Swedish company relocation - To where? (12M € turnover, 3M € yearly profits)

[factual]

Hi all!

I am a Swedish citizen and run a company (B2C 90%) together with my partner who is based in Turkey himself. None of us are entitled, we are simple guys growing up from poor neighbourhoods and we have worked hard to where we are now with no previous connections or network. My partner is also a Swedish citizen but not tax resident here as he decided to move abroad 10 years ago with his turkish wife. We have zero own staff, everything is outsourced and billed to us.

We run an e-commerce site based of a limited company, that is registered in Sweden. We sell physical goods and ship them within Europe. I own 75% shares, and he 25%. We have been running this for 6 years now and it has been growing great, little too fast. We made a profit of 3M € last year and this year will probably surpass that. Our yearly turnover is 12M €. We also plan to make an exit here for about 20M €+++ when time comes so we wish to be prepared with our setup if/before that happens.

We are currently taking out a normal salary from company for living (about 70k€ each yearly, effectively taxed at around 55%). Everything has been done all legal so far and company records looks clear and good.

Each year we are paying a company profit tax here of 22% (profits are still stuck in company though). We have now collected a large sum in free capital which are just allocated in our Swedish bank that just sits there doing nothing. If we cash them out we will have to pay another 30%+ on this amount which is why we have not done that as we are looking for some solutions.

Since we are selling physical goods things does get a bit more complicated as I understand from reading on this forum compared to selling services.
Our customers are in EU and UK. We are using a 3PL(thirdpart logistics warehouse) in both EU (Netherlands) and UK, we own all our inventory. The products we import directly from China. We are VAT registered in Netherlands and UK and we also pay sales VAT to respective countries (through OSS) that are above the thresholds.

Does any of you have any suggestion or can point me to a possible tax effective setup as e-commerce owners where we are able to continue running our operation with same 3PL in Netherlands and 3PL in UK. Import our products to Netherlands/UK from China, pay any sales VAT but also be able to deduct the import VAT. But have the company profits taxed at much lower rates?
A setup where we are also able to have good company banking to send money for buying goods, PSP to accept payments online and so on.

Anything between 0-15% in final effective tax is acceptable for us.

If the possible tax effective setup requires personal relocation (excluding option of living on an island) up to 190 days per year to interesting places within +-3h timezone from Sweden, I would be up for it as what we pay in taxes here, could as well be spent as nice living as every work we do is done on remote.

Otherwise, we are fine if the profits are being collected somewhere offshore waiting for us to spend them when time comes. Our goal here is to try and avoid the yearly company profit taxes as well as any taxes that may arise if/when we exit. We want everything to be done legal.

Where I live (Sweden) it is not possible to "find a good tax advisor" unless you have the previous connections which is why I registered and reached out to this forum and reason why I started the topic explaining where we come from. I just a little guidance or direction where to continue searching for the optimal solution.


Thanks in advance!

 

[Dandyline]

Do you want to prepare for an exit or setup a new structure for the actual business? Thats two different things.

If you plan to make an exit and sell the Swedish company, then you can prepare by setting up a holding company first of all, then you can move the money to Cyprus and move from Sweden after the exit: Exit utomlands

Since you are outsourcing everything and don't have any physical warehouses, there are many solutions, In EU for example Cyprus 12,5% tax, Estonia 20% tax, Bulgaria 10% and so on.

Either way, you have to move from Sweden and cut all ties. Everything is better than Swedens 50-70% tax.

 

[chrisgerth]

Set up a company which offers special IP-Patent-Box profit tax rates (i.e. Cyprus with 2.5%). I would definitely go with a country where labour is cheaper than in Sweden. This is important as you need to create substance (meaning employing at least a local director). Then you either create from scratch, meaning your coders writes "new" software (definition of new is very flexible) or buy existing software from Swedish company. This software can be the actual shop system of your website. This software will be assigned to new low tax company. Once that is done you set up a Software-License-Agreement between Low-tax-IP-Patent-Box-Company and your Swedish company. Software-License-Agreement can contain fix amount or dynamic pricing, dynamic pricing can be coupled to usage/visitors/sales. That way you can suck out the 3 mio in profit. You can also do it with company logo besides software, although not all countries allow logo licensing.

