Tax Residency. How to prove?

[Bilbo Begins]

Hey guys,
As a newbie in this question, I wanted to ask you:
1) what can be a proof of tax residency for the company?
Will Nominee Director will be enough to proof that the effective management based for example in Singapore (or any other low tax country)? Even though its other directors (owners) are residents in Italy?
What are other documents needed to show that the company is managed in that country?
2)What can be a proof of tax residency to minimise source income? How it can be proved on paper to tax authorities? Proof of address? Utility bills?
And how to get a tax residency certificate in other case?

Thanks!

 

[Tax Cow]

If you want fair tax residency ruling just reach out to both tax offices of nations that may consider your company as their resident for whatever reason. Describe your situation in regards to place of operation as well as place of management decisions. They may ask more details. In most cases, you're likely to receive a final conclusion within a few weeks, free of any cost.

The tax offices are hyenas that will compete over one carcass, your revenue. So if you want to pay tax fairly, you will not need to worry about it - let the competing tax offices take the matter in their hands. Tax residency certificate is generally not required. If you want to pay as little tax as possible, you will need to shift all residency indicators to a favorable jurisdiction before reaching out for tax ruling.

Do not use nominee directors or shareholders. These services only keep your name off the public record and I'd be brave enough to say those services are utterly worthless, for the newbie consumers who do not have a clue how to use offshore corps properly. If you want real privacy, you go for darks. Nominees will not protect your identity in case of information probe. Will your nominees sign a personal liability guarantee and also agree to cover all damages in case of information leak (i.e. Panama Papers, Bahama Papers?) - then you may consider their services.

If you want to invoice with your IBC or open a bank account, having transparent ownership is only in your benefit. Needless to say, nominees are not tax residency indicators - quite the opposite, they indicate your place of operation and management is not where the nominees are.

 

[Bilbo Begins]

If you want fair tax residency ruling just reach out to both tax offices of nations that may consider your company as their resident for whatever reason. Describe your situation in regards to place of operation as well as place of management decisions. They may ask more details. In most cases, you're likely to receive a final conclusion within a few weeks, free of any cost.

The tax offices are hyenas that will compete over one carcass, your revenue. So if you want to pay tax fairly, you will not need to worry about it - let the competing tax offices take the matter in their hands. Tax residency certificate is generally not required. If you want to pay as little tax as possible, you will need to shift all residency indicators to a favorable jurisdiction before reaching out for tax ruling.

Do not use nominee directors or shareholders. These services only keep your name off the public record and I'd be brave enough to say those services are utterly worthless, for the newbie consumers who do not have a clue how to use offshore corps properly. If you want real privacy, you go for darks. Nominees will not protect your identity in case of information probe. Will your nominees sign a personal liability guarantee and also agree to cover all damages in case of information leak (i.e. Panama Papers, Bahama Papers?) - then you may consider their services.

If you want to invoice with your IBC or open a bank account, having transparent ownership is only in your benefit. Needless to say, nominees are not tax residency indicators - quite the opposite, they indicate your place of operation and management is not where the nominees are.

Thanks a lot! Much appreciation for an open answer. Do u have any idea on how to lower source income (salary from my IBC) if I am resident in Portugal or Italy? Or its just a matter of good accountant in order to increase all the expenses so there wont be any need for hight salary?

 

[Tax Cow]

Thanks a lot! Much appreciation for an open answer. Do u have any idea on how to lower source income (salary from my IBC) if I am resident in Portugal or Italy? Or its just a matter of good accountant in order to increase all the expenses so there wont be any need for hight salary?

In Portugal and most of the high tax Europe 'dividend split' is common. This helps mitigate social security. If done correctly, this is considered a safe tax mitigation method. The principle is that you pay yourself 'arguably fair' or 'arms-length' salary, a number that is common in your industry. For example, you invoice your client for 10K EUR per month, you pay yourself salary of 4K EUR per month and take the remainder out of your business as dividends or whatever form of payment is exempt from social security contributions.

Your defense in case of tax dispute is that MacDonalds does not pay out all the business proceeds to their employees as salary either. Apart from minimum salary, nobody can dictate a business what it must pay in salary to it's employees. I've not heard of cases where 40% salary/60% dividend got someone in serious trouble. If you go too greedy with dividend split, you may end up in court due to violation of 'arms-length' principle. Just do not be absurd and pay yourself only minimum wage if you invoice your client for 10K eur per month as IT security consultant.

