For many people with a
Romanian micro company it makes sense to max out the possible benefits and have an alternative structure available when you are getting close to relevant thresholds.
I would use the Romanian company shares to make a capital contribution to the Estonian holding company.
Estonian company only pays tax on distributions so it can be effectively 0% tax vehicle.
Now you can have an Estonian company as a parent with a Romanian subsidiary.
As per EU parent-subsidiary directive the profits distributed by a subsidiary to its parent company are exempt from withholding tax. Similarly,
Estonia may not and will not charge withholding tax on the profits that this company receives from its subsidiary and can redistribute them tax free.
Immediately saving 8% tax and you will only pay this revenue tax.
Lets say we used discounted
cash flow method and valued the romanian subsidiary as EUR 500k.
Now the holding will be generating 500k surplus cash over time. As we are sort of miser and don't want to pay 20% tax we will not distribute
dividends from the operating profits of the Estonian holding. Instead, at some point we would consider the holding company to be overcapitalized and decide to reduce the capital up to the extent of the previous capital contributions leaving us with additional EUR 500k tax-free income (which will not even be considered income, although technically it is).
Because the amounts are so low and we have structured everything appropriately we don't need to involve auditors in the process.
Estonian company with a branch in Bulgaria is also a great structure with maximum 10% total tax.
You can structure the profits that you need to distribute under Bulgarian branch where they will be taxed at 10% and reinvestable profits to Estonia where they will not be taxed if not distributed (0%).