 

[JustAnotherNomad]

You can afford to talk to a BIG4 consultancy firm (PwC etc.), they should be able to help. I would guess that the best option would be some kind of holding setup, maybe with Cyprus. I would get a couple different quotes and go with the one where you feel they understand your needs the best.

 

[JohnnyDoe]

You can afford to talk to a BIG4 consultancy firm (PwC etc.),

Don’t do that! It’s wasted money and you will end up dealing with a random junior.

@CyprusLawyer101 can help you with Cyprus, which can be a good option for a piece of the puzzle.

 

[Konstanz]

Hi all!

I am a Swedish citizen and run a company (B2C 90%) together with my partner who is based in Turkey himself. None of us are entitled, we are simple guys growing up from poor neighbourhoods and we have worked hard to where we are now with no previous connections or network. My partner is also a Swedish citizen but not tax resident here as he decided to move abroad 10 years ago with his turkish wife. We have zero own staff, everything is outsourced and billed to us.

We run an e-commerce site based of a limited company, that is registered in Sweden. We sell physical goods and ship them within Europe. I own 75% shares, and he 25%. We have been running this for 6 years now and it has been growing great, little too fast. We made a profit of 3M € last year and this year will probably surpass that. Our yearly turnover is 12M €. We also plan to make an exit here for about 20M €+++ when time comes so we wish to be prepared with our setup if/before that happens.

We are currently taking out a normal salary from company for living (about 70k€ each yearly, effectively taxed at around 55%). Everything has been done all legal so far and company records looks clear and good.

Each year we are paying a company profit tax here of 22% (profits are still stuck in company though). We have now collected a large sum in free capital which are just allocated in our Swedish bank that just sits there doing nothing. If we cash them out we will have to pay another 30%+ on this amount which is why we have not done that as we are looking for some solutions.

Since we are selling physical goods things does get a bit more complicated as I understand from reading on this forum compared to selling services.
Our customers are in EU and UK. We are using a 3PL(thirdpart logistics warehouse) in both EU (Netherlands) and UK, we own all our inventory. The products we import directly from China. We are VAT registered in Netherlands and UK and we also pay sales VAT to respective countries (through OSS) that are above the thresholds.

Does any of you have any suggestion or can point me to a possible tax effective setup as e-commerce owners where we are able to continue running our operation with same 3PL in Netherlands and 3PL in UK. Import our products to Netherlands/UK from China, pay any sales VAT but also be able to deduct the import VAT. But have the company profits taxed at much lower rates?
A setup where we are also able to have good company banking to send money for buying goods, PSP to accept payments online and so on.

Anything between 0-15% in final effective tax is acceptable for us.

If the possible tax effective setup requires personal relocation (excluding option of living on an island) up to 190 days per year to interesting places within +-3h timezone from Sweden, I would be up for it as what we pay in taxes here, could as well be spent as nice living as every work we do is done on remote.

Otherwise, we are fine if the profits are being collected somewhere offshore waiting for us to spend them when time comes. Our goal here is to try and avoid the yearly company profit taxes as well as any taxes that may arise if/when we exit. We want everything to be done legal.

Where I live (Sweden) it is not possible to "find a good tax advisor" unless you have the previous connections which is why I registered and reached out to this forum and reason why I started the topic explaining where we come from. I just a little guidance or direction where to continue searching for the optimal solution.


Thanks in advance!

Selling physical goods in Sweden?
Forget it. Unless you plan to set-up really good substance in some other low tax country

 

[Sols]

You can't get around VAT when selling EU, but you can lower the corporate tax burden on the profits the company makes.

Anything between 0-15% in final effective tax is acceptable for us.

The two easiest options you have then are Malta and Cyprus. Relocate yourselves physically there, shift the business into new structure set up there. Whether you sell the Swedish company to your new company or simple wind down the Swedish operations while shifting agreements with suppliers et cetera to your new structure is something a local tax adviser can help with.

The effective tax rate ends up being 5% in Malta and 12.50% in Cyprus. That might make Malta seem like the obvious winner, but Cyprus is significantly easier to manage and extract profits out of at no further tax. Both are worth studying closely.

Otherwise, we are fine if the profits are being collected somewhere offshore waiting for us to spend them when time comes.

Don't do that. The Swedish tax authority will very likely just decide that the income is taxable under Swedish law.

