Question Refusal of 70-90% Income Exclusive in Italy, What Netx?

[A1988]

Just wanted to bring to everyones notice that my request has been refused for 70-90% exemption in Italy stating "I did not move to italy with the intention to take the 70-90% exemption of income". I was involved in Research and Development activity and finished the R&D in 2023 and moved to italy in 2019. Again, I did not make any income in this period in Italy and now when the time came for commercialization of the product I am stuck with this huge blow. I have my R & D in Italy and a business partner based in Italy, hence I moved.
My present situation is that,

1. I would like to move out of italy without creating any problems or trigerring any issue with the tax authorities.
2.I would like to move to either UK, Ireland, Malta (less preferred0 and take advantage of non dom program also I have 2 kids who would start their preschooling.
3. I would like to know if anyone knows if a structure where I pay 0-5% in corporate tax?
4. I have my business partner and R and D in Italy so daily flights would be a plus, ideally within 2hrs and not more.
5. I am expecting capital gains in the next 3-4 years.

Any suggestion or experience of the situation would be very welcome, I would want to stay in the country permanently and want my children to build their life and network in it, I am not really interested in Middle eastern countries as I have lived there and I feel its not best for my children to be exposed to that lifestyle and specially having daughters. I turn 35 in may this year.

sorry for excessive information, just wanted everyone to know that the regime can come up with any kind of excuses to refuse of accept what suits them or their objectives.

 

[A1988]

So you will get a job on paper with a low salary, on which you will pay 24% tax and you will have some director for your company outside of Spain?
But if you do work from Spain, how can you be sure they won't say that your company has a PE in Spain?

The Portugal NHR setups work in just the same way, but you don't need a local job. You just have your company outside of Portugal with some substance and capital gains/dividends are exempt from tax in Portugal.

The risk seems quite comparable to me? The biggest difference of course being that, if you don't have to declare anything, it might raise fewer questions in Spain than in Portugal, where I think you have to declare capital gains, but they are not taxed.

Even if I work from spain the company cannot have PE in spain because i am a minority shareholder and not involved in the day to day management of the business outside spain, the company will have proper substance outside spain. Another advantage is no need to declare anything in spain and thats where it wins against portugal hands down. I am thinking of having a holding company in either gibralter or cyprus and that holding company will own the IP plus the operating company in a third country, once my company is sold, the IP is transferred from the holding along with the operating company and the capital gained goes into personal swiss / singaporean or luxembourg account.

Even if I work from spain the company cannot have PE in spain because i am a minority shareholder and not involved in the day to day management of the business outside spain, the company will have proper substance outside spain. Another advantage is no need to declare anything in spain and thats where it wins against portugal hands down. I am thinking of having a holding company in either gibralter or cyprus and that holding company will own the IP plus the operating company in a third country, once my company is sold, the IP is transferred from the holding along with the operating company and the capital gained goes into personal swiss / singaporean or luxembourg account.

IF you are from the tax office of spain, what would make you go after me? Its all by the book.

 

[Marzio]

The Portugal NHR setups work in just the same way, but you don't need a local job. You just have your company outside of Portugal with some substance and capital gains/dividends are exempt from tax in Portugal.

I thought exactly the same.

Even if I work from spain the company cannot have PE in spain because i am a minority shareholder

Being a minority shareholder doesn't mean that you can't create a PE, you can create a PE in another country even if you aren't a shareholder at all.

It's enough to be considered a dependent agent of the foreign company for the tax agency to claim that you created a PE.

That's why there are EOR services like remote.com that hire people on your behalf to avoid the risk of creating a PE.

 

[A1988]

I thought exactly the same.



Being a minority shareholder doesn't mean that you can't create a PE, you can create a PE in another country even if you aren't a shareholder at all.

It's enough to be considered a dependent agent of the foreign company for the tax agency to claim that you created a PE.

That's why there are EOR services like remote.com that hire people on your behalf to avoid the risk of creating a PE.

Ok, i think i need to spend more time on understanding the risks of beckham law and spain in general but still at the end of the day it looks very attractive, just needs a little bit of optimizing.

 

[JustAnotherNomad]

I think you will probably be fine - but then you would also be fine in Portugal. The risks seem very similar.
How many people use the Beckham Law? That might be a factor. If it's only a handful, the risk of an inspection and issues may be higher than in Portugal where there's a very large number of NHR residents, from what I've heard. Then again - with the Backham Law, at least you pay some tax, so maybe it's part of the deal that they'll leave you alone.

