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Where to incorporating SaaS company (with substance?)

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corp1212

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Mar 27, 2023
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#1
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Looking for corporate structure for SaaS company that will have 2-3M EUR in revenue within the coming years.

Looking for:
- Low CIT
- Simple processes etc
- Substance? (is it even possible to set up a company ie in Romania and run it from another country?)

The questions in basically. Do I need to relocate to the country where I'm running it from? I will be the CEO the coming years, can put R&D, marketing, support, sales etc in a "HQ" in any country but will that be "substance" if I'm running the company from somewhere else as a CEO? I will own 100% of the company so all the decision power will be in my hands.

The dream scenario will be to have it set it up ie Romania, Estonia, Malta or somewhere else and then take dividends to the country where I'm tax resident (could be UK non dom, Monaco, Switzerland Spain Beckham Law etc).

Or will this setup be "risky"? Some people are telling me that I simply need to live in the country where I'm incorporating it since I will own the decision power. If thats the case, what countries could be an alternative in EU? Cyprus? Malta? Canary Islands? Andorra? Monaco? Switzerland? Am I missing something?

Curious to get your expertise guys :)
 
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#2
I'd suggest to incorporate a company in the country where you currently live and worry about corp structure once you hit > $20k+/mo in revenues.

In a few years things can change a lot and thinking years ahead of time might be a waste of your time
 
#4
Do you have the software already fully developed and ready to bring it to the market?
 
#5
Marzio said:
Then your company will be tax resident where you will be tax resident.

Since you are building a SaaS company you'll be dealing with software, are you the person who will build the software?
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Nope - I will not be building it. I will be the CEO and biggest owner.

Don said:
Do you have the software already fully developed and ready to bring it to the market?
Click to expand...
It will be continuous developments for the coming years - meaning we will always need a software development team.
 
#6
corp1212 said:
Looking for corporate structure for SaaS company that will have 2-3M EUR in revenue within the coming years.

Looking for:
- Low CIT
- Simple processes etc
- Substance? (is it even possible to set up a company ie in Romania and run it from another country?)

The questions in basically. Do I need to relocate to the country where I'm running it from? I will be the CEO the coming years, can put R&D, marketing, support, sales etc in a "HQ" in any country but will that be "substance" if I'm running the company from somewhere else as a CEO? I will own 100% of the company so all the decision power will be in my hands.

The dream scenario will be to have it set it up ie Romania, Estonia, Malta or somewhere else and then take dividends to the country where I'm tax resident (could be UK non dom, Monaco, Switzerland Spain Beckham Law etc).

Or will this setup be "risky"? Some people are telling me that I simply need to live in the country where I'm incorporating it since I will own the decision power. If thats the case, what countries could be an alternative in EU? Cyprus? Malta? Canary Islands? Andorra? Monaco? Switzerland? Am I missing something?

Curious to get your expertise guys :)
Click to expand...
Estonia company combined with a Maltese subsidiary forming a fiscal unit is quite a decent choice:
1) on the Estonian level, there is no CIT on undistributed profits, simple tax code and processes, and relatively cheap substance
It's also highly flexible for in-kind contributions if you have some assets that you can inject as capital into the entity.
2) Malta fiscal unit has 5% effective CIT, and the profits can be redistributed by the Estonian holding without further tax.

Estonia would also be an excellent option for residence since it's not an island and does not have any physical stay requirements for tax residency (which works well for EU citizens)

SaaS is in general, one of the fields where you have a lot of room to plan taxes.

Romania is probably best among those you mentioned for hiring IT staff since it has the biggest pool, but Poland could potentially be even better if you can qualify for the IP box.
 
#8
Marzio said:
He doesn't since he said software development will be outsourced.
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Well.. even for an outsourcing structure, it could be decent, given the vast pool of ICT staff.
Poland also provides the Estonian CIT regime (although not precisely the same).
 
#11
corp1212 said:
Will this be substance?

