Got the Estonian e-residency approved

[isaiah122]

So I applied for the Estonian digital residency and got it approved. My plan now is to open an Estonian digital company using a service such as xolo.io, and become a tax resident in some cheaper country in the Balkans (I´m going to check Bulgaria first this January, I rented an Airbnb for a month, if I don't like it I will keep looking around in the area). My question is, has anyone tried this and how did it work for you? I know of a guy who did this but went to Brazil and he's paying zero taxes there (apparently you pay no taxes for foreign profits there). I'm content with paying around 10%. I was told if I pay the Estonian company profits to myself as a salary I don't have to pay tax in Estonia, so how much do you reckon I'd have to pay in total if I'm a tax resident in Bulgaria doing this type of strategy? I'm gonna hire a legal advisor ASAP but I also would like to get your opinions.

Yes, this is the first time I'm gonna be doing something like this, so bear with me, I have no idea what I'm doing. I'm in Spain right now by the way.

 

[beardedguy]

@isaiah122 So, your company will be paying taxes in Estonia but you as a resident will be paying taxes in another east country, right? So you can avoid the high taxes from Spain. I don't know, just asking.

 

[victoriap]

@beardedguy No, that's not how it works for a single person company in EU. Company taxes are paid according to your own country of residence even if the company was registered in Estonia. Well some EU countries at least, I'm no tax attorney.

 

[bible_boy]

@victoriap

Well some EU countries at least

All EU countries. And most non-EU countries as well.

If a EU country had territorial taxation (as opposed to worldwide taxation), OECD and Brussels would be at its throat.

The UK, for example, has a territorial taxation scheme that lasts 7 years and allows you to keep your income away from the Queen's hands, as long as it's outside of the country. Ask your local EU representative what they think of it they won't be very happy.

 

[12345sj]

@bible_boy What about someone that owns a company in Estonia, get a self salary of 1€ and keep all the rest for the company. Is the company taxed regarding Estonia’s laws or EU ?

 

[bible_boy]

@12345sj https://en.m.wikipedia.org/wiki/Controlled_foreign_corporation

 

[matheww1]

@isaiah122 What if your company is in Estonia, digital residency, and you are from Spain and stay there? International income isn't taxed in Estonia, but if you pay dividends to yourself, you pay taxes in Spain, no? Can't they also consider they you should be taxed in Spain since you are the owner of the company and you operate from Spain?

 

[alan21usr]

@matheww1 It depends on where their clients are

 

[matheww1]

@alan21usr Well, not entirely. Typically, afaik, your tax residency is what matters, regardless of your clients being in the USA, Japan or UE.

 

[alan21usr]

@matheww1 Not really. Tax residency only matters for IRPF, tax on personal income not company’s income. A company outside of Spain with the clients outside of Spain but one ceo living in Spain the company pays taxes wherever it is and the ceo will only pay taxes on their income, what they pay themselves as salary

 

[jamesl]

@alan21usr Tax residency for Spain is defined as to "where the main productive source of income occurs". If you bill customers in Spain, spend in Spain, save in Spain, your tax residency (for Spanish authorities) is Spain, regardless of where you actually live

 

[alan21usr]

@jamesl Yes, exactly, but if you live in spain and your customers are outside of Spain, your company is outside of Spain, your company pays taxes wherever it’s based and you just pay taxes on your income. Also tax residency of a company is not the same as a person. Doesn’t work the same. Doesn’t behave the same.

I live in Spain.

 

[matheww1]

@alan21usr Not really. In many EU countries, even if your company is located in a different EU country (Estonia), tax authorities may decide that you are only using that country to avoid taxes, and that all your work is behind done from the country of your tax residency (Spain), even if you are only billing American clients. Hence, they may try to make you pay as if the company is in Spain. It's complicated.

 

[alan21usr]

@matheww1 I live in Spain, im telling you how it works in Spain, I don’t know about other countries, I know Germany is more like u said I think but idc because I live in Spain.. where OP lives..

They can try, they won’t have any legal leg to stand on, a company is not the same as a person.

 

[matheww1]

@alan21usr Are you Spanish or NHR?

 

[alan21usr]

@matheww1 Spanish, currently self employed (autónoma) looking to create a company but since my job is digital marketing I have to be careful with my strategy because of influencer law and such.

I’m currently on kid having time so for the next 4 years all my taxes are returned so I’m taking the time to educate myself first. That’s why I know what I answered

 

[matheww1]

@alan21usr But being self employed is different from having a company. Hacienda likes to go after those who create companies in other Eu jurisdictions just to evade Spanish taxes. Inform yourself with an accountant.

 

[alan21usr]

@matheww1 .. I know it’s different that’s why I’m explaining it to you.

You are treating a company like a person, it doesn’t matter as long as it is a company where it is. Hacienda can’t do anything about it. If it’s your personal taxes as a person is another story.

I have informed myself, you seem confused by this.

 

[professor]

@isaiah122 Welcome to Bulgaria!
I’m registered as self insured person in Bulgaria. Tax and insurance is the next:

1 Insurance payments around 25% but capped at 500€

1. Taxes are 10%. but 25% of expense is assumed so real tax is 7.5%. However you cant submit expenses

Nice article about self insured in bulgaria: https://ruskov-law.eu/bulgaria/article/social-security-contributions-self-insured-persons.html

Other option is opening Ltd (ЕООД) the expenses are next.
1. Minimal salary for manager(yourself). Which will be taxed at 10 and also insured. So Id say around 150€ for insurance
2. 10 % corporate tax on profits. You can file expenses
3. 5% tax on dividends

One nice thing. In Bulgaria investment in EU securities ( for example ETFs) are exempt from capital gains tax.

 

[isaiah122]

@professor My situation is the following, I work for a Swiss company as a freelance contractor and get a regular salary of 2.5k every month paid through Deel, from where I can send it anywhere, bank, Wise, Revolut, crypto etc. I bill them from a Spanish autonomo account right now, however I want to close the autonomo account and bill them either from the Estonian digital company or from a Bulgarian company. Eventually I will want to use my company to offer other freelance services to other clients as well. But the company will always be me alone, I don't need to pay dividends to anyone.

So let's say right now, if I opened the Bulgarian company to bill my employer, no dividends, just my own salary paid to myself, how much would it be left after taxes with the strategy you mention?