 

[saponaire]

Just a few notes, assuming that you want to save tax on cap gains on a company where you are involved in management:
1) Spain: Beckham law will work if you are employed in Spain - so if you own <25% of this company, then you can set up a subsidiary in spain and work from there - otherwise someone must employ you and it must look legit.
2) Portugal: It won't work, cap gains are still taxed in PT under NHR UNLESS the other country tax them (but there are very few countries that tax cap gains), unless you can liquidate these gains in the form of dividends (but that would require setup)

Overall from this conversation: do not risk it.. either pay taxes in Italy (which btw you can pay 14% due to the latest finance bill, talk to a good commercialista), or move to a country where you are guaranteed not to pay capital gains (Switzerland, Monaco, Liechtenstein, UK non-dom, Malta non-dom, Gibraltar, Greece non-dom)

 

[JustAnotherNomad]

2) Portugal: It won't work, cap gains are still taxed in PT under NHR UNLESS the other country tax them (but there are very few countries that tax cap gains), unless you can liquidate these gains in the form of dividends (but that would require setup)

Wouldn't you be able to avoid this with a holding company, e.g. in Cyprus?

 

[A1988]

I think you will probably be fine - but then you would also be fine in Portugal. The risks seem very similar.
How many people use the Beckham Law? That might be a factor. If it's only a handful, the risk of an inspection and issues may be higher than in Portugal where there's a very large number of NHR residents, from what I've heard. Then again - with the Backham Law, at least you pay some tax, so maybe it's part of the deal that they'll leave you alone.

The idea of not declaring any worldwide income or assets just makes it way more attractive

Just a few notes, assuming that you want to save tax on cap gains on a company where you are involved in management:
1) Spain: Beckham law will work if you are employed in Spain - so if you own <25% of this company, then you can set up a subsidiary in spain and work from there - otherwise someone must employ you and it must look legit.
2) Portugal: It won't work, cap gains are still taxed in PT under NHR UNLESS the other country tax them (but there are very few countries that tax cap gains), unless you can liquidate these gains in the form of dividends (but that would require setup)

Overall from this conversation: do not risk it.. either pay taxes in Italy (which btw you can pay 14% due to the latest finance bill, talk to a good commercialista), or move to a country where you are guaranteed not to pay capital gains (Switzerland, Monaco, Liechtenstein, UK non-dom, Malta non-dom, Gibraltar, Greece non-dom)

I think spain looks way more attractive than portugal not only for taxes but also from a lifestyle perspective

Wouldn't you be able to avoid this with a holding company, e.g. in Cyprus?

Im thinking of cyprus or gibralter holding company which would hold the patents.

 

[uncreative]

There a lot of changes since 2023 for beckham law. P.E you can set up your own active SL ( 100% shares ) and work as a director to apply for beckham law. Here is good summary of the changes:

Beckham Law; Tax benefit for expats | Blog | Parakar

The Beckham law in Spain provides a unique tax advantage to foreigners in Spain. Rather than paying a progressive tax on their worldwide income (ranging

parakar.eu

 

[Marzio]

@A1988 i see Gibraltar monkeys in your future

 

[A1988]

There a lot of changes since 2023 for beckham law. P.E you can set up your own active SL ( 100% shares ) and work as a director to apply for beckham law. Here is good summary of the changes:

Beckham Law; Tax benefit for expats | Blog | Parakar

The Beckham law in Spain provides a unique tax advantage to foreigners in Spain. Rather than paying a progressive tax on their worldwide income (ranging

parakar.eu

Amazing resource, thankyou, so basically only modulo 151 and not 720 that means they dont care what you own outside spain and how much money you make? I can maybe qualify under entrepreneurial activity inside spain? I will mostly manage my company thru telecommunication so that is totally exempt from any taxes in spain? I think its even better than non dom regime of uk, ireland, malta and cyprus.

Amazing resource, thankyou, so basically only modulo 151 and not 720 that means they dont care what you own outside spain and how much money you make? I can maybe qualify under entrepreneurial activity inside spain? I will mostly manage my company thru telecommunication so that is totally exempt from any taxes in spain? I think its even better than non dom regime of uk, ireland, malta and cyprus.

Because you can bring the money inside spain tax free unlike non dom regime where its taxed at normal rates if you bring the money inside for personal use.

@A1988 i see Gibraltar monkeys in your future

Haha not yet, working out if it can workout for me.

Wouldn't you be able to avoid this with a holding company, e.g. in Cyprus?

Maybe yes but when i sell the company i cannot take the money as dividends its capital gains and the patents are transferred in public domain. So portugal can be dangerous.

 

[JustAnotherNomad]

Maybe yes but when i sell the company i cannot take the money as dividends its capital gains and the patents are transferred in public domain. So portugal can be dangerous.

No, you sell/gift your company to your holding company now. When there is an exit, then it's your holding company, not you, who has capital gains.

 

[A1988]

No, you sell/gift your company to your holding company now. When there is an exit, then it's your holding company, not you, who has capital gains.

Ok, we did it differently last time with the dutch sandwich, now its no longer available. But, gibralter or cyprus looks great at the moment with personal tax residency in spain. But you seem to like portugal more than spain?

Ok, we did it differently last time with the dutch sandwich, now its no longer available. But, gibralter or cyprus looks great at the moment with personal tax residency in spain. But you seem to like portugal more than spain?

