Opinion requested - freelance - normal wage (no HWNI)

[SomeSome]

Hello all,

I'd like some opinions on my plans to verify my current understanding of tax laws and if my plans make any sense.

Basically my situation:
- Live in a west-european country, high taxes obviously
- I like to travel and am attempting a digital nomad-ish life. Have quite some travel experience so I'm definitely comfortable traveling to countries to get things set up.
- I managed to get a remote contract from a company in East Europe. No big bucks, but enough to live off & travel I believe.

The problem is obviously that my salary is alright, until I have to pay west-european level taxes on it. I'm at an easy 40% average tax pretty much. I don't want to pay this considering I won't be living in my country nor making use of any services.

The company I'll be freelancing for offered me to either:
1. Create a company in their country and get payed, paying taxes to their country (low taxes and totally OK for me).
2. Open an account somewhere in the world and just get paid in full (no tax). They have a company branch in Delaware (US) which allows them to pay me without having to report this (they claim).

So I wanted to avoid option 2 because that's just blatant tax avoidance. However the problem with option 1 is that my company would fall under CFC rules (even though I won't be physically in my country nor working there and I probably can't even prove I'm doing the work in that country too).

What I thought was a better solution:
1. Renounce my residency in my country for starters. Move my money to bank accounts in foreign european countries. Then I have no ties anymore to my home country (except for friends/family living there, but no possesions nor will I spend significant time here)
2. Make an Estonian company using the e-residency, this company will receive the money from my contact. I'm probably triggering people right here with the estonia/e-residency thing but why would I choose it: because I'm new to all of this and it seems prety easy/accessible for me to do.
3a. Either try the perpetual traveler theory and pay myself from my Estonian company without taxes (legally gray zone or illegal but more realistic because of step 1?)
3b. OR keep the money in my Estonian company, live on my current funds (definitely sufficient) and wait until I claim a residency in for example Malta (self sufficient residency) and then pay myself a salary to one of my bank accounts in Europe (not home country) and not pay any tax on it because of tax remittance regulations in Malta ...?

I'd like to hear your opinions or any flaws or mistakes I made or good suggestions that are practical to carry out.
I personally believe these factors to be the most important:
- I want to be mobile (so not having to stay 183 days a year in country X)
- Practicality: tax avoidance is not the main goal, I don't have a six figure income (10 or 20% tax is not going to be a big difference to me) but I'd like to not lose half my salary to a country I'm not spending any time or life in.

Thank you for your time.

 

[SomeSome]

Well apparently I can't edit my post:

In some ways step 2/3 also seem a lot of hassle if it is fair to believe that I can simple make a monetary account abroad, get paid by their US delaware branch, never have any tax authorities in Europe have knowledge of it and be done with it all. The money I will earn is merely to support my travels (a temporary situation 1-3 years max) until I settle down again.

 

[Larry]

Cheers @SomeSome and welcome to the forum!

I suggest you the easiest and best working way to get your setup done is to get a residence outside Europe! As long as you move inside EU as a EU citizen you will always have sleepless night believe me I know exactly what I'm talking about. Everything inside EU like Malta, Cyprus is pricey and still a lot of paperwork and democracy.

The most common bullet proofed setups for digital nomads are residence in UAE or Panama. Both need just a few days stay during the year but you can get solid banking that work for you and your global lifestyle. Everything else will be not a problem if you travel around and don't stay too long on the same place.
Maybe inside EU you can find several options but you will always have your local taxman in your neck. That are my 2 cents to this topic. Everybody should have the goal to have silence and no trouble so you can focus 100% on your business. By the way you have with both setups 0% tax and why don't go for 0% tax if your global travel lifestyle allows it?

 

[jackfrost]

Careful there, not even as close to as simple as described if you are a western european citizen. Especially UAE can and will be a huge pain in the a*s. Forget about invoices, VAT etc. Most companies tax agencies will flat out deny deduction of them, blacklisting issues etc. Think about sepa banking etc.

