Where to incorporate when invoicing and holding shares of a Dutch B.V.

[Somchai]

Hi,

I am French, relocated in Thailand for a while now.

I am going to work with a Dutch operating B.V. that can be invoiced up to 10k euro monthly.

I will also receive a corporate loan from one of the founder, through his existing Dutch holding B.V, to buy 20% share in the Dutch operating B.V.

I'm ideally looking at an exit plan of 1M+ in ~5 years.

By then i'll be glad not to pay capital gain tax, and meanwhile i'll be glad to keep proceeds of invoices and dividends that i don't need out of Thailand with a low CIT/WHT.

So I'm looking to incorporate a holding between me and that Dutch company to holds the shares, and the money i don't need to bring in Thailand.

My understanding is that the Netherlands are no fool and i need substance for this to work.

After doing my research on this forum and google, it seems to me that a Latvian holding would be of interest ?

I am just unsure that i understand correctly the new taxation they introduced in 2018. (New corporate income tax in Latvia. How to benefit from it?)

- there won't be tax to be paid until i distribute profits
- there won't be tax to be paid on capital gain if i held the shares at least 3 years before selling them
- there won't be tax to be paid on dividends received and re-distributed (what they call flow-through dividends, as the Dutch B.V. will already have paid dividends tax when distributing them to the Latvia holding)
- there will be 25% CIT tax to be paid on profit distributed through dividends
- there is a 20% WHT mentioned at end for management and consultancy fees to non-resident

Which means, whenever i'd want to distribute profit:

- if i pay myself dividends, i would pay 25% on the profits and 0% on the dividends received from the Dutch B.V.
- if i pay myself through consultant/management fee, i would pay 20% WHT

So it would make sense to let dividends received flow-through, and profit earned be distributed as consultant/management fees.

Did i get anything wrong ? Is there red flags regarding the Latvia tax man i need to be aware of ?

How would the Netherlands see such a holding and accept it substance wise ? (The operating B.V has currently already two Dutch holding B.V. with directors paying all due in the Netherlands).

Does anyone has experience with holding shares/gains from a Dutch B.V. in a foreign country and optimizing taxes ?

Does anyone has experience with incorporating in Latvia with banking solution ?

Is there better options out there than Latvia ?

Cordially,

 

[Mr Gus]

Probably not the answer you want to hear but get in touch with a Dutch tax advisor about this... And there are many (better) alternatives for a Latvian Holding. Cyprus, Malta, Hungary etc...

 

[Somchai]

Probably not the answer you want to hear but get in touch with a Dutch tax advisor about this... And there are many (better) alternatives for a Latvian Holding. Cyprus, Malta, Hungary etc...

No problem, I already intend to consult with a tax advisor to confirm things, I just want to do my homework first.

You mention Cyprus and Malta as better alternatives, but my understanding is that it will be harder to make it work with the Netherlands because of their reputation. What makes you say they are better alternatives ?

I will look into Hungary, could you also elaborate why it's a better option ?

Do you have experience with any alternatives mentioned ?

Thank you!

 

[Mr Gus]

No problem, I already intend to consult with a tax advisor to confirm things, I just want to do my homework first.

You mention Cyprus and Malta as better alternatives, but my understanding is that it will be harder to make it work with the Netherlands because of their reputation. What makes you say they are better alternatives ?

I will look into Hungary, could you also elaborate why it's a better option ?

Do you have experience with any alternatives mentioned ?

Thank you!

I see.

Well on paper Malta or Cyprus are just really good options for holding companies, however in practice maybe not anymore, however they are both in the EU and are not considered as tax havens by either the Netherlands or the EU, also Malta came off the FATF grey list last week which made Cyprus a better option, but that doesn't really matter anymore.

The downside with Malta and Cyprus would be getting a bank account, especially a local bank account for a Maltese company is practically impossible, mainly because you will not be resident in Malta, so Cyprus might have a slight advantage in that case. So maybe for that reason alone it might be worth looking at different options like Latvia, Estonia, Hungary.

I can't tell if Hungary will be a better option but it's just another option but the advantages are there are no withholding taxes on dividends and it might be easier to get a bank account compared to Malta and Cyprus and it is also not known as a tax haven.

I have experience with both Malta and Cyprus and the advantage is over other jurisdictions is the huge corporate service industry, which is a lot less so in the other countries mentioned, but like I said getting a bank account in your situation without being a resident director.

Have you looked into Estonia over Latvia?

 

[Somchai]

I see.

Well on paper Malta or Cyprus are just really good options for holding companies, however in practice maybe not anymore, however they are both in the EU and are not considered as tax havens by either the Netherlands or the EU, also Malta came off the FATF grey list last week which made Cyprus a better option, but that doesn't really matter anymore.

The downside with Malta and Cyprus would be getting a bank account, especially a local bank account for a Maltese company is practically impossible, mainly because you will not be resident in Malta, so Cyprus might have a slight advantage in that case. So maybe for that reason alone it might be worth looking at different options like Latvia, Estonia, Hungary.

I can't tell if Hungary will be a better option but it's just another option but the advantages are there are no withholding taxes on dividends and it might be easier to get a bank account compared to Malta and Cyprus and it is also not known as a tax haven.

I have experience with both Malta and Cyprus and the advantage is over other jurisdictions is the huge corporate service industry, which is a lot less so in the other countries mentioned, but like I said getting a bank account in your situation without being a resident director.

Have you looked into Estonia over Latvia?

After looking further into East Europe countries and Cyprus i do agree with you.

East Europe is interesting on paper but they're still much less developed for corporate purposes and that's bringing in quite some uncertainty.

