Portugal NHR combined with Georgia Virtual Zone company

[mallshtow]

Hi, I'm a software engineer working for a fund (for which I have some shares in) so I have to incomes: monthly salary from providing services to it and also the dividends that the fund distributes each year. I'd like to know what's the best strategy for me. My main idea is the following:
- I'll be setting up residency in Portugal under the NHR programme
- Incorporating a company in Georgia (which will apply to get the Virtual Zone status).

Georgia Virtual Zone company:

• 0% corporate tax,
• 0% VAT,
• 5% capital gains tax on dividends (due when dividends are paid out to the shareholders),
• no annual license fees.

As far as I understand, the 2 income I'm having (mentioned above) will not be paying any tax as my Georgia company will be having 0% corporate tax. I will only have 5% when distributing dividends (but as long as I keep the money there, I would not have to pay anything).

And, in Portugal, I would not have to pay anything.

Thoughts?

Thanks!!

 

[JustAnotherNomad]

You wrote that you have a salary. But what you meant is that you would be sending invoices from your Georgian company to your client?
The clear risk here is that Portugal could claim that you run your "Georgian" company from Portugal and also work from there, so it should be treated like a Portuguese company.
You might be able to reduce that risk a bit by hiring local employees in Georgia, especially a local director, but some risk remains.
You might be better off using a well-proven setup that has been implemented for hundreds of such NHR clients. I believe they typically involve companies in Malta or Cyprus. It's probably more expensive, but at least you have a common setup, not an exotic one. Talk to some Portuguese lawyers and get a quote. I believe it's typically about 10k per year.
But even then, there is always some risk if you spend a lot of time in Portugal.

 

[mallshtow]

You wrote that you have a salary. But what you meant is that you would be sending invoices from your Georgian company to your client?

Right

The clear risk here is that Portugal could claim that you run your "Georgian" company from Portugal and also work from there, so it should be treated like a Portuguese company.

You might be able to reduce that risk a bit by hiring local employees in Georgia, especially a local director, but some risk remains.

Yes, the idea is that, to add economic substance.

You might be better off using a well-proven setup that has been implemented for hundreds of such NHR clients. I believe they typically involve companies in Malta or Cyprus. It's probably more expensive, but at least you have a common setup, not an exotic one. Talk to some Portuguese lawyers and get a quote. I believe it's typically about 10k per year.

Exactly, I've seen that, normally, NHR is combined with a Maltese company which is indeed more expensive, basically because you have ~5% corporate tax. It is approx because you actually have 35% but then you can get refunded 6/7 so you effectively end up paying 5%.
The thing is that, in terms of setup, as far as I understood, it would be very similar to the Maltese one because in both cases I would need to add economic substance...

And I guess that most of NHR residents which are not retiree people are all doing that, working remotely from Portugal even though they are saying that they do not, they are just building economic substance on the companies they have incorporated, right?

Thoughts @JustAnotherNomad?

Cheers,
Federico

 

[JustAnotherNomad]

Economic substance is not enough. Like you said, you can't be working/managing the company from Portugal, no matter how much economic substance you have.
Otherwise they can say: "Oh yeah, sure. You have economic substance. So we don't tax the value that is created outside Portugal. We only tax the value that is created in Portugal. And we happen to see that 90% of the value is created by you, in Portugal. So we will tax 90% of the company profits in Portugal. The other 10% we won't tax because they are created outside of Portugal and there is economic substance."

However, I know that lots of people have such setups and they are doing fine. Whether that is because the setups actually are safe or rather because the PT authorities don't have the capacity to investigate this closer, that's for you to decide.
I could also imagine that in a couple years, they will realize that hundreds of Maltese "NHR" companies are located at the same address. I don't know what will happen then.

So it's not just 5% tax in Malta, but also 10k or so for the "substance", accounting etc. There is also a new way to pay just 5% instead of 35% with a refund, but I don't know the details.

Instead of Georgia, you could also do it with a UAE company. But I can't tell you what the risk is with Georgia vs. Malta vs. UAE.

 

[mallshtow]

Thanks @JustAnotherNomad!

Does anybody has any other recommendation on this setup? Maybe a Portuguese tax lawyer here?

 

[Mr Gus]

You should look into Management and Control rules of Portugal and if you can meet those criteria, which is highly unlikely if you are going to stay there most of the year and have a active trading company, for holding companies that might be a lot easier.

However you might be able to still get away with it and the Portuguese tax authorities will leave you alone. But the NHR program isn't designed for people with active income from trading companies.

Cyprus, Malta and Bulgaria are safer options if you want to reside in the EU.

 

[mallshtow]

@JustAnotherNomad @wie7se what about combining it with an offshore in Panama? As it happens with the UAE, even though they are blacklisted jurisdictions for Portugal, they have DTTs with Portugal...

 

[JohnLocke]

Cyprus, Malta and Bulgaria are safer options if you want to reside in the EU.

how do you define "safer options"?

 

[Mr Gus]

how do you define "safer options"?

These countries are a lot less likely to hunt you down for having an offshore company.

 

[JustAnotherNomad]

@JustAnotherNomad @wie7se what about combining it with an offshore in Panama? As it happens with the UAE, even though they are blacklisted jurisdictions for Portugal, they have DTTs with Portugal...

I guess that should work. in theory at least. But all the other stuff still applies.

 

[Brutus]

@fartinav and @JustAnotherNomad
I think the option here is to setup your NHR status but not stay in portugal while you manage your company. This way they cannot say that you are running the company from Portugal and therefore tax your income.

 

[JustAnotherNomad]

@fartinav and @JustAnotherNomad
I think the option here is to setup your NHR status but not stay in portugal while you manage your company. This way they cannot say that you are running the company from Portugal and therefore tax your income.

Yes, I guess that's the idea. But then where do you live? Lots of catches.

 

[tariq]

@JustAnotherNomad @fartinav have you succeeded with NHR + LLC/LTD setup that works? Any luck with Portuguese lawyer / consultant / accountant with common sense and knowledge of the topic? I struggle to find anyone competent and able to cover entire spectrum. Only consulting firms with crazy price tags so far and even they recommend Cyprus/Malta with known shortcomings