Germany etc also have special provisions against certain countries and you moving yourself and or your assets/business there.

If you have citizenship in any of the stricter western european countries than just spending a few days in the UAE etc will not cut it as tax/living residency tests of those go FAR beyond simple days and e.g. if you spend 30 days in 10 countries and 65 days in the 11th or your home country e.g. even though they will have provisions in law to not country family/health visits against you that will already trigger tax residency in that country again even though the UAE might accept your tax / living residency and you are staying for below the 183 days in your citizenship country. Point of interest in life is keyword here.

The days rule ist just a entry ticket to be allowed to the next step, it does not have any substantial meaning in if your citizenship country is going to let you off the tax/residency hook or not.

 

[Larry]

Careful there, not even as close to as simple as described if you are a western european citizen. Especially UAE can and will be a huge pain in the a*s. Forget about invoices, VAT etc. Most companies tax agencies will flat out deny deduction of them, blacklisting issues etc. Think about sepa banking etc.

Germany etc also have special provisions against certain countries and you moving yourself and or your assets/business there.

If you have citizenship in any of the stricter western european countries than just spending a few days in the UAE etc will not cut it as tax/living residency tests of those go FAR beyond simple days and e.g. if you spend 30 days in 10 countries and 65 days in the 11th or your home country e.g. even though they will have provisions in law to not country family/health visits against you that will already trigger tax residency in that country again even though the UAE might accept your tax / living residency and you are staying for below the 183 days in your citizenship country. Point of interest in life is keyword here.

The days rule ist just a entry ticket to be allowed to the next step, it does not have any substantial meaning in if your citizenship country is going to let you off the tax/residency hook or not.

I see your points but don't understand how they are related to the informations OP gave us?

If he only work with one eastern europe company with delaware daughter company I think they will find a way. I understand your point with VAT but this issue I can't see in his case because he is dealing just with one firm and don't need to invoice to different customers. For SEPA he can just use Transferwise or Paysera or ePayments etc.
And if VAT would really mater he can incorporate at cheap price UK company with VAT and if his UAE company is 100% shareholder of the UK Ltd. the Ltd. will be tax neutral in UK (spoke yesterday with Maples lawyer about this topic)

Regarding your days rule I completely agree with that but when OP says he want to live a digital nomad lifestyle... well I think their are better places then europe to travel around like asia, south america etc.

The biggest issue I see in his case is that he maybe make to less money to get a bulletproof setup.

 

[Tax Cow]

You want lower taxes, but don't want to engage in "blatant tax avoidance"? They are the exact same thing.

Evasion - you refuse to pay toll. Avoidance - you find a free, or a cheaper road to same destination. If morality is a concern, you should live and pay taxes where you were raised. It's the country that deserves your taxes the most - for years and years, you were just a burden on the rest of society.

As an individual freelancer, you do not need a company, unless you also require some sort of liability protection, or if your partners or service providers refuse you because of your residency and/or citizenship.

Renounce your residency in that high-tax EU country. Some countries want to see proof of other residency before letting you "off the hook", therefore, just being a "perpetual traveler" might not be good enough. Work towards a second residency - you will need it to solve your tax matters but also to have access to basic services such as banking and payments. Accept to be paid via their Delaware branch.

 

[daxbr]

Agree but...
... depending on EU country one must file and obtain approval.

In my situation, and I have done it years ago. I filed to be taken off tax roll in embassy while I was renewing passport. Got receipt but never received official confirmation. Luckily some other chap did the same thing and received huge tax bill. He took tax department to court and won and based on that decision, I got grandfathered.

Unfortunately at the time, I exchanged one high tax country for another high tax country and had to address that mistake years later.

One thing for sure, it is unlikely EU country will approve tax expatriation to a tax heaven. Instead, consider a country that does not tax overseas income.

Careful there, not even as close to as simple as described if you are a western european citizen. Especially UAE can and will be a huge pain in the a*s. Forget about invoices, VAT etc. Most companies tax agencies will flat out deny deduction of them, blacklisting issues etc. Think about sepa banking etc.

