Optimal Tax Setup for Fully Digital Professional Services Firm

[vs90]

Hi everyone! I am new to OffshoreCorpTalk. I found the threads so interesting I was up until 2 am reading last night

I am trying to identify the optimal tax setup for my fully digital professional services firm. Let me give you a bit of background. I provide corporate finance services to US, UK and Swiss companies. The profit before tax is circa EUR 250k - 300k, with potential to grow up to EUR 500k, I think.

Currently I am tax resident and living in Italy, where I pay an effective tax rate of circa 15% (including social contributions.) However, this setup will last for another couple of years only, after which I'd like to move out of Italy and find a better solution, e.g. Malta.

I am looking for a structure that is:

• Clean: I'd rather avoid grey areas which could create troubles and take focus away from company building. Also, I prefer not to invoice clients from a place that raises eyebrows
• Easy to maintain: Since I'm not trading millions I'd like something with minimal accounting, reporting and costs
• Future proof: Ideally, I'd like a setup that I can keep for the next 5-10 years. The plan is to move from Italy to a sunnier place such as Malta, Cape Verde, or even Spain. Maybe in the future move closer to the US, in a place like Costa Rica

I have read about a few options I find interesting:

1. Estonian company + Maltese non-dom resident:
   1. Pay pretty much all profit before tax as salary to a non-Maltese bank account, therefore avoiding corporate tax in Estonia and personal income tax in Malta (since not remitted)
   2. Pay as many things as possible with a foreign credit card from a non-Maltese bank account. If I need to remit something to Malta (to pay for things like rent), I do it selling investments so they are capital gains (not taxed.) Pay the minimum EUR 5k tax
   3. Problems I see and/or things I don't understand:
      1. Will Estonia allow me to pay a salary of 250k-300k and no dividends? It can be argued it's market salary, but I assume they won't like giving up on the 22/78 = 28% corporate tax
      2. Do I need to be setup as a contractor in Malta since I don't ever remit any employement/freelance income to the country?
      3. Will Malta see the Estonian company as a Maltese company since its place of effective management and control is in Malta? Are there ways to ensure this is not the case?
      4. If I move out of Malta in another country, will this structure hold? Do I need to go to another country that does not tax foreign income? What happens if I go to a stricter country?
      5. I'm not sure if there are any benefits of adhering to the TRP in Malta since the minimum tax would be 15k + cost to apply instead of 5k
2. Maltese Holding + Maltese Trading Company.
   1. Set them up as a fiscal unit to benefit from the 5% corporate tax. Pay dividends to myself as Maltese non-dom resident and effectively pay no personal income tax because of the full imputation system
   2. Problems I see and/or things I don't understand:
      1. I read about pressure from the EU to increase tax in Malta. How much worse are they planning to make it?
      2. Does it really work that way? Will Malta accept I take no salary although I produce the foreign income while working in Malta?
      3. What are the costs to maintain such setup? Startup + ongoing
      4. If I move out of Malta in another country, will this structure hold? Do I need to go to another country that does not tax foreign dividends? What happens if I go to a more strict country?
3. Other combinations with Estonian Holding and Maltese Trading Company, PEs, etc. I didn't fully understand them and the costs/reporting work associated. Estonia's reputation is not too bad, but if I can have the company set up in a place like Switzerland to have a clean, easy to maintain and future proof setup, but I have to pay a bit more tax, that's acceptable.

I hope I provided relevant information, I am happy to hear ideas from people who know more about this than I do! I hope this can be helpful for other people, too.

 

[bountymounty]

• Easy to maintain: Since I'm not trading millions I'd like something with minimal accounting, reporting and costs

can work for Switzerland.

Currently I am tax resident and living in Italy, where I pay an effective tax rate of circa 15% (including social contributions.)

That's really not a bad tax rate to pay, in that case you have a few options like Switzerland, Cyprus and Malta or even Estonia. If reputation matters personally I can only see Switzerland as an option from the one you mentioned.