Will my Offshore company be considered a Local Resident Company in these countries?

[banafinfodafuggiano]

I could not find any info in English online. Does anybody know if my Hong Kong registered company will be Taxed as a Resident company if I change my PERSONAL tax residency to any of these countries?
(consider that I run 100% of the operation of the company, which provides both digital services and physical goods to customers in the USA).

- Hungary
- Slovakia
- Malaysia
- Slovenia

In Canada and Australia as well as in Spain (where I'm originally from), if you run an offshore company and you are a Tax resident of Spain, or Canada or Australia, the company automatically becomes
a Tax resident after 1 year and it has to pay corporate taxes on profits in the country where the director resides.
Does it also apply to any of the above mentioned 4x countries? Since these are the countries I'm looking to relocate ASAP and I'm trying to exclude the ones that will tax the s**t out of my company.

 

[Sols]

Yes.

 

[banafinfodafuggiano]

Yes.

I don't think that's correct, Malaysia doesn't tax foreign income, therefore wouldn't make your foreign company a tax resident.

Does anyone know if the oher 3x european countries will deem the offshore company a local tax resident? is there any credible source available from official websites?

 

[Sols]

I don't think that's correct, Malaysia doesn't tax foreign income, therefore wouldn't make your foreign company a tax resident.

It's not foreign income because the company is tax resident in Malaysia by you operating it from Malaysia.

Malaysia - Corporate - Corporate residence

Detailed description of corporate residence rules in Malaysia

taxsummaries.pwc.com

Does anyone know if the oher 3x european countries will deem the offshore company a local tax resident? is there any credible source available from official websites?

Same in Hungary, Slovakia, and Slovenia. It's not a foreign company/income for tax purposes.

Just look up how they all define corporate tax residence.

Hungary - Corporate - Corporate residence

Detailed description of corporate residence rules in Hungary

taxsummaries.pwc.com

Slovak Republic - Corporate - Corporate residence

Detailed description of corporate residence rules in Slovak Republic

taxsummaries.pwc.com

Slovenia - Corporate - Corporate residence

Detailed description of corporate residence rules in Slovenia

taxsummaries.pwc.com

In the case of Hungary, also look at how a Permanent Establishment is created, then go to "Taxes on corporate income", and you'll find Hungary would tax a PE of your HK company fully.

If PwC isn't good enough for you, you can look at what the countries have sent to OECD.

https://www.oecd.org/tax/automatic-exchange/crs-implementation-and-assistance/tax-residency/Hungary-Tax-Residence.pdf

https://www.oecd.org/tax/automatic-exchange/crs-implementation-and-assistance/tax-residency/Slovenia-Tax-Residency.pdf

https://www.oecd.org/tax/automatic-exchange/crs-implementation-and-assistance/tax-residency/Slovak-Republic-Tax-Residency.pdf

https://www.oecd.org/tax/automatic-exchange/crs-implementation-and-assistance/tax-residency/Malaysia-Residency.pdf

If that still isn't good enough, you can usually read the laws online on some government website. If can't find English translations of the law, just search in Hungarian, Slovak, and Slovene.

 

[TheCryptoAnt]

The answer is yes to all however you are likely to finesse it in all of them if you pull a modest salary (never dividends) and lay low.

 

[banafinfodafuggiano]

The answer is yes to all however you are likely to finesse it in all of them if you pull a modest salary (never dividends) and lay low.

Why not Dividends? How would the country of residence even know if I'm pulling a salary or dividends?

It's not foreign income because the company is tax resident in Malaysia by you operating it from Malaysia.

Malaysia - Corporate - Corporate residence

Detailed description of corporate residence rules in Malaysia

taxsummaries.pwc.com

Same in Hungary, Slovakia, and Slovenia. It's not a foreign company/income for tax purposes.

Just look up how they all define corporate tax residence.

Hungary - Corporate - Corporate residence

Detailed description of corporate residence rules in Hungary

taxsummaries.pwc.com

Slovak Republic - Corporate - Corporate residence

Detailed description of corporate residence rules in Slovak Republic

taxsummaries.pwc.com

Slovenia - Corporate - Corporate residence

Detailed description of corporate residence rules in Slovenia

taxsummaries.pwc.com

In the case of Hungary, also look at how a Permanent Establishment is created, then go to "Taxes on corporate income", and you'll find Hungary would tax a PE of your HK company fully.