 

[Marzio]

Apparently there's a special place in EU where you pay 0% CIT.

Also i presume workforce costs less than Sweden.

 

[factual]

Thank you for all valuable inputs.
I have also received PM regarding Cyprus setup from advisors. Thanks a lot! I will look into it first before taking any of your time.

I was a bit surprised to see that all solutions were involved around Cyprus or Malta which would make it easier for me to move forward if everything else is ruled out. Is it because we need to be able to VAT register ourselves in EU and pay EU VAT? Example a Dubai company will not work here?

As I mentioned in the beginning I am not ready to relocate or seeing myself living on any island such as Cyprus for half of the year. Nor staying in Malta for that long. I am ready to travel and step my foot inside every X days to any of those if that's required. I guess it's half of the year required as otherwise the Swedish government would want to tax me under Swedish laws.

I could also see myself staying in Dubai for example half of the year if it is mandatory to make this happen and even other countries. Example if required to cash out the company profits in dividends to a personal account.

Also is it really mandatory to relocate for me here to Malta or Cyprus and no other country? As long as the money are still kept inside the company accounts, pay corporate tax and not transferred out to personal accounts as dividends?

Do you want to prepare for an exit or setup a new structure for the actual business? Thats two different things.

If you plan to make an exit and sell the Swedish company, then you can prepare by setting up a holding company first of all, then you can move the money to Cyprus and move from Sweden after the exit: Exit utomlands

Since you are outsourcing everything and don't have any physical warehouses, there are many solutions, In EU for example Cyprus 12,5% tax, Estonia 20% tax, Bulgaria 10% and so on.

Either way, you have to move from Sweden and cut all ties. Everything is better than Swedens 50-70% tax.

Primarily profits generated. Secondary exit. Do I have to move to the country I select to form my company in or can it be a third one?

Selling physical goods in Sweden?
Forget it. Unless you plan to set-up really good substance in some other low tax country

The goods are shipped physically through a third part logistics warehouse in Netherlands and UK. The decisions of the company are only made from Sweden and Turkey and so is all day-to-day online-operations such as speaking with suppliers, accounting and so on. Everything else is outsourced and billed to us.
I am positive there should be some solution here as long as we do not have any staff hired in Sweden, nor any warehouse in Sweden. For example the profits we make in UK are taxed in Sweden. We only pay the VAT quarterly in UK, no profit tax.

You can't get around VAT when selling EU, but you can lower the corporate tax burden on the profits the company makes.


The two easiest options you have then are Malta and Cyprus. Relocate yourselves physically there, shift the business into new structure set up there. Whether you sell the Swedish company to your new company or simple wind down the Swedish operations while shifting agreements with suppliers et cetera to your new structure is something a local tax adviser can help with.

The effective tax rate ends up being 5% in Malta and 12.50% in Cyprus. That might make Malta seem like the obvious winner, but Cyprus is significantly easier to manage and extract profits out of at no further tax. Both are worth studying closely.


Don't do that. The Swedish tax authority will very likely just decide that the income is taxable under Swedish law.

Thank you! We are not trying to get around VAT at all. We are ready to pay VAT in each country however we would need some company solution where the import VAT can also be deducted.
Does both solutions here for Malta and Cyprus involve in me as major shareholder moving to any of those countries?
Or can I still stay in Sweden or perhaps even a third country but take advantage of those tax rates?

By cutting ties with Sweden, it means do not own anything and have no active transactions from your bank account. But I can still come and visit and stay in airbnb or at my brothers place say 2-3 months a year?

 

[JustAnotherNomad]

Don’t do that! It’s wasted money and you will end up dealing with a random junior.

That's why I said, get different offers and make sure you feel comfortable with them. It would be stupid not to get proper advice for any move and OP already said it's very difficult to find good local advisors.
Maybe he could already make some suggestions and see how they respond. I'm sure they are very familiar with people moving to Cyprus to cash out.

@factual: Also look at this thread, it's about the same topic essentially (also with a Swedish company):
https://www.offshorecorptalk.com/threads/estonia-lithuania-and-latvia-for-a-holding-company.41045/
Here are some ideas, but please check everything with a professional:

1. Sell your company to a holding company in Estonia or Cyprus (for example... I think Malta might work as well) and then you should probably move to that country yourself.
You can keep your Swedish company and you would only pay the 22% and after that, you should be able to cash out from the company without additional taxes, including the money that you've already saved up.
Selling the company should be tax free in Cyprus (I think also in Malta), but in Estonia, there would likely be tax in this case.
Not sure how much time you'd have to actually spend in Estonia or Cyprus.
Read the thread above, this is what it is about.

