest of the Baltic capitals and some say it is boring.
• Some write you have to pay yourself a salary commensurate with the job you are performing. You cannot simply withdraw a dividend a few times a year to live on.
  • How much would you have to pay yourself as a trader?
  • How is this calculated?
  • Given the very high payroll and social taxes, the bigger this number is the less attractive 0-25% becomes.
  • I found in another source that there was a court case involving a 1-man LLC paying himself only dividends who was sued by the tax authority. He went to court and won. They ruled he didn't have to pay himself a salary. I need help to confirm, must you have to pay yourself or not, as it could become a dealbreaker.

Latvia Positives:

• Riga is bigger and more populous than Tallinn by 200K and seems more livable in that regard. Since I'll be living there full time, this is important to me.
• Riga has a lower cost of living. Real estate is less expensive by about 45% according to numbeo.
• No tax on shares if held for more than three years. I'm trying to figure out if this applies to publicly traded securities. I found conflicting answers.
• You do not have to pay yourself a salary as a 1-man LLC. Or maybe you do? I can't find any sources to confirm either.

Latvia Negatives:

• Considered the most corrupt of the three Baltic states.
• Many posts on this forum about Latvian banks closing accounts and confiscating money for their own benefit. Most of the occurrences seem to be around 2018-2020 but still worrying.
• Highest crime rate in the three Baltic states but compared to Stockholm, Paris and London, still very low.
• Not as e-friendly as Estonia. You can't do everything online. But maybe this has changed since they copied Estonia's tax structure?

Other questions regarding both Estonia and Latvia:

• Can taxes be done online and how easy is it to do? I always did my own once a year with the help of software, and hope to continue.
• Do you have to declare every trade? Or just your profit and loss at the end of the year?
• If after a few years I want to move, what are my options other than liquidating my LLC? Some write you can move to a country with a low PIT and pay yourself a salary instead of dividends.

Thanks in advance for your knowledge and advice.

 

[Sols]

Go spend time in both.

Estonia is far more well established and set up for foreigners than Latvia. E-government in Tallinn is miles ahead of Latvia.

You won't have to worry about not speaking Estonian in Estonia, which is different from Latvia where English will get you very far especially in Riga but it gets limited outside of the capital.

Tallinn may be smaller but if you value business connections and networking, Tallinn is by far the better of the two. Thanks to a strong crypto and tech startup scene, you will have more peers in Estonia in Latvia. Tenfolds more, probably.

Tallinn has good connections (air and sea) to Finland and Sweden, which helps make it feel less small.

I think Latvia works out to have a lower overall tax pressure, though, so if you really value saving every cent, that's something to consider. However, when all is said and done, I think you can capture more value out of living in Estonia than in Latvia.

 

[scooterguy]

I think Estonia doesn't make sense, but maybe someone can change my view. At the end of the day you'll be taxed at 20-40% when you pay yourself anyways.

Have you considered UAE?

 

[rust3964]

No one can beat UAE freezone as far as the effective rate.

In UAE you have 183 days of:

• Sharia law
• Extreme heat, pollution
• Very expensive
• No beautiful natural surroundings outside the city. Some might love desert, this is just my opinion.

Estonia and Latvia are way more livable. Yes, you give up 25% on dividends but if your life expenses are low compared to your profits, the compounding power is phenomenal. If you make 300K and pay yourself 60K in dividends, the effective rate is only 5%. As your assets compound, the rate becomes more and more favorable.

The big question is, do they force one man OUs to pay a salary and how big? I can't find a clear answer to this. Given the low level of corruption in Estonia, I am surprised how ambiguous the tax law is in this one area.

 

[scooterguy]

Fair enough. Now, let me go for another shot.

What about Bulgaria? Very livable, cheap, flat tax of 10% (this is also the capital gains tax), social security is 32% but capped at ~500 EUR. And dividends are taxed at only 5%.

You could give yourself a low salary, and extract dividends at 5% when needed. But even with a relatively high salary (like 60K a year), you'd be paying roughly 10-15% in personal income tax + social security.

Bonus country: Romania is also a good option, with their micro-company regime, although dividends trigger an 8% tax.

 

[uplana]

You could give yourself a low salary, and extract dividends at 5% when needed. But even with a relatively high salary (like 60K a year), you'd be paying roughly 10-15% in personal income tax + social security.

that would work well. Go there for vacation, look for you self if it is a country you want to live in.