If PwC isn't good enough for you, you can look at what the countries have sent to OECD.

https://www.oecd.org/tax/automatic-exchange/crs-implementation-and-assistance/tax-residency/Hungary-Tax-Residence.pdf

https://www.oecd.org/tax/automatic-exchange/crs-implementation-and-assistance/tax-residency/Slovenia-Tax-Residency.pdf

https://www.oecd.org/tax/automatic-exchange/crs-implementation-and-assistance/tax-residency/Slovak-Republic-Tax-Residency.pdf

https://www.oecd.org/tax/automatic-exchange/crs-implementation-and-assistance/tax-residency/Malaysia-Residency.pdf

If that still isn't good enough, you can usually read the laws online on some government website. If can't find English translations of the law, just search in Hungarian, Slovak, and Slovene.

Ok, so how come Malaysia is well known for not taxing foreign income? I am aware of some "large" names on Youtube that have some residency in Malaysia and they don't pay any tax there even though their company is incorporated in the UAE. Would Malaysia even give a damn if I live there 6 months a year and I run an offshore company from my laptop earning a mere $300-500K a year?

Another example is the T-AT- E S who are based in Romania

 

[Sols]

Ok, so how come Malaysia is well known for not taxing foreign income?

Is it? By what metric?

Even if it is, Malaysia enacted changes to its tax law in 2023/2024. More are expected. Things are changing. Don't plan for the future based on yesterday's news.

I am aware of some "large" names on Youtube that have some residency in Malaysia and they don't pay any tax there even though their company is incorporated in the UAE. Would Malaysia even give a damn if I live there 6 months a year and I run an offshore company from my laptop earning a mere $300-500K a year?

You're asking a different question now. You are now asking "Can I get away with tax evasion?" rather than "Will my Offshore company be considered a Local Resident Company in these countries?"

 

[TheCryptoAnt]

Why not Dividends?

Because its (way) more likely the local IRS comes asking 'where do this divis come from' than 'where does this salary come from'

How would the country of residence even know if I'm pulling a salary or dividends?

I assumed you will be paying taxes on your personal income, and rates are different for earned / unearned income. Thats how they know. But if you plan on not paying then yeah you can try to finesse that too.

Ok, so how come Malaysia is well known for not taxing foreign income? I am aware of some "large" names on Youtube that have some residency in Malaysia and they don't pay any tax there even though their company is incorporated in the UAE. Would Malaysia even give a damn if I live there 6 months a year and I run an offshore company from my laptop earning a mere $300-500K a year?

Probably not cause in most of this countries they are more interested in what their citizens are doing (domestically mostly). We try to give the 'legal' answer to questions here but certainly you can try to finesse the system literally everywhere.

I for example lived in Spain for years and never declared anything but it wasnt legal and could have gotten in trouble. This doesnt mean 'everybody can finesse Spain' nor 'Spain doesnt care about foreigners'.

Another example is the T-AT- E S who are based in Romania

I can 1k% guarantee you the Tates are paying taxes in Romania or else it would have been the first thing they would have thrown at them.

 

[JustAnotherNomad]

Because its (way) more likely the local IRS comes asking 'where do this divis come from' than 'where does this salary come from'

Why? I don't know about Malaysia, but as for the other examples, they would probably demand social security contributions on salary payments, the "employer" (your own company) would at least have to register for social security contributions locally.
And a salary is for work that was performed - somewhere. If I was working for the tax office, my next question would be: "Where was this work performed?" This could very quickly lead to questions about PE etc. And it could also touch on questions regarding work permits (I believe MM2H visa holders aren't allowed to work in Malaysia.)

I don't understand why dividends wouldn't be a much simpler approach: You're a passive investor in a foreign company that has substance.
Of course you receive dividends, what is strange about that?

 

[TheCryptoAnt]

Why? I don't know about Malaysia, but as for the other examples, they would probably demand social security contributions on salary payments, the "employer" (your own company) would at least have to register for social security contributions locally.

Bill the company as a contractor and pay the contributions yourself.

And a salary is for work that was performed - somewhere. If I was working for the tax office, my next question would be: "Where was this work performed?" This could very quickly lead to questions about PE etc. And it could also touch on questions regarding work permits (I believe MM2H visa holders aren't allowed to work in Malaysia.)

'Performed at home, by me, a contractor. The company is somewhere else, I dont know the director, nor the management team, I just know my supervisor' etc

I don't understand why dividends wouldn't be a much simpler approach: You're a passive investor in a foreign company that has substance.
Of course you receive dividends, what is strange about that?

The fact that they could ask your for incorporation papers and to actually probe your substance, whereas for a salary its way less likely cause you are just another 9-5er with not much going on so why even bother looking at him.

Its all about avoiding the scrutiny.