2. Move to a country with lower taxes, such as Malta or Cyprus, or even the UAE. If you are worried about the company's reputation, you could try to make it look nicer by adding something like a UK LLP or Dutch CV, possibly even a Swedish KB in front of it (but I guess you don't target the Swedish market specifically, so no need for a Swedish entity).
This could allow you to pay somewhere between 0-12.5% in taxes.
Different options to go about this:
a) Close your Swedish company, start a new company somewhere else.
b) Keep the Swedish company, but move its corporate tax residency to e.g. Cyprus under a treaty (as described here for a UK Ltd.: The treaty non-resident UK Ltd. - the best-kept offshore secret? )
c) Redomiciliation, which I believe is basically the same as closing your Swedish company and starting a new one somewhere else, but all assets and liabilities follow from the old company to the one... if I understood correctly.

In any case, please work with a good advisor.
BIG4 companies do have experience with this, otherwise there's a couple more options here:
https://www.legal500.com/c/sweden/tax/
Please do NOT trust a non-Swedish lawyer. A lawyer (or worse, some company service provider) from Cyprus cannot advise you on Swedish law and your specific situation.
You can of course get some ideas (like from this thread), but then please double check everything with licensed professionals from Sweden.

Also, it's alwasy interesting to hear what people find out, so please come back and share here what they told you.

 

[MiltonStone]

Selling physical goods in Sweden?
Forget it. Unless you plan to set-up really good substance in some other low tax country

I say the same. You need to relocate to get tax benefits from all of it. As long as you and your partner controlling the company and are part of the management of the company the Swedish Tax officers will rape you for tax evasion if you try something. Good tax advisors are to be used.

 

[JustAnotherNomad]

Sorry, somehow I missed this reply earlier.

I was a bit surprised to see that all solutions were involved around Cyprus or Malta which would make it easier for me to move forward if everything else is ruled out. Is it because we need to be able to VAT register ourselves in EU and pay EU VAT?

No, because they are EU countries, which makes everything easier with regards to Sweden.

Example a Dubai company will not work here?

Yes, that could also work, but there is no tax treaty with Sweden, which can make things more complicated.

As I mentioned in the beginning I am not ready to relocate or seeing myself living on any island such as Cyprus for half of the year. Nor staying in Malta for that long.

It may not be required, but it would give you better protection against Sweden.

I guess it's half of the year required as otherwise the Swedish government would want to tax me under Swedish laws.

Only if there is a tax treaty.
To give a very basic example: You are resident in Sweden and have an apartment there, where you spend 120 days. But you also have an apartment in Cyprus (tax treaty country) and are resident there as well, where you spend 190 days.
Sweden considers you tax resident because you match the Swedish tax residency criteria (Swedish residency). However, also match the Cypriot criteria (183+ days, residency). So now you are tax resident in two countries at the same time, so there's a risk of double taxation. However, there's a tax treaty, and the tax treaty places the tax residency in the country where you spend 183+ days, so Cyprus. Your personal tax residency is thus clearly in Cyprus.
Now imagine the same situation with the UAE instead of Cyprus: You're still tax resident in both countries, but Sweden won't give two shits about your UAE tax residency. Sweden will still tax your personal worldwide income regardless.
So spending 183+ days in some other country is not a guarantee Sweden can't tax you, only if you either don't fulfill the Swedish criteria for tax residency, or if there is a tax treaty that limits Sweden's right to tax you.

I could also see myself staying in Dubai for example half of the year if it is mandatory to make this happen and even other countries.

See above.

Also is it really mandatory to relocate for me here to Malta or Cyprus and no other country? As long as the money are still kept inside the company accounts, pay corporate tax and not transferred out to personal accounts as dividends?

Companies are taxed where they are run from. As long as you run your company from Sweden, it will always be taxed in Sweden, no matter where it is registered.
You could create a new company in a low-tax country and hire people there to do the work for you. Then, as long as it is only run from that country (and you aren't secretly running it from Sweden), that company could pay taxes in that country instead of Sweden. But there are some restrictions to this (CFC rules) as well, and it's important to pay realistic salaries and really not be involved in the daily operations.
Not sure if that's what you want to do.