Lets say I live in Spain under Beckham Law and own 100% of the company, acting as a CEO - wouldn't Spain tax me then?
Click to expand...
Go speak with a Spanish tax adviser. Spain is known to be quite strict.

A company is resident in Spain and subject to CIT on its worldwide income when:

  • it has been incorporated in accordance with Spanish law
  • its registered office is in Spain, and/or
  • its ‘effective’ head office is in Spain.
Under Spanish law, a company’s ‘effective’ head office is in Spain when its business activities are managed and controlled from Spain.

You need to hire someone who manages and controls the operations outside of Spain.
 
#14
corp1212 said:
Looking for corporate structure for SaaS company that will have 2-3M EUR in revenue within the coming years.

Looking for:
- Low CIT
- Simple processes etc
- Substance? (is it even possible to set up a company ie in Romania and run it from another country?)

The questions in basically. Do I need to relocate to the country where I'm running it from? I will be the CEO the coming years, can put R&D, marketing, support, sales etc in a "HQ" in any country but will that be "substance" if I'm running the company from somewhere else as a CEO? I will own 100% of the company so all the decision power will be in my hands.

The dream scenario will be to have it set it up ie Romania, Estonia, Malta or somewhere else and then take dividends to the country where I'm tax resident (could be UK non dom, Monaco, Switzerland Spain Beckham Law etc).

Or will this setup be "risky"? Some people are telling me that I simply need to live in the country where I'm incorporating it since I will own the decision power. If thats the case, what countries could be an alternative in EU? Cyprus? Malta? Canary Islands? Andorra? Monaco? Switzerland? Am I missing something?

Curious to get your expertise guys :)
Click to expand...

Hey,

Basically, the answer depends on your tax residency country or where you live.

The country in which you set up a company will not ask you to live there. Some countries have substance requirements but in practice, if you don’t comply with them it cannot cause tax issues.

In any case, you pay full tax in the country where a company is established (whether the company has substance or not).

The main problem comes from the country where you live and from which you are managing your business.

It might tax you based on CFC or PE rules because you are managing a foreign company from another country.

All the countries you mentioned as residency countries have comparable high tax rates and apply the PE rule.

So in order to benefit from a favorable tax environment you should create a certain level of substance in the country where you will set up a business entity (employee, office, proper corporate file management, etc.) and also spend time there.
 
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#15
Don said:
SaaS is in general, one of the fields where you have a lot of room to plan taxes.
Click to expand...
Isn't it the exact same as with any other service. Taxes take place where the owner lives and not where the company is located unless you have staff and substance in the company?
 
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#16
diro said:
Isn't it the exact same as with any other service. Taxes take place where the owner lives and not where the company is located unless you have staff and substance in the company?
Click to expand...
What I mean is that in such a case, you have intellectual property. So, a substantial part of your business is based on intangible assets, making it not dependent on a fixed location. This provides better tax planning opportunities than some other businesses, e.g., renting a harvester service to farms, which are fixed in one location, and you cant optimize much.

Quite often, what you can see is the following:
  1. The owner develops IP in one jurisdiction.
  2. The owner moves the IP to another jurisdiction under a newly incorporated company and opens a small office with a local manager (builds substance).
  3. The company starts marketing and selling the product globally.
As a result, the company could be paying less (corporate) tax and have better access to credit, investors, government grants, etc.
 
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#17
Don said:
What I mean is that in such a case, you have intellectual property. So, a substantial part of your business is based on intangible assets, making it not dependent on a fixed location. This provides better tax planning opportunities than some other businesses, e.g., renting a harvester service to farms, which are fixed in one location, and you cant optimize much.
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how do you convince the tax office in your country (it's an EU country) that I have not to be taxed because the intangible assets are in Estonia while I have my office say in France and handle it all from there?
 
#18
diro said:
how do you convince the tax office in your country (it's an EU country) that I have not to be taxed because the intangible assets are in Estonia while I have my office say in France and handle it all from there?
Click to expand...
What I meant by substance is basically the proof of the opposite.
 
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