 

[Bilbo Begins]

In Portugal and most of the high tax Europe 'dividend split' is common. This helps mitigate social security. If done correctly, this is considered a safe tax mitigation method. The principle is that you pay yourself 'arguably fair' or 'arms-length' salary, a number that is common in your industry. For example, you invoice your client for 10K EUR per month, you pay yourself salary of 4K EUR per month and take the remainder out of your business as dividends or whatever form of payment is exempt from social security contributions.

Your defense in case of tax dispute is that MacDonalds does not pay out all the business proceeds to their employees as salary either. Apart from minimum salary, nobody can dictate a business what it must pay in salary to it's employees. I've not heard of cases where 40% salary/60% dividend got someone in serious trouble. If you go too greedy with dividend split, you may end up in court due to violation of 'arms-length' principle. Just do not be absurd and pay yourself only minimum wage if you invoice your client for 10K eur per month as IT security consultant.

Thats a great hint, thanks a lot! So if I understood right, me as a shareholder of a company (for example in Latvia) first I pay corporate tax in Latvia, than I pay myself a minimum salary that is taxed in Italy and the "fair" rest of profits I give myself in the form of dividends that are exempt from taxes in Italy?

If dividends are a way to go, why not use A holding company in 0% tax jurisdiction + a company in Latvia. Company in Latvia will send dividends to offshore and than a holding will send the dividends to me as a shareholder, to my personal bank account? Or this is toooo magical?

Can you PM me with your email? I would much appreciate if you are willing to help me with other hints.

 

[Tax Cow]

Suddenly a wild Latvia appears in the picture. Your case is a little too complex.

Tax is not my specialty, I've just kept things in mind from paid conversations with professionals. Nevertheless, your plan needs a bit of ironing for sure because offshore holding companies in 0% havens need to be sufficiently substantiated or they will be treated as local corps, subject to local CIT. Do get in touch with your local tax expert.

Have you considered moving yourself to a country like Paraguay that has territorial taxation regime? If you can work remotely, you just go there and live like a king. You won't even need to incorporate a business - request money directly to your personal account for services. 0% Tax on foreign income, 0% corporate upkeep hassle. Life's good.

There are places with no PIT of any kind. Such as Monaco or Qatar but those countries are a little pricey to live in. Then there are underdeveloped wastelands like Somalia where nobody would want to live regardless of costs. IMHO, if you can work remotely, just relocate to a country with territorial taxation regime (International taxation - Wikipedia ) - livable, affordable, 0% tax. What more could you ask for from a country? There are about 20 decent countries to choose from.

I'm in the process of discarding all my on-site consulting business activities and going fully remote so I can do the same

 

[GrumpyMess]

IMHO, if you can work remotely, just relocate to a country with territorial taxation regime (International taxation - Wikipedia ) - livable, affordable, 0% tax. What more could you ask for from a country? There are about 20 decent countries to choose from.

There are far less territorial taxation countries where you can get a residency certificate easily and enjoy your living.

and going fully remote so I can do the same

What country did you choose for this way?

 

[KJK]

Have you considered moving yourself to a country like Paraguay that has territorial taxation regime? If you can work remotely, you just go there and live like a king. You won't even need to incorporate a business - request money directly to your personal account for services. 0% Tax on foreign income, 0% corporate upkeep hassle. Life's good.

Do you have experience with passport/citizenship there as well? Or residency only?

 

[Bilbo Begins]

Do you have experience with passport/citizenship there as well? Or residency only?

Residence only. Both of us has Ukrainian passports

 

[fortunespeculator]

In Portugal and most of the high tax Europe 'dividend split' is common. This helps mitigate social security. If done correctly, this is considered a safe tax mitigation method. The principle is that you pay yourself 'arguably fair' or 'arms-length' salary, a number that is common in your industry. For example, you invoice your client for 10K EUR per month, you pay yourself salary of 4K EUR per month and take the remainder out of your business as dividends or whatever form of payment is exempt from social security contributions.

Your defense in case of tax dispute is that MacDonalds does not pay out all the business proceeds to their employees as salary either. Apart from minimum salary, nobody can dictate a business what it must pay in salary to it's employees. I've not heard of cases where 40% salary/60% dividend got someone in serious trouble. If you go too greedy with dividend split, you may end up in court due to violation of 'arms-length' principle. Just do not be absurd and pay yourself only minimum wage if you invoice your client for 10K eur per month as IT security consultant.

So we can't do something like warren buffet- he is paying himself just 100000$ salary a year and not taking out any dividends from a company that is making billions a year.