Do I have to move to the country I select to form my company in or can it be a third one?

The tricky part for you is Sweden. If you move to Dubai, you can have a company in Cyprus, but then you might as well just use a Dubai company. The important part is that you don't trigger taxes in Sweden.

Does both solutions here for Malta and Cyprus involve in me as major shareholder moving to any of those countries?

No, but if you don't want to live there, there may be better options - as long as you cut your ties with Sweden.

Or can I still stay in Sweden or perhaps even a third country but take advantage of those tax rates?

See above.

By cutting ties with Sweden, it means do not own anything and have no active transactions from your bank account. But I can still come and visit and stay in airbnb or at my brothers place say 2-3 months a year?

Sweden has two rules for tax residency, as far as I know:

1. Residency: you have a place to live in Sweden and a registered address. If your registered address (in the Swedish residency register) is in Sweden, you have to pay taxes in Sweden, even if you only spend 2 days per year there.
2. Habitual abode: You spend 183+ days in Sweden, but they can also count time away if it's shorter than the time spent in Sweden, and they can come up with other bulls**t if you go to Sweden frequently (e.g. you come every week for two days). If you come for 2-3 months in summer and only as a visitor and you are outside of Sweden for the rest of the year, you should be good.

But again, please check this stuff with a licensed Swedish advisor.

 

[JackAlabama]

You can afford to talk to a BIG4 consultancy firm (PwC etc.), they should be able to help. I would guess that the best option would be some kind of holding setup, maybe with Cyprus. I would get a couple different quotes and go with the one where you feel they understand your needs the best.

Stuff like that can go terribly wrong, I know personally of a few cases. Better to get a few independent folks who can assist on the specific situation and know the places one is interested in.

 

[JustAnotherNomad]

Stuff like that can go terribly wrong, I know personally of a few cases.

What do you mean?

Better to get a few independent folks who can assist on the specific situation and know the places one is interested in.

That may work well in countries where tax planning is commonplace. From what I've heard (and also what OP mentioned), it's difficult to find someone like that in Sweden.
As an alternative, you could try to do it the other way around, get some suggestions from someone in e.g. Cyprus, and then run it by a Swedish tax law firm (BIG4 or otherwise) to make sure it really works.

 

[Barney2201]

Have you considered the Channel Islands? Zero Corp tax 'reasonable' personal tax at 20%. Maybe set up a company using a Non-Exec Director, the company would buy the product from China and sell to your company in Sweden or supply UK market direct. The Channel Island company retains most of the margin but acting as the broker... There is also no CGT when it comes time to sell. And if you want to be really aggressive you can do what I do and relocate to Sark for a while and pay no personal income tax on the sale.

 

[Konstanz]

Have you considered the Channel Islands? Zero Corp tax 'reasonable' personal tax at 20%. Maybe set up a company using a Non-Exec Director, the company would buy the product from China and sell to your company in Sweden or supply UK market direct. The Channel Island company retains most of the margin but acting as the broker... There is also no CGT when it comes time to sell. And if you want to be really aggressive you can do what I do and relocate to Sark for a while and pay no personal income tax on the sale.

Hows life in Sark?

 

[JustAnotherNomad]

Have you considered the Channel Islands? Zero Corp tax 'reasonable' personal tax at 20%. Maybe set up a company using a Non-Exec Director, the company would buy the product from China and sell to your company in Sweden or supply UK market direct. The Channel Island company retains most of the margin but acting as the broker...

I'm not an expert, but I see no way this would work while living in Sweden. Especially not with a non-EU company without substance.

There is also no CGT when it comes time to sell.

What taxes the Channel Islands would charge is also irrelevant since it's about Swedish taxes...

And if you want to be really aggressive you can do what I do and relocate to Sark for a while and pay no personal income tax on the sale.

Wouldn't work either because Sweden retains the right to charge CGT for 10 years after one has left Sweden.
There's no exit tax, but they have this rule precisely because they don't want people to go away for a year or two, cash out without paying tax in Sweden, and then come back. It's the reason why other countries have exit tax, so Sweden is at least a little bit better there.
That's why it's so important to find someone who is licensed to advise on Swedish tax law.