Germany etc also have special provisions against certain countries and you moving yourself and or your assets/business there.

If you have citizenship in any of the stricter western european countries than just spending a few days in the UAE etc will not cut it as tax/living residency tests of those go FAR beyond simple days and e.g. if you spend 30 days in 10 countries and 65 days in the 11th or your home country e.g. even though they will have provisions in law to not country family/health visits against you that will already trigger tax residency in that country again even though the UAE might accept your tax / living residency and you are staying for below the 183 days in your citizenship country. Point of interest in life is keyword here.

The days rule ist just a entry ticket to be allowed to the next step, it does not have any substantial meaning in if your citizenship country is going to let you off the tax/residency hook or not.

 

[jackfrost]

Renounce your residency in that high-tax EU country. Some countries want to see proof of other residency before letting you "off the hook", therefore, just being a "perpetual traveler" might not be good enough. Work towards a second residency - you will need it to solve your tax matters but also to have access to basic services such as banking and payments. Accept to be paid via their Delaware branch.

@Larry this. digital nomad and UAE does not fly at all if you hold EU citizenship

 

[JohnLocke]

As usually with such topics I would recommend you to consult a tax lawyer and accountant, they may be able to help you structuring your tax so you may pay less compared to now. Otherwise move to a low tax / no tax country like UAE, Switzerland or similar places where you legally can avoid huge tax burdens.

 

[SomeSome]

Cheers @SomeSome and welcome to the forum!

I suggest you the easiest and best working way to get your setup done is to get a residence outside Europe! As long as you move inside EU as a EU citizen you will always have sleepless night believe me I know exactly what I'm talking about. Everything inside EU like Malta, Cyprus is pricey and still a lot of paperwork and democracy.

The most common bullet proofed setups for digital nomads are residence in UAE or Panama. Both need just a few days stay during the year but you can get solid banking that work for you and your global lifestyle. Everything else will be not a problem if you travel around and don't stay too long on the same place.
Maybe inside EU you can find several options but you will always have your local taxman in your neck. That are my 2 cents to this topic. Everybody should have the goal to have silence and no trouble so you can focus 100% on your business. By the way you have with both setups 0% tax and why don't go for 0% tax if your global travel lifestyle allows it?

My main issue with Panama is that it screams tax evasion. On top of that, isn't it quite expensive to set up everything? I haven't googled it that much since I'm not to keen on Panama but if it seems very easy I should consider it.

I'm just wondering how I would still have problems if I renounce my residency in my country and have one in Malta instead. I understand Malta is a bit of a debatable tax heaven but if I visit my home country for basically 1 month every 1-2 years and I possess nothing there, isn't my case defendable?

I want to thank people for their response but also verify: am I making any big mistakes here with my three steps above?

Careful there, not even as close to as simple as described if you are a western european citizen. Especially UAE can and will be a huge pain in the a*s. Forget about invoices, VAT etc. Most companies tax agencies will flat out deny deduction of them, blacklisting issues etc. Think about sepa banking etc.

Germany etc also have special provisions against certain countries and you moving yourself and or your assets/business there.

If you have citizenship in any of the stricter western european countries than just spending a few days in the UAE etc will not cut it as tax/living residency tests of those go FAR beyond simple days and e.g. if you spend 30 days in 10 countries and 65 days in the 11th or your home country e.g. even though they will have provisions in law to not country family/health visits against you that will already trigger tax residency in that country again even though the UAE might accept your tax / living residency and you are staying for below the 183 days in your citizenship country. Point of interest in life is keyword here.

The days rule ist just a entry ticket to be allowed to the next step, it does not have any substantial meaning in if your citizenship country is going to let you off the tax/residency hook or not.

The UAE/Panama would not be an issue for invoices as the company I work for doesn't care and also even offered my illegal options. However I'm not to keen because those countries have an obvious reputation.