I think portugal fits well for someone under 2mil euros wealth or assets. For anyone above that I think spains beckham law is great considering assets and income is generated outside spain. Marbella is a lovely place to live and spend time, is there an equivalent of marbella in portugal? Not that im going to move but just out of curiosity

 

[JustAnotherNomad]

I know almost nothing about the Beckham law. I only mentioned Portugal as an alternative.
I understand you prefer Spain and I would, too, from a lifestyle perspective. Just make sure you check things like accidental creation of a PE in Spain.

I don't think there's a need for any sandwich. Just use a holding company from a suitable country (e.g. in Cyprus), done.
However, you'll want to check that Italy will accept the substance of the CY company. Also, there's this new Unshell thing where the EU tries to fight holding companies.
The Dutch sandwich was, as far as I know, only relevant for profit shifting to non-EU tax havens. With capital gains, it should be much simpler if you structure it through a holding. The holding would be able to distribute dividends to you.

 

[A1988]

I know almost nothing about the Beckham law. I only mentioned Portugal as an alternative.
I understand you prefer Spain and I would, too, from a lifestyle perspective. Just make sure you check things like accidental creation of a PE in Spain.

I don't think there's a need for any sandwich. Just use a holding company from a suitable country (e.g. in Cyprus), done.
However, you'll want to check that Italy will accept the substance of the CY company. Also, there's this new Unshell thing where the EU tries to fight holding companies.
The Dutch sandwich was, as far as I know, only relevant for profit shifting to non-EU tax havens. With capital gains, it should be much simpler if you structure it through a holding. The holding would be able to distribute dividends to you.

Thanks a lot for your input, it has helped me a lot to get more clarity, really appreciate it, will post my updates and how things pan out.

Just a few notes, assuming that you want to save tax on cap gains on a company where you are involved in management:
1) Spain: Beckham law will work if you are employed in Spain - so if you own <25% of this company, then you can set up a subsidiary in spain and work from there - otherwise someone must employ you and it must look legit.
2) Portugal: It won't work, cap gains are still taxed in PT under NHR UNLESS the other country tax them (but there are very few countries that tax cap gains), unless you can liquidate these gains in the form of dividends (but that would require setup)

Overall from this conversation: do not risk it.. either pay taxes in Italy (which btw you can pay 14% due to the latest finance bill, talk to a good commercialista), or move to a country where you are guaranteed not to pay capital gains (Switzerland, Monaco, Liechtenstein, UK non-dom, Malta non-dom, Gibraltar, Greece non-dom)

Can you share any link for 14% in italy with the new finance bill?

 

[saponaire]

Wouldn't you be able to avoid this with a holding company, e.g. in Cyprus?

If your company has already increase it's valuation, moving assets in the cyprus company will trigger cap gains in Italy for you..

Exactly what I meant with "unless you can liquidate these gains in the form of dividends (but that would require setup)"

Can you share any link for 14% in italy with the new finance bill?

It's 16%, my bad: Rivalutazione partecipazioni 2023: costa il 16%

 

[A1988]

Currently in barcelona with my family, meeting with a tax attorney tomorrow. Lets see, apparently lots of new changes in the beckham law to accomodate more entrepreneurs.

 

[Steven Lewis]

@JohnnyDoe i sadly agree with you , In Europe, it might be difficult to move and select a nice life for yourself and your family or children, and I predict that it will get even harder in the near future.

 

[wellington]

Can you see what is happening to Europe? Or are you suffering from the boiling frog syndrome?

Had a friend who'd lived in Asia for 20+ years, cock sure heading back to Europe recently, he was back there a month and is already returning to Asia.

Expensive holiday for him (hazard its cost hime 50,000 Euro's so far lol)

 

[marioIT]

Currently in barcelona with my family, meeting with a tax attorney tomorrow. Lets see, apparently lots of new changes in the beckham law to accomodate more entrepreneurs.

yeah but socialists and the even more left wing ones are still too strong to be a safe country for my wallet long term... I don't trust the place at all.
have you seen the elections?

 

[A1988]

Had a friend who'd lived in Asia for 20+ years, cock sure heading back to Europe recently, he was back there a month and is already returning to Asia.

Expensive holiday for him (hazard its cost hime 50,000 Euro's so far lol)

Lol, where in asia? Asia doesnt have a single country with a strong democratic system, all are corrupt, political system is weak, fragile and opposition parties are put behind bars without trial, law and order is a mess, zero personal freedom and liberty. If you are a poor moron with less than 1 mil euros in wealth then go to asia, anyone with little bit of money wouldnt risk it unless they are totally out of their mind. Europe is still a very balanced place all things considered. Not perfect but you can fight it out in the courts and still have a chance of justice, in asia sadly you wont.

yeah but socialists and the even more left wing ones are still too strong to be a safe country for my wallet long term... I don't trust the place at all.
have you seen the elections?

View attachment 5066

Im using the beckham law, not moving as a normal resident. I will get the tax ruling first.