 

[JohnLocke]

The fact that they could ask your for incorporation papers and to actually probe your substance, whereas for a salary its way less likely cause you are just another 9-5er with not much going on so why even bother looking at him.

Its all about avoiding the scrutiny.

This sounds quite correct, however, there is still a certain risk of being discovered. But the amount withdrawn as salary and taxed each month makes it less interesting to look into such a case. Unless one withdraws several hundred thousand a month.

 

[JustAnotherNomad]

Bill the company as a contractor and pay the contributions yourself.

That could work because you wouldn't usually submit any information about who your clients are.
That's not a salary though.

'Performed at home, by me, a contractor. The company is somewhere else, I dont know the director, nor the management team, I just know my supervisor' etc

I doubt this would work.

 

[TheCryptoAnt]

This sounds quite correct, however, there is still a certain risk of being discovered.

Theres always a certain level of risk with trying to finesse any system, yeah.

But the amount withdrawn as salary and taxed each month makes it less interesting to look into such a case. Unless one withdraws several hundred thousand a month.

yeah thats my whole thesis; lay low, be just another boring 9-5 self-employed.

That could work because you wouldn't usually submit any information about who your clients are.
That's not a salary though.

Certainly its not a 'salary' but the argument still stands imo.

I doubt this would work.

why? Ive performed work for multiple companies in my life where I didn't know much about the company besides an HR rep and my line of reporting. I was a contractor at the end of the day.

 

[JohnLocke]

Theres always a certain level of risk with trying to finesse any system, yeah.

Yes, that's what I meant was appropriate to elaborate on a bit so that one does not think it's just straightforward to do and everything is without problems.

 

[Sols]

I doubt this would work.

But that's literally how employment/cross-border contracting works. As long as the income is commensurate with normal income, it's unlikely anyone will bat an eye at the funds. Just pay the income tax.

The problem is it doesn't scale well. If you start raking in six figures per month, the risk of a deeper inspection goes up.

And you're still left with the risk that the company itself gets exposed somehow and becomes known to your local tax authority.

 

[JustAnotherNomad]

yeah thats my whole thesis; lay low, be just another boring 9-5 self-employed.

Yes, that's fine, and I can imagine this will work fine, as long as nobody takes a closer look. Which is unlikely to happen, as long as the amounts are low and you don't receive money from dodgy countries.

Ive performed work for multiple companies in my life where I didn't know much about the company besides an HR rep and my line of reporting. I was a contractor at the end of the day.

What I meant is: I believe it's a consensus here that it's not advisable to register a BVI company (for example) while living in the Netherlands, and then just invoice that BVI company as a self-employed NL resident, pretending you have no idea who you are working for.
Why would other EU countries be any different?

And you're still left with the risk that the company itself gets exposed somehow and becomes known to your local tax authority.

That was my point.

That said, there are probably lots of people who Estonian service providers have led to believe they could live in countries like Spain without paying tax, as long as they keep their money in their "Estonian" company. And I assume few of them have been caught, even though this should in theory be extremely simple as the Estonian company register is public and even offers API access...

 

[TheCryptoAnt]

Why would other EU countries be any different?

Mismanagement mostly, tons of EU countries IRS are just very bad at what they do. The NL is not one of them unfortunately.

 

[GPT]

This sounds quite correct, however, there is still a certain risk of being discovered. But the amount withdrawn as salary and taxed each month makes it less interesting to look into such a case. Unless one withdraws several hundred thousand a month.

Put a payroll company in between and you are just another one of the remote or work from home workers and as long as the socials are paid and you complete your filings there wont be a problem. You are to grey to draw attention.

If you start to have a discrepancy between income and spending behavior the case changes. Play it smart. Accept some taxes here and there.
It becomes even better when you work with a payroll company in a country where you pay taxes but you make sure to travel all the time.

I know its tempting to then say "im not gonna pay taxes because (fill in your reason)" but that is asking for attention you don't want.
For the next 5-6 years this will work without too many hurdles. Likely longer, but that depends on what the despised organisations come up with to collect more taxes from the people.

 

[mud]

You might want to look for countries with Double Tax Agreements with Hong Kong. Often the DTA will deem one country or the other as the taxable authority regardless of PE or where Effective Control lies.

Most of the EU uses the 6 month rule for Effective Control I've found.

 

[Jerry1911]

why? Ive performed work for multiple companies in my life where I didn't know much about the company besides an HR rep and my line of reporting. I was a contractor at the end of the day.

Your local tax authorities haven't received a CRS report for any of those companies, and that changes things AFAIK.

It becomes even better when you work with a payroll company in a country where you pay taxes but you make sure to travel all the time.

How would this work in practice?