I know the laws are very vague / ambiguous for tax residency because of the "point of interest in life" but how do you know for sure? I see myself returning to my home country for 1 month max every 1-2 years, mostly staying in countries abroad outside EU for periods of 1 or 3 consecutive months (depending on visa). My only possessions are money and I am capable of bringing these abroad (to other EU countries not considered tax heavens).

I want to thank people for their response but also verify: am I making any big mistakes here with my three steps above?

You want lower taxes, but don't want to engage in "blatant tax avoidance"? They are the exact same thing.

Evasion - you refuse to pay toll. Avoidance - you find a free, or a cheaper road to same destination. If morality is a concern, you should live and pay taxes where you were raised. It's the country that deserves your taxes the most - for years and years, you were just a burden on the rest of society.

As an individual freelancer, you do not need a company, unless you also require some sort of liability protection, or if your partners or service providers refuse you because of your residency and/or citizenship.

Renounce your residency in that high-tax EU country. Some countries want to see proof of other residency before letting you "off the hook", therefore, just being a "perpetual traveler" might not be good enough. Work towards a second residency - you will need it to solve your tax matters but also to have access to basic services such as banking and payments. Accept to be paid via their Delaware branch.

I do fully agree that you should pay taxes where you have been raised because it does deserve it. However that would literally just push me in a poverty wage of 6 dollars an hour? In that case it's not even worth for me to try and have a real job and I'm better of just teaching English online on skype and get paid on Paypal completely illegal. I wouldn't be making an issue out of this if it was "doable" as this is only temporary (1-2 y?). However it is just not. You can still disagree obviously I can understand that.

I do not need a company indeed , but the Estonian company would allow me to store my earnings until I can retrieve them at a better rate.

So what do you think about my suggestion to go for the Maltese self suffiency residence? Or are there any better alternatives?

Agree but...
... depending on EU country one must file and obtain approval.

In my situation, and I have done it years ago. I filed to be taken off tax roll in embassy while I was renewing passport. Got receipt but never received official confirmation. Luckily some other chap did the same thing and received huge tax bill. He took tax department to court and won and based on that decision, I got grandfathered.

Unfortunately at the time, I exchanged one high tax country for another high tax country and had to address that mistake years later.

One thing for sure, it is unlikely EU country will approve tax expatriation to a tax heaven. Instead, consider a country that does not tax overseas income.

Did you and that chap have another residency established? So the tax department tried to make you pay tax, how did they spot your income? European account?
In some way Malta does not tax overseas income and it is not a real "tax heaven" (debatable).

 

[daxbr]

Did you and that chap have another residency established? So the tax department tried to make you pay tax, how did they spot your income? European account?
In some way Malta does not tax overseas income and it is not a real "tax heaven" (debatable).

Cant vouch for the chap, but I showed up at embassy, filled out forms, showed 5eyes perm residence card and they took copy of it. Never run any income thru eu accts, or stayed long. Local lawyer claims they even watch cellphone activity as proof of return.

Like Malta 2 step approach but disagree on birthright indentured servitude.

 

[Tax Cow]

@SomeSome

Malta self-sufficiency is a transparent option for EUR 5K per year. They used to have remittance-based taxation for overseas income - funds not remitted back to Malta were exempt from taxes for non-domiciled residents, but this changed recently. Now the minimum tax applicable for overseas income is EUR 5K annually if your overseas income exceeds EUR 30K, even if you keep the funds overseas. If you do not earn at least 30K, you do not owe anything, but if you want to pay less, but more than zero, this could be an option for you.

As an obvious exploit, if you do establish an Estonian company, you can take out 29.9K EUR in aggregate salary/dividend per year, and make sad puppy eyes to Malta when they come asking for that 5K.

 

[SomeSome]

Cant vouch for the chap, but I showed up at embassy, filled out forms, showed 5eyes perm residence card and they took copy of it. Never run any income thru eu accts, or stayed long. Local lawyer claims they even watch cellphone activity as proof of return.

