Solution Instead of Malta / Stay and re-structure in Malta

[Ani]

Hi Everyone,

I am new to the forum and tried to read as much as I could.

I would need your advice regarding a reasonable setup possibility:

- Currently, I am self-employed (Malta) and work on websites
- Income coming from Ads, Affiliate programs (Mostly US-based companies)
- amount around 60-70k

What setup would you suggest if, in the next year, I would like to travel as much as I can and avoid high tax payments?

My current setup problem is as a website owner/blogger I don't have expenses so at the end of the tax year I need to pay a lot of tax (35% on profits) + if I sell the site let's say another 50-70k will also taxable.
SSC is already maxed out I thank God I never used any healthcare yet but would be nice to optimize not to just pay a lot.

I was thinking setup a company here in Malta however my accountant told me since I will be working in the company will be the same as self-employed status. To get a 5% benefit I need to set up another company somewhere. (with that income I don't see the point to do the audit, accountant etc. 2x )

I am happy to leave Malta and I am looking for an easy setup where I can pay less and focus on increasing my income.

Any suggestion welcome

Thank you!
Ani

 

[Martin Everson]

For income of only 60-70k I would not bother to structure anything yet. Just pay your taxes and enjoy life.

 

[AZERTYLO]

Hi Everyone,

I am new to the forum and tried to read as much as I could.

I would need your advice regarding a reasonable setup possibility:

- Currently, I am self-employed (Malta) and work on websites
- Income coming from Ads, Affiliate programs (Mostly US-based companies)
- amount around 60-70k

What setup would you suggest if, in the next year, I would like to travel as much as I can and avoid high tax payments?

My current setup problem is as a website owner/blogger I don't have expenses so at the end of the tax year I need to pay a lot of tax (35% on profits) + if I sell the site let's say another 50-70k will also taxable.
SSC is already maxed out I thank God I never used any healthcare yet but would be nice to optimize not to just pay a lot.

I was thinking setup a company here in Malta however my accountant told me since I will be working in the company will be the same as self-employed status. To get a 5% benefit I need to set up another company somewhere. (with that income I don't see the point to do the audit, accountant etc. 2x )

I am happy to leave Malta and I am looking for an easy setup where I can pay less and focus on increasing my income.

Any suggestion welcome

Thank you!
Ani

I would need some advice on the affliation if you want but advised tell me

 

[bandanna]

Companies setup and maintenance is costly. A Maltese company would easily cost you 4-5k in the first year and at least 3k every year afterwards. That’s 5%-7% of your revenue.

I’d avoid anything complex like that.

If Malta allows you to freelance with 15% fixed go for it. Otherwise you can check other options. If you’re EU national, you can easily move to Bulgaria or Cyprus and get low taxes (10%-12%). Portugal and Estonia also ok with 20%. Possible Dubai. But I’d avoid structuring complex corporates at this scale.

 

[myhand]

Yeah better relocate to a low tax country if you want to reduce your tax burden. Suggested Cyprus would be fine, otherwise, I would relocate to Dubai and apply for a VISA there to get a tax resident certificate and pay 0% taxes!

 

[Sols]

Look into forming a fiscal unit in Malta, where both holding company and operating company are in Malta. Yes, it's two companies but you usually get a healthy discount on the accounting and audit if you set everything up with the same provider. However, at your current income level, the difference might not be massive.

If you're earning 70,000 EUR/year and pay ordinary income tax, you're paying around 20,000 EUR/year in taxes.

If those 70,000 EUR/year were corporate profits, you'd be paying 3,500 EUR/year in taxes plus around 10,000 EUR/year in incorporation and company management fees (the fees can vary a lot by service provider and what you do). But then there are taxes for getting the money to yourself, where additional optimization may be necessary.

Focus on growing your business. If you're certain you're going to at least double your income in the next 12 months, it might be worth doing something.

Before you relocate, consider the cost of doing so. Costs of living are still relatively low in Malta, even if they have increased a lot in the last few years.

 

[Don]

Yeah better relocate to a low tax country if you want to reduce your tax burden. Suggested Cyprus would be fine, otherwise, I would relocate to Dubai and apply for a VISA there to get a tax resident certificate and pay 0% taxes!

Moving to a different country could save OP 20k in one year, which could be used to further develop a small business to increase income faster.
In my opinion Dubai is a nice choice with a bit higher income, but at this level moving to a cheaper country could possibly make even more difference than tax savings.

Malta is not a bad choice for a bit bigger companies or if you can set up a holding structure. Many Maltese businesses are setting up holding companies in Estonia to access the 5% rate. Estonia is an affordable setup providing you a 0% tax until distribution structure.
I would recommend looking into micro company regimes in Georgia and Romania and possibly moving in to either of them.

Georgia
Individual entrepreneurs with annual turnover of less than GEL 500,000 may register as a small business and pay 1% tax on their turnover. The rate increases to 3% if annual turnover will exceed GEL 500,000.

Romania
The tax rate on micro-company revenues remains only 1%.

 

[Ani]

Hi Everyone,

Thanks for the answer.
@bandanna
@myhand
@Sols
@Don

Agree I would like to focus to increase the income.

Regarding Dubai, the thing is I registered myself as a freelancer (already paid a lot...) there however since my income is from the U.S. they said withholding tax (30%) will be applied cause there is no DTT between U.S. and UAE. Am I missing something here?

Another important thing I need to use wise or airwallex and revolut cause I need local U.S. bank details and none of these companies offer their service with UAE address.

