Relocating to Portugal (?), which tax structure is best for me?

[digger]

Hello all, this is my first post

I am exploring the option of relocating with my wife and two daughters (2yo and 5yo) to Portugal (D7 Visa), and thus be eligible for NHR status.
We are currently not EU citizens, but I am in a process of obtaining my Romanian citizenship and my wife on her German citizenship (by ancestry).
My wife is working as a fully remote employee for a big US corporation - so I guess for her income the 20% tax in Portugal is imminnent.
As for myself, I work for a startup company as a full-time employee with an annual salary of approx 170k USD.
My salary can be converted to a service contract with an offshore company, maybe even with a 20-30% addition to the salary base to compensate for the social contributions paid by my employer.

NHR status exempts local tax for foreign dividends and foreign rent income (I have some rental properties around the world), which are the basis for my assumptions.

I was doing some research online and in this forum and came up with few possible setups:

1. Romanian Micro Company (with one local employee) - 1% CIT + 8% dividend WHT.
2. Cyprus company - 12.5% CIT + 0% dividend WHT.
3. Cyprus holding company + Malta company - 5% CIT after refund + 0% dividend WHT paid by the Cypriot company (is this setup even viable for my situation?)

Points for consideration:

• Are there any CFC considerations I should be aware of? The majority of my work will be made from Portugal, but I can visit Romania/Cyprus/Malta every year if that helps to my case.
• As a future Romanian citizen (should be in less than a year from now), maybe the Romanian Micro Company will be the best fit? I own an apartment in Bucharest which I rent out so maybe I can use that as a PE?
• Portugal is our current favourite, but Malta and Cyprus as a relocation destination might be also possible - so if the end tax result will be lower it will be taken into consideration for our relocation destination, albeit not the only deciding factor since we value quality of life and education for our daughters

Please share you thoughts, ideas and risks associated with this kind of setups or feel free to propuse any other setup.
Any additional relevant information will be gladly provided.

 

[johnwickert]

As a future Romanian citizen, the Romanian Micro Company may be the best fit for you. However, Cyprus and Malta are also options to consider, but there may be CFC considerations.

 

[digger]

As a future Romanian citizen, the Romanian Micro Company may be the best fit for you. However, Cyprus and Malta are also options to consider, but there may be CFC considerations.

Portugal tax resident with NHR + Romanian micro company you mean?

 

[johnwickert]

Portugal tax resident with NHR + Romanian micro company you mean?

Yes

 

[Larin]

In your case, I'd consider the simplified regime available in Portugal. Provided your annual income is under 200k EUR, you are looking at an effective tax rate of about 15% or less: Freelancers: NHR and the Simplified Regime

Your wife may be able to use the same program as well to reduce her tax liability.

 

[digger]

In your case, I'd consider the simplified regime available in Portugal. Provided your annual income is under 200k EUR, you are looking at an effective tax rate of about 15% or less: Freelancers: NHR and the Simplified Regime

Your wife may be able to use the same program as well to reduce her tax liability.

Thank you for your reply.
I found this online calculator for simplified tax regime plus NHR, while for my wife's job it could be a nice solution - for myself I don't see a huge tax saving since you are obliged to pay social security as well.

I am leaning towards the Cyprus company solution since it is 12.5% CIT (with the ability to reduce expenses) with 0% dividend WHT.
Cyprus company should not trigger CFC rules in Portugal since it's CIT is higher than 10.5% (50% threshold of PT CIT of 21%).
However, how do I avoid being PE in Portugal?

 

[digger]

Also, what would be my Cyprus taxes if I take the minimum salary from the Cypriot company to Portugal (for social security contribution in PT)?

 

[johnwickert]

Thank you for your reply.
I found this online calculator for simplified tax regime plus NHR, while for my wife's job it could be a nice solution - for myself I don't see a huge tax saving since you are obliged to pay social security as well.

I am leaning towards the Cyprus company solution since it is 12.5% CIT (with the ability to reduce expenses) with 0% dividend WHT.
Cyprus company should not trigger CFC rules in Portugal since it's CIT is higher than 10.5% (50% threshold of PT CIT of 21%).
However, how do I avoid being PE in Portugal?

Careful structuring of your business activities and presence in the country can help achieve this goal.

Also, what would be my Cyprus taxes if I take the minimum salary from the Cypriot company to Portugal (for social security contribution in PT)?

This would depend on various factors such as the company's income, expenses, and any applicable deductions or exemptions. It's best to consult with a tax professional who can provide specific advice based on your individual circumstances.

 

[JimBeam]

1. Romania - you most probably won't be tax exempt for these rentals you have unless you pay tax in your home country and that country has DTT with Romania. If that's not something major I guess you could just report that and pay tax and no issues there. Since you have no EU passports have you checked what are the options for obtaining Residence permit in Romania.
2. Cyprus - you most probably won't pay tax on these property rentals BUT having a company in Cyprus would cost more than that for sure (for CIT you need to pay the tax in advance or you pay 1% extra so it's not 12.5 it becomes 13.75%, you would have social contributions on your salary + expensive accounting, auditing and banking services).
3. Cyprus + Malta - same as above plus having to mess up with Maltese taxes (where you pay full 35% and then wait to get the 30% back). I guess that having these two companies up and running would make your life quite complicated and that managing these two would be quite a challenge (on top of your regular work).

Out of curiosity, where are you from and where do you live right now?
(you can DM me if you don't want to post it in public).

Also, are you a shareholder of that startup company?
Will you get dividends from the company?

What I would look into:

1. Bulgaria - form a limited company pay 10% CIT tax and 5% dividend tax, pay small social contributions. Having a company there allows you to gain residency permit. Try to deduct as much personal spending as company spending (good accountant) to lower your effective CIT.
2. Romania - if you can figure out the residence permit part. Also note that they can change this program and then what you are going to do at that point? (move again?)
3. UAE - you'll pay no taxes but the cost of living is pretty high (especially in last couple of years). Renting a property can easily cost you $50k/year. Private nursery or elementary school $10k/year/child. So the question is - is it worth it.
4. Italy - more details in here: CBI St. Kitts + Taxes - but be warned the Italy is a tax hell country so be aware.