Like Malta 2 step approach but disagree on birthright indentured servitude.

You mean a 5 years perm residence card? So you renounced your residency & tax responsibility only after having stayed 5 years in your new residential country?
You believe that using a non EU account is crucial ? Even with complying to Malta's tax requirements in my example?
So your cellphone activity in your home country can be used as proof of return?

@SomeSome

Malta self-sufficiency is a transparent option for EUR 5K per year. They used to have remittance-based taxation for overseas income - funds not remitted back to Malta were exempt from taxes for non-domiciled residents, but this changed recently. Now the minimum tax applicable for overseas income is EUR 5K annually if your overseas income exceeds EUR 30K, even if you keep the funds overseas. If you do not earn at least 30K, you do not owe anything, but if you want to pay less, but more than zero, this could be an option for you.

As an obvious exploit, if you do establish an Estonian company, you can take out 29.9K EUR in aggregate salary/dividend per year, and make sad puppy eyes to Malta when they come asking for that 5K.

Thanks for your response.

 

[GrumpyMess]

Switzerland or similar places where you legally can avoid huge tax burdens.

Switzerland isn't a low tax country, or am I something missing?

Malta self-sufficiency is a transparent option for EUR 5K per year. They used to have remittance-based taxation for overseas income - funds not remitted back to Malta were exempt from taxes for non-domiciled residents, but this changed recently. Now the minimum tax applicable for overseas income is EUR 5K annually if your overseas income exceeds EUR 30K, even if you keep the funds overseas.

Don't they increased the minimum tax to 15k? You also have to rent an apartment for 9k/year. It's also unknown whether they will issue the tax residence certificate if you don't spend 180 days there.

I suggest you the easiest and best working way to get your setup done is to get a residence outside Europe!

Like there are a good options outside EU. You can get a residency in a 3rd world country, where you'll never live, but it will be a clear sign for your home country tax office that it's a fictitious residency.

 

[SomeSome]

Switzerland isn't a low tax country, or am I something missing?


Don't they increased the minimum tax to 15k? You also have to rent an apartment for 9k/year. It's also unknown whether they will issue the tax residence certificate if you don't spend 180 days there.


Like there are a good options outside EU. You can get a residency in a 3rd world country, where you'll never live, but it will be a clear sign for your home country tax office that it's a fictitious residency.

Do you believe that a western european homecountry has more reason/legal bias to claim residence than the third world country even if
- you don't have anything in your homecountry nor stay there for significant times
- you do stay a reasonable time (3 months?) in that third world country

 

[daxbr]

Then there is always Cambodia, business visa on arrival, annual visa cheap, claim residence and be done with.

 

[SomeSome]

Then there is always Cambodia, business visa on arrival, annual visa cheap, claim residence and be done with.

Any answers to what I asked you above? I do understand if you don't want to specify your situation any further.

 

[daxbr]

Certainly:
1. my spelling is fine.
2. 5 mins not 5 years wait after you establish credible residency is fine.
3. "a non EU account is crucial" if you reside outside EU.
4. Guessing here since rely on lawyers opinion but I am sure they have other sources.

Whats would be your primary destination besides tax consequences?

 

[Trashbin]

Dear all,

Reading interesting concepts from you about offshore constructions involving more than one company (e.g. Malta + Estonia, Malta + Scotland + US corporation), I would like to ask you a beginner’s question:
Searching the internet for providers to open and run my (future) offshore companies in the countries indicated above, I learned that each company will cost me a few thousand EUR to open it, plus a few thousand EUR per year and company to run and maintain it (costs for local office, local director, accounting etc.). If I triple these amounts (for a 3-company setup), this is a significant amount of money.
Is there an option to avoid or greatly reduce these high running costs for companies / holdings which actually have no or few activities?
Or are your tax savings that high anyway - so the runnings costs of 2 - 4 companies are negligible?

Apologies if my beginner’s question is wrong in this forum. Please feel free to redirect me to elsewhere.

Kind regards,
Matt