 

[Sols]

Does both solutions here for Malta and Cyprus involve in me as major shareholder moving to any of those countries?

Yes, it's based on you living there. If you keep living in Sweden, neither will work.

Remember, you are taxed based on where you live. The same goes for any companies that you control/manage. Cyprus, Malta, Dubai — all are pointless if you stay in Sweden.

By cutting ties with Sweden, it means do not own anything and have no active transactions from your bank account. But I can still come and visit and stay in airbnb or at my brothers place say 2-3 months a year?

Correct. Despite being a high tax jurisdiction with a highly skilled tax authority, Sweden's enforcement of tax laws is predictable and generally sensible. You can stay in Sweden a few months a year as a visitor/tourist and not become tax resident.

You can maintain both bank accounts and property in Sweden. They just shouldn't be your primary economic ties. Establish bonafide residence and tax residence somewhere that isn't Sweden.

 

[Barney2201]

Hows life in Sark?

Sark works very well from my point of view.... Especially with a UK passport which makes Europe just difficult. Spent the last few years looking for a better option and haven't found it yet! Rent a property there for less than £10k, no minimum stay requirements, total local tax bill £1K with an invoice from tax office with TIN, no personal tax, can still bank with high street banks if required. In summer it's stunning and winter I spend mainly off island. It works for anyone who travels a lot but needs somewhere to call home without all the hassles of big countries. Feel free to PM me if you want any more info, happy to share my experiences.

 

[factual]

Appreciate the activity in this topic very much.

So to summarize all above content. Please correct me if I am mistaken somewhere in below possible options which are valid for my case. There are probably few other options also which we have not dug ourselves into.

Option 1:
Cyprus Company, with myself as official shareholder and director. VAT register this company in Netherlands/UK to be able to continue operations. Sweden company dissolves and sells everything to the Cypriot company. Meaning I have no business being done in Sweden.
I am able here to sell my Swedish business at my acquired cost to the Cyprus part (since I started this, the cost is just the shares-value which is 2500€)

Stay in Sweden maximum 120days. Still have option to own my apartment in Sweden, have a car staying in garage the whole time, still have a Swedish bank account for mortgage or other fixed expenses which can not be avoided.
Rent a place in Cyprus. Stay there in Cyprus for 70+days +any other third country for remaining days. I would be treated as Cyprus tax resident. I would here be able to take advantage of 12.5% effective tax and unlimited dividend cashout to my personal bank account (but this bank can not be a Swedish bank).
If I would make a company exit, it would also be taxed here at 12.5% and I could cash these amounts out as dividends as well.
I could also be able to travel to Dubai, become tax resident in Dubai as well. Cash out my dividends from my Cyprus company to my Dubai bank account.

Above would probably work for Malta also, perhaps with an adjustment for amount of days to stay in Malta.


Option 2:
Stay in Dubai for 190 days. Form a Dubai company. I have to sell everything that I have in Sweden, including Apartment, car, mobile subscriptions and so on. Basically cancel everything I have here and make a move to Dubai.

I am only allowed to travel and visit Sweden up to 180 days and maximum 3 months at a time. (to be on safe side lets say I would only visit Sweden for 3 months a year only during summertime).
The Dubai company would now somehow need to be able to be VAT registered in EU, it will probably be much harder to have PSP, continue agreement with 3PL warehouses, probably much harder to import goods to EU also as well as make the reports for VAT (both import and sales vat).


Option 3:
Let's say I do not want to move from Sweden at all. I want to stay in Sweden 365 days a year except for some short holidays.

Can I still form a Cyprus company, dissolve the Sweden company and have all the company profits generated being taxed in Cyprus only?
The profits would never leave the Cyprus company bank account, no dividends paid out and so on. Also no business is made in Sweden, no offices are rented in Sweden, no utility bills. The only happening would be order would be shipped from Netherlands to Swedish customers using our NL VAT number. If I in future decides to cash out any allocated company profits, I could then make a move to any other favorable low-tax country and make it a reality using that countries taxation rules.

I would then be paid a regular yearly salary from the Cyprus company as consultant working from my home. This salary would be taxed with Swedish tax rate.
If this option would not work. Would it work if my Swedish partner living in Turkey would be the director and major shareholder here?