Also substance is important, so having a resident director, a secretary, 12.5% corporate tax (above 9 seems to be the threshold, probably why Hungary keep it to that?), and the Netherlands getting on good terms again with Cyprus (not considered a tax haven anymore, and they're now signing a DTT), is gonna cost some money (without talking about higher incorporation/maintenance fee), but it's going to pay off it seems.

I'm going to be in Europe in a couple weeks and can stop by, i do want a local bank and not an EMI, so that will be the challenge ?

Could you recommend agencies that you have experience with ?

Thanks for you answers!

 

[Mr Gus]

After looking further into East Europe countries and Cyprus i do agree with you.

East Europe is interesting on paper but they're still much less developed for corporate purposes and that's bringing in quite some uncertainty.

Also substance is important, so having a resident director, a secretary, 12.5% corporate tax (above 9 seems to be the threshold, probably why Hungary keep it to that?), and the Netherlands getting on good terms again with Cyprus (not considered a tax haven anymore, and they're now signing a DTT), is gonna cost some money (without talking about higher incorporation/maintenance fee), but it's going to pay off it seems.

I'm going to be in Europe in a couple weeks and can stop by, i do want a local bank and not an EMI, so that will be the challenge ?

Could you recommend agencies that you have experience with ?

Thanks for you answers!

There are plenty of service providers for Cyprus on this forum, they could help you out with everything including bank accounts I suppose.

Keep in mind that the DTT isn't in effect yet, but should be this year or next year. And like I said before be sure the get in touch with a local Dutch advisor that preferably also has experience with international tax planning.

In my experience getting a bank account with a local bank will be harder, more expensive and more time consuming, if you are planning to hold more then 100K in the bank account for a long time I would try to get a bank account with a reputable bank (do your own research on this). Personally I do make use of EMI's mainly because they are cheaper, better customer service and most of them have a EU bank license as well. But a general rule of thumb is if it's very easy to get a business account with an EMI they tend to attract risky business which isn't a positive thing. So the more questions and documents they ask the better IMO.

 

[Somchai]

There are plenty of service providers for Cyprus on this forum, they could help you out with everything including bank accounts I suppose.

Keep in mind that the DTT isn't in effect yet, but should be this year or next year. And like I said before be sure the get in touch with a local Dutch advisor that preferably also has experience with international tax planning.

In my experience getting a bank account with a local bank will be harder, more expensive and more time consuming, if you are planning to hold more then 100K in the bank account for a long time I would try to get a bank account with a reputable bank (do your own research on this). Personally I do make use of EMI's mainly because they are cheaper, better customer service and most of them have a EU bank license as well. But a general rule of thumb is if it's very easy to get a business account with an EMI they tend to attract risky business which isn't a positive thing. So the more questions and documents they ask the better IMO.

Yes as said above i'm looking for a tax adviser as well, i won't risk failing this deal over tax issues.

I did get PM already by someone urging me to consider Cyprus and incorporate with them on this forum, but my feeling about all these agencies is that they'll make it look good for you to sign off, and then you have to hope you're not dealing with lots of additional costs and that they can actually pull it off for a bank account and not just redirect you to an EMI.

Thus my interest to have some recommendation, it would be pretty random otherwise to choose one, and it seems they're all in the same price range, at least announced up front.

Is there any concern to have with European EMI in my situation, or the fact that i have a French passport but live in Thailand ?

I believe they would not accept me with proof of address in Thailand ?

And if i found a way, through family or something to get a proof of address in France and use an EMI, would that be a concern ? Like considered as if i were banking in France ?

I'm not planning to hold more than 100K at first, but after a couple year of business it should amount to that yes.

 

[Mr Gus]

Yes as said above i'm looking for a tax adviser as well, i won't risk failing this deal over tax issues.

I did get PM already by someone urging me to consider Cyprus and incorporate with them on this forum, but my feeling about all these agencies is that they'll make it look good for you to sign off, and then you have to hope you're not dealing with lots of additional costs and that they can actually pull it off for a bank account and not just redirect you to an EMI.

Thus my interest to have some recommendation, it would be pretty random otherwise to choose one, and it seems they're all in the same price range, at least announced up front.

Is there any concern to have with European EMI in my situation, or the fact that i have a French passport but live in Thailand ?

I believe they would not accept me with proof of address in Thailand ?

And if i found a way, through family or something to get a proof of address in France and use an EMI, would that be a concern ? Like considered as if i were banking in France ?

I'm not planning to hold more than 100K at first, but after a couple year of business it should amount to that yes.

Yes just ask price sheets before and compare, but if someone is urging you to come to Cyprus I would stay far way from that person, same thing for service providers being overly positive or never speak a bad word of Cyprus.

Well banks will ask for proof of address as well, so you will run into the same 'issue'. Maybe some EMI's would not accept you but I have no experience with this, only way to found out is trail & error.

I would just try to get an EMI with your Thai proof of address.

 

[Somchai]

Yes just ask price sheets before and compare, but if someone is urging you to come to Cyprus I would stay far way from that person, same thing for service providers being overly positive or never speak a bad word of Cyprus.

Well banks will ask for proof of address as well, so you will run into the same 'issue'. Maybe some EMI's would not accept you but I have no experience with this, only way to found out is trail & error.

I would just try to get an EMI with your Thai proof of address.

My understanding was that would not be an issue to a local bank where my proof of address is ?

 

[Mr Gus]

My understanding was that would not be an issue to a local bank where my proof of address is ?

What made you think it would be an issue with emi's?

 

[Somchai]

What made you think it would be an issue with emi's?

Reading revolut conditions, it says they accept only EU resident and a few other countries, Thailand was not listed. I assumed from there other EMI were similar if the big one didn't support it. i guess i'll have a second look at that.