I was checking Cyprus to move there register as self-employed and at least instead of 9100 EUR (Malta), will be 19500 EUR the non-taxable limit. Living costs could be even cheaper than in Malta and since I want to travel the Non-Dom status 60 days can be beneficial. I can keep the bank accounts... Suggestion on this?


Bulgaria, Romania, or Georgia I don't feel to move there.

Thank you

 

[bandanna]

Many Maltese businesses are setting up holding companies in Estonia to access the 5% rate. Estonia is an affordable setup providing you a 0% tax until distribution structure.

@Don I kinda hoping for a bit more details here. I have already an Estonian company, and a trading in Malta. Actually I'm just starting the process of creating a holding company in Malta. But based on what you say, it sounds like I can have my Estonian company become the Holding and benefit directly from the 5% without needing 2 Maltese companies (operating + holding).

Could you add more details on how does that actually work?

 

[Don]

@Don I kinda hoping for a bit more details here. I have already an Estonian company, and a trading in Malta. Actually I'm just starting the process of creating a holding company in Malta. But based on what you say, it sounds like I can have my Estonian company become the Holding and benefit directly from the 5% without needing 2 Maltese companies (operating + holding).

Could you add more details on how does that actually work?

Malta company and Estonian company can form a fiscal unit in Malta paying 5% corporate tax.
For the fiscal unit, there needs to be a Maltese subsidiary. The parent company can be Maltese, or it can be a foreign company, e.g., Estonian, holding at least 95% of the subsidiary's shares.
Fiscal units pay 5% corporate tax without having to pay 35% Maltese tax and without needing to wait for a subsequent tax refund.
Estonian holding can redistribute the dividends paid by the Maltese fiscal unit to its shareholders without any tax, resulting in total effective tax of 5%. You will generally have lower costs, additional flexibility, and 0% tax on undistributed profits with an Estonian entity.

In my opinion, in many cases, this is currently one of the best structures available in the whole EU/world.

 

[Sols]

I was checking Cyprus to move there register as self-employed and at least instead of 9100 EUR (Malta), will be 19500 EUR the non-taxable limit. Living costs could be even cheaper than in Malta and since I want to travel the Non-Dom status 60 days can be beneficial. I can keep the bank accounts... Suggestion on this?

Non-doms usually don't register as self-employed in Cyprus. They get their income as dividends, meaning the company pays 12.50% corporate tax and then you pay around 2.65% national health insurance (max 4,800 EUR/year) on the dividends you take out.

Costs of living in Cyprus overall are lower than Malta but if you want to live in Limassol, the costs are same as or higher than Sliema/St Julian's in Malta. So it depends on where you live.

 

[Don]

A branch or a permanent establishment (PE) of a foreign company in Malta is subject to tax at the standard rate of 35% on the profits attributable thereto. It is interesting to note that the shareholders of the foreign company may still claim tax refunds provided the foreign company distributes profits which have been subject to tax in Malta (at the level of the branch or PE).

Your PE in Malta can get a 6/7 refund of 35% tax on trading profits, meaning your effective rate will be 5%.
Passive Interest and Royalties will be subject to a combined overall effective tax of 10%.

The registration of a PE is a simple and straightforward process and can be completed within a few days of receipt of all the documents required.

If you do this with an Estonian company, on the Estonian level you have 0% tax on undistributed profits in Estonia, and at the same time, the Estonian company can redistribute the profits of the PE in Malta tax-free. If you lend out money from an Estonian company, you can avoid paying any tax on interest since you can reinvest profits tax-free.

This is far more optimal than simply using Cyprus as a trading company. With a Cyprus company, you would pay a total of 15.15% tax noting that interest income is subject to the standard 12.5% tax. Cyprus is best kept for stock trading, IP holding (using IP Box) or holding your startup stocks if you intend to sell the company.

What's more, you could use the Maltese company and inject it as a capital contribution to your Estonian holding company, to benefit from further tax-free income that would result in possible capital reductions in the future that would not be taxed up to the extent of the valuation you contributed even if you happen to close the company later.

 

[bandanna]

Estonian holding can redistribute the dividends paid by the Maltese fiscal unit to its shareholders without any tax, resulting in total effective tax of 5%. You will generally have lower costs, additional flexibility, and 0% tax on undistributed profits with an Estonian entity.

How can dividends be redistributed from Estonia without any tax?

Assume I’m a tax resident in a European country where there’s DTA with both Malta and Estonia. AFAIK - Estonia does tax on dividends. I wonder how I can get to zero tax on dividends + 5% consolidated corp tax?

 

[Don]

How can dividends be redistributed from Estonia without any tax?

Assume I’m a tax resident in a European country where there’s DTA with both Malta and Estonia. AFAIK - Estonia does tax on dividends. I wonder how I can get to zero tax on dividends + 5% consolidated corp tax?

Estonian participation exemption rule allows dividends from most foreign subsidiaries to pass through without taxation in Estonia (defined as companies where an Estonian company holds at least 10% of the shares or votes when the dividends are issued). Dividends from a company located in a non-cooperative jurisdiction for
tax purposes (tax havens defined by EU) do not qualify for the exemption.

There is no withholding income tax from such dividends.

 

[JimBeam]

If you have a company and bank account in Malta up and running - I wouldn't change anything.
Setting up another company is a hustle and costs time and money.

If you're up for that I would suggest skipping Cyprus (as the costs will be similar as on Malta) and would go for Bulgaria.
The company setup and maintenance prices as well as banking fees there are way cheaper than on Malta or Cyprus.
You have low CIT at 10% and low dividend tax at 5% and that's about it.

 

[bandanna]

How’s the banking situation in Bulgaria?

For Malta, EMI is the main, and most only, way to go.