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JustAnotherNomad

Mentor Group Gold
Do you pay income tax for receiving dividends from an Estonian company if you live in Cyprus? How much corporate tax would you pay?

You would probably pay the same taxes as if it was a Cypriot company. Unless you can show that the company has substance in Estonia and is managed from there. In theory at least, of course Cyprus may not enforce the rules.
 

marzio

Entrepreneur
Do you pay income tax for receiving dividends from an Estonian company if you live in Cyprus? How much corporate tax would you pay?

You pay 20% when you distribute dividends from Estonian company. You don't want to use the Estonian company as the operating company but as a holding.

Dividends distributed by Estonian companies are exempt from corporate income tax (‘participation exemption’) if these are paid out of:

profits derived through a permanent establishment (“PE”) in the EU, EEA or Switzerland;


You register the Estonian company with tax authorities in Cyprus in order to create a permanent establishment there and be taxed at 12,5% in Cyprus

You pay yourself tax free in Cyprus 19,500€ and distribuite the remaining dividends to the Estonian head office.

Then, when you'll distribute dividends from the Estonian head to yourself there will be tax free.

Obviously you first need to move you residence in a country where foreign income in not taxed.

That way you only pay 12,5% taxes, you only have to be in Cyprus 60 days a year to be considered tax resident in Cyprus and if you really want it you could operate an offshore company, pay yourself dividends tax free in Cyprus from the offshore company and transfer everything in Estonia but i admit this last part is a bit of a grey zone.

How about that for a plan?
 

marzio

Entrepreneur
If you want to pay even less taxes you simply register the permanent establishment in Budapest so you are taxed 9%
 

JustAnotherNomad

Mentor Group Gold
Why not move to Bulgaria then? 10% flat and a very simple structure (no risk).
The more countries you involve, the higher the risk that there will be problems.

If you want to involve Estonia, you can just get residency there (rent a cheap apartment), then pay yourself dividends from a company outside of Estonia. You do not have to spend time in Estonia to be considered tax resident. There will be no Estonian tax, as far as I know. However, this only works if the company paid a certain amount of corporate income tax. I am not sure what the rules are - if only certain “ tax haven” countries are excluded and only the head tax rate is considered (so Romanian 1% revenue tax would be fine), or if the actual tax paid has to be at least X%. Anyway, 9-10% should probably be fine for Estonia.
You’d have residency in an EU country, you don’t have to spend any time there and you only pay the corporate income tax in the other country. You might have to show that the company isn’t managed from Estonia, but that shouldn’t be an issue if you don’t spend much time there. The tax filings are supposed to be extremely simple in Estonia and everything is online and in English.
I would prefer that over spending 60 days in Cyprus...
 

marzio

Entrepreneur
I'm not sure what are you suggesting.

Are you suggesting to open a bulgarian company? Well i don't want to live there and i have to stay 183 days to be tax resident. Not something that i want to do. Of course i could rent an apartment and live around the world but i wouldn't do it.

Also it's not clear your structure involving the Estonian company.
 

JustAnotherNomad

Mentor Group Gold
Like I said, the minimum time required for Estonia is zero days. If you don’t want to spend any time in a country anyway, I would say 0 is better than 60?

I’ll open a new thread about the details.

By the way, someone mentioned that in practice, you’d get a tax residence certificate from the UAE if you spend 30 days there. Not sure if it’s true.
 

marzio

Entrepreneur
Like I said, the minimum time required for Estonia is zero days. If you don’t want to spend any time in a country anyway, I would say 0 is better than 60?
I got that but i can't use the branch strategy if i'm tax resident in Estonia, that's why i'm not sure what you are suggesting here. Using the estonian company for operations is not the best strategy since you'll have to pay 20% on dividends, instead if you relocate to Cyprus for 60 days, or Hungary you'll pay 12,5% or 9%.
 

JustAnotherNomad

Mentor Group Gold
See this post:
 

jscargo

New member
I see no advantage in doing this Estonia, Cyprus arrangement. The costs and time invested in this will be much greater than being able to get 19,500 tax free. Even if you distribute all of it from an Estonian company, you'd pay 3,800 tax, but a much more simple, uncomplicated, near compliance free operation.
Moreover, I see virtually no advantage to have an Estonia company, unless you are non-EU and from a high risk country without access to PayPal, SEPA, and other merchants. Or, if you for some reason decided that you want to live in Estonia.
 

dziter

New member
I read everything but I am not sure to understand the goal of this setup.


You register the Estonian company with tax authorities in Cyprus in order to create a permanent establishment there and be taxed at 12,5% in Cyprus

You pay yourself tax free in Cyprus 19,500€ and distribuite the remaining dividends to the Estonian head office.

Then, when you'll distribute dividends from the Estonian head to yourself there will be tax free.

Why not creating directly a LLC in Cyprus. It's 12.5% CIT and dividends are already tax free.
With another juridiction for a holding, I could understand for reputation or access to EMI ( Transferwise USD may be) and even, I don't really see the benefit. With Malta setup, of course I got it.

But why with Cyprus? What's the real benefit to do Estonia + Cyprus (being tax resident in Cyprus)?
 

orangekangaroo

New member
You pay 20% when you distribute dividends from Estonian company. You don't want to use the Estonian company as the operating company but as a holding.

Dividends distributed by Estonian companies are exempt from corporate income tax (‘participation exemption’) if these are paid out of:

profits derived through a permanent establishment (“PE”) in the EU, EEA or Switzerland;


You register the Estonian company with tax authorities in Cyprus in order to create a permanent establishment there and be taxed at 12,5% in Cyprus

You pay yourself tax free in Cyprus 19,500€ and distribuite the remaining dividends to the Estonian head office.

Then, when you'll distribute dividends from the Estonian head to yourself there will be tax free.

Obviously you first need to move you residence in a country where foreign income in not taxed.

That way you only pay 12,5% taxes, you only have to be in Cyprus 60 days a year to be considered tax resident in Cyprus and if you really want it you could operate an offshore company, pay yourself dividends tax free in Cyprus from the offshore company and transfer everything in Estonia but i admit this last part is a bit of a grey zone.

How about that for a plan?
I like your thinking if the Estonian with PE in cyprus can be more easily administered than a Cyprus company.
 

orangekangaroo

New member
Yes you would pay 12.5% corp tax. I am not sure if you only pay divi it will qualify as employment. Also divi not tax-free for non-dom in Cyprus there is 2.65% Gesy payments. Payments for the health service.
 
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