4 ms·

One thing that is unique about Estonia is its corporate tax system. Specifically, a business does not pay any tax on profit that it does not distribute as divid

by boris 4y ago

One thing that is unique about Estonia is its corporate tax system. Specifically, a business does not pay any tax on profit that it does not distribute as dividents. Meaning that any profit that you re-invest into the business (or just save for the rainy day) is not taxed. It's hard to appreciate what a game changer this is unless you've experienced the traditional system with capitalization of assets, depreciation, etc. BTW, if anyone else knows of other countries with a similar tax system, please share (I did a bit of research but couldn't find any).

thelittleone 4y ago
How about a free zone in the UAE?
chongli 4y ago
a business does not pay any tax on profit that it does not distribute as dividents Can a business get around this by re-purchasing shares from the open market?
- skeletal88 4y ago
  Yes, but how long can you do that? Also, our local stock exchange has listed only a few dozen companies.
  - chongli 4y ago
    As long as you want. When the share prices go up you do stock splits.
    - skeletal88 4y ago
      Private persons have to pay income tax when they sell their shares for a profit. So there is no way to avoid the income tax and getmoney out of the company without taxes.
      - Scoundreller 4y ago
        But the stock buyback is at capital gains rates. And non-income personal revenue can have other advantages like avoiding various payroll taxes.
        skeletal88 4y ago
        There is no such thing as "capital gains" tax, everything is covered by income tax, at the same rate. You can't use the US tax system to cheat Estonian taxes:)
  - stonemetal12 4y ago
    As long as you want really. Say you have 100M shares outstanding. You do stock buy backs over the years now there is only 50M shares outstanding. You do a two way stock split, now there are 100M shares outstanding again.
    - lalos 4y ago
      You would still pay taxes when selling the stock for profit.
      - jungturk 4y ago
        Yes, though in the US the capital gains tax (for investments held over a year) is quite often lower than the tax on dividends (which are treated as income).
Drunk_Engineer 4y ago
The US has a similar system. It is not officially written into law, but any halfway decent tax accountant knows the loopholes.
- xedrac 4y ago
  I wonder if Biden's proposal to tax based on reported income to shareholders instead of taxable income, will change that for public companies: https://www.taxpolicycenter.org/taxvox/what-bidens-minimum-book-income-tax-corporations https://www.taxpolicycenter.org/taxvox/what-bidens-minimum-b...
LtWorf 4y ago
So Estonia wants to play the tax haven card like Malta and NL? Ok, but let's not pretend that taking away tax money from other countries for stuff like healthcare and schools is something to be praised.
- snapplebobapple 4y ago
  That really depends on how much more efficiently invested the money is in the startup vs in the government. Depending on which country you are in the answer is different but if you are in the first world the answer is almost certainly the money is better invested in the startup.
  - LtWorf 4y ago
    - dang 4y ago
      > Hahahahahahaha! It's like you don't know how startups really are (and also are somehow unaware Hey, can you please not break the site guidelines like this—regardless of how ignorant someone is or you feel they are? We have to ban accounts that post this way. If you'd please review https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html and stick to the rules when posting here, we'd appreciate it.

by boris 4y ago

thelittleone 4y ago

How about a free zone in the UAE?

chongli 4y ago

a business does not pay any tax on profit that it does not distribute as dividents Can a business get around this by re-purchasing shares from the open market?

skeletal88 4y ago
Yes, but how long can you do that? Also, our local stock exchange has listed only a few dozen companies.
- chongli 4y ago
  As long as you want. When the share prices go up you do stock splits.
  - skeletal88 4y ago
    Private persons have to pay income tax when they sell their shares for a profit. So there is no way to avoid the income tax and getmoney out of the company without taxes.
    - Scoundreller 4y ago
      But the stock buyback is at capital gains rates. And non-income personal revenue can have other advantages like avoiding various payroll taxes.
      - skeletal88 4y ago
        There is no such thing as "capital gains" tax, everything is covered by income tax, at the same rate. You can't use the US tax system to cheat Estonian taxes:)
- stonemetal12 4y ago
  As long as you want really. Say you have 100M shares outstanding. You do stock buy backs over the years now there is only 50M shares outstanding. You do a two way stock split, now there are 100M shares outstanding again.
  - lalos 4y ago
    You would still pay taxes when selling the stock for profit.
    - jungturk 4y ago
      Yes, though in the US the capital gains tax (for investments held over a year) is quite often lower than the tax on dividends (which are treated as income).

Drunk_Engineer 4y ago

The US has a similar system. It is not officially written into law, but any halfway decent tax accountant knows the loopholes.

xedrac 4y ago
I wonder if Biden's proposal to tax based on reported income to shareholders instead of taxable income, will change that for public companies: https://www.taxpolicycenter.org/taxvox/what-bidens-minimum-book-income-tax-corporations https://www.taxpolicycenter.org/taxvox/what-bidens-minimum-b...

LtWorf 4y ago

So Estonia wants to play the tax haven card like Malta and NL? Ok, but let's not pretend that taking away tax money from other countries for stuff like healthcare and schools is something to be praised.

snapplebobapple 4y ago
That really depends on how much more efficiently invested the money is in the startup vs in the government. Depending on which country you are in the answer is different but if you are in the first world the answer is almost certainly the money is better invested in the startup.
- LtWorf 4y ago
  - dang 4y ago
    > Hahahahahahaha! It's like you don't know how startups really are (and also are somehow unaware Hey, can you please not break the site guidelines like this—regardless of how ignorant someone is or you feel they are? We have to ban accounts that post this way. If you'd please review https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html and stick to the rules when posting here, we'd appreciate it.