Setup advice

[Zl1dmitry]

Dear everyone
Can you give me some information and advise please?
My setup:
1. I am a tax resident of Spain (dont want to change it for now, may be later)
2. I set up a company in Hong Kong for investing in crypto, shares, also to trade them (not many deals) to invest from the company. I am the director and the shareholder. I dont want to pay dividends in the nearest future by this company.
So, do I have to make substance in HK?
(If not, the company is not HK resident... it is resident of Spain?) because the director and office in Spain company incorporated in HK.
For Spain its important that the company has activity, Im also work there, and 1 worker 8h/day (no tax for wealth)
The main idea is to invest in crypto/shares, grow up and avoid big taxes. No cashout in the nearest future.
Thank you!

 

[aniglo22]

Dta from Spain-Hongkong :
(2) The term "permanent establishment" includes especially:

• (a) a place of management;
• (b) a branch;
• (c) an office;
• (d) a factory;
• (e) a workshop; and
• (f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources.

Conclusion : Your company would be resident in Spain ( you would be liable for spanish corp tax ) and also CFC rules would affect you .

 

[Zl1dmitry]

thank you! So it will work only if I make a sufficient substance in HK, but in general this setup viable?

 

[aniglo22]

thank you! So it will work only if I make a sufficient substance in HK, but in general this setup viable?

No, this setup wouldn't work:

1. Ownership threshold: As you own more than 50% of the Hong Kong company, Spanish CFC rules apply
2. Low-tax jurisdiction: Hong Kong's tax rates are likely low enough compared to Spain's to trigger CFC rules.
3. Nature of income: Crypto investing is typically considered passive income, which is the primary target of Spanish CFC regulations.

Conclusion : CFC rules would probably apply and you would need to pay Spanish tax on the income , even when not distributed . CFC = Controlled-Foreign-Corporation

 

[Zl1dmitry]

Ok, I think I understand, thank you!

 

[lory]

It’s practically impossible to set up something like what you're aiming for in Europe, and likely in the rest of the world as well. These days, it takes a lot for a company to be taxed abroad rather than where the real owner resides.

So, your idea, as already confirmed here, doesn't work that way. You need to be much more creative if you want to avoid taxation of the HK company in Spain, and it's associated with significant risk.

 

[Zl1dmitry]

Sorry, am I right that if this company will make real activity and has enough substance in HK it can work?
I have company in Rusia (it doesnt apply to any sanction goods/people or companys) I am the owner, director is theother person in Rusia, I also work in this company. (But live in Spain)
So when I pay dividends, I pay 15% in Rusia, then +10% in Spain. If it is enough substance I dont have to pay % of the cost of the company.
And for Spain it is enough (information from spanish consulting)
If the substance is not enough I have also to pay some % of wealth tax as phisical person for owning this company
Or it works different due to Hong Kong?
I can also pay taxes there and get resident tax sertificate
Thank you!

 

[daniels27]

As he explained, you cannot be the owner of a low-tax company trading crypto without being taxed in Spain. This is the goal of CFC rules.

Why keep living in Spain? Are they paying you for it? Social welfare payments or something?

 

[Zl1dmitry]

No, they only get my money)
Here is my family, childs school, flat, and also some real estate buisness.
In general rather good exept taxes)

 

[daniels27]

No, they only get my money)
Here is my family, childs school, flat, and also some real estate buisness.
In general rather good exept taxes)

You cannot have all. Maybe ask your friends and family to move with you. The world is big and good.

 

[brianK]

You cannot have all. Maybe ask your friends and family to move with you. The world is big and good.

The problem most have and why they never relocate!

 

[daniels27]

The problem most have and why they never relocate!

They would better have told you in primary school that you should free yourself from family so you can relocate.

 

[Zl1dmitry]

Yes, true... thats also an option in some way

 

[Propeller]

1. Ownership threshold: As you own more than 50% of the Hong Kong company, Spanish CFC rules apply

how would it be possible to get around the 50% ownership, could some sort of nominees work? You can only own 25% or less of a company for the CFC not to kick in right?

 

[Zl1dmitry]

I think for CFC in Spain its important to have less than 50% in company, so may be nominal shareholder(s) its an option too. (May be there is not to much risk if prepare all the documents correctly)

 

[aniglo22]

I think for CFC in Spain its important to have less than 50% in company, so may be nominal shareholder(s) its an option too. (May be there is not to much risk if prepare all the documents correctly)

Even when you have less than 50% but have de facto control (through nominees ) cfc will still apply.

 

[Zl1dmitry]

I understand that the options are only
1. Move with family
2. Move without (divorse) move point of interes, also not sure that then I can spend about 5 month in Spain (I was a tax resident for 5 years)
3. Relax, and be robbed by Spain finaly))

 

[aniglo22]

I understand that the options are only
1. Move with family
2. Move without (divorse) move point of interes, also not sure that then I can spend about 5 month in Spain (I was a tax resident for 5 years)
3. Relax, and be robbed by Spain finaly))

You could maybe look into Gibraltar .

 

[Offct]

As mentioned by others, as long as you are in control (directly or indirectly), you will be subject to CFC.
An alternative to Gibraltar might also be Andorra (Barcelona is around 2 hours from there, especially if you like mountains, it is not a bad place).

I don't know what amounts we are talking about, however, if we are talking about 1M plus, a family foundation in Liechtenstein could be of interest to you (you could remain living in Spain). Non-EU trusts and similar structures are usually not recognized in Europe, however the "Liechtensteinische Familienstiftung" usually is. Not an easy setup and quite costly, but it is a proven working solution.

 

[Zl1dmitry]

Thank you very much! Liechtenstein is a very interesting option, I didnt know about it.