4 ms·

I’d be very careful about the business taxes - it used to be a common model that Germans would form a UK ltd to do mostly business in germany - and they were ge

I’d be very careful about the business taxes - it used to be a common model that Germans would form a UK ltd to do mostly business in germany - and they were generally liable for corporate taxes in germany. (1) So depending on your local tax laws and where you perform work/where your customers are located, you might still be liable for taxes. (1) see the section about “inbound Tätigkeit” here https://www.dittmann-hartmann.de/Fachgebiete/Gesellschaftsrecht/uk-ltd-vs-gmbh https://www.dittmann-hartmann.de/Fachgebiete/Gesellschaftsre...

ChuckNorris89 4y ago
Indeed. Many EU countries expect to pay the corporate tax levels of where you live, not where your company is registered. Like say you have a company tax rate in your country of residence of 40%, but you open a company in a country where you'll pay just 5%, then your country of residence will expect you to pay the difference to the local 40%, minus the 5% tax you paid in the country where your company is registered so you save nothing in the end while also making life more difficult for you in attorneys and accountants fees. I knew people doing this without reporting their foreign company income to their local tax authorities, but if they catch you you're looking at severe fines and possibly jail time. I knew a British guy living in Sweden making money from his UK company without fully paying Swedish taxes on his gain from the UK. He later got slapped with a equivalent ~80k Euros fine by the Swedish tax authorities. Turns out, governments don't like you cheating your tax dues. Legally avoiding taxes in the EU is pretty difficult for the average person without completely relocating to a tax heaven. So be careful and hire dedicated tax attorneys with experience in international/EU tax laws before you think you're clever and dream of dodging taxes like you're Amazon all on your own.
- Xylakant 4y ago
  It’s not “where you live” but where the company operates. I happen to (indirectly) co-own a UK ltd. It does business in the UK and has UK resident employees. It pays taxes in the UK only. But if that Ltd. would operate in Germany from a German office and have German resident employees, it would likely be classified as German tax subject.
  - ramtatatam 4y ago
    I was considering to incorporate in UK (not for tax reasons but for transparency of their laws compared with the place where I live). My accountant told me that recently there had been laws introduced making it basically impossible to become significant shareholder unless you relocate. I have not confirmed this myself as I'm yet to review regulations.
    - Xylakant 4y ago
      We have formed our Ltd in the UK pretty much exactly one year ago and it wasn’t a problem for us - however, the Ltd is a subsidiary of our German company, so I’m not a direct shareholder. This may or may not change things.
  - ChuckNorris89 4y ago
    It depends how you extract the company profits (as salary? as dividends? do you reinvest them? etc.), and where you move them after you've taken them out. If you live in Germany but operate a UK company and all those profits never leave the UK, then you'll pay no German tax on those gains. But if you were to take those profits from the UK to use in Germany, then the German gov will want a sizable piece of your foreign gains.
    - konha 4y ago
      > If you live in Germany but operate a UK company and all those profits never leave the UK, then you'll pay no German tax on those gains. From my limited understanding this is wrong and you should consult a tax advisor before attempting do set this up. “Ort der Geschäftsleitung” (smth. like “location where business decisions are made”) seems do be a recurring topic when it comes to taxation of foreign companies in Germany. They might argue you are “unbeschränkt steuerpflichtig” in Germany. (You owe taxes just like if your company was registered there.)
      - Xylakant 4y ago
        Yup, that’s what I took from discussing this with our tax accountants. The reason our UK ltd is taxed in the UK is that it does it’s business in the UK and our German business is served from the German GmbH which owns the UK ltd.
- andrepd 4y ago
  It's very easy for companies. Netherlands and Luxembourg are tax havens inside the EU, and of course Ireland tailors her laws specifically to "sell" tax evasion products.
  - ChuckNorris89 4y ago
    For companies yes, but not for individuals. As an individual, your gains are taxed by your country of residence. Paying taxes in the Netherlands, doesn't absolve you from also being taxed in your home country, if that's where your profits from the Netherlands will end up eventually.
    - varispeed 4y ago
      Not necessarily. If you are rich, then there are many ways to get around that. For instance having another company in a tax haven charging licensing fees to your company in Netherlands or whenever and then loaning money to the individual, which in many countries still is tax free. Of course you don't have to repay the loan or pay just the small interest. These taxes are designed to keep working class being working class and ensure they'll never jump the class ladder.
- varispeed 4y ago
  It's funny that these measures only catch small businesses. Big corporations can register all over the place and divert profits where tax is the lowest and don't be bothered by these laws.
- hakanensari 4y ago
  This is a tricky subject, and I’m certainly not expert on this, but my understanding is that where a company is resident depends on where its central management and control are based. So if you are the sole director of a UK registered company but reside in the Netherlands, your company is tax resident in the latter. However, if your board are majority in the UK, hold meetings there, etc. your company is resident there, even if you reside in the Netherlands. Then, if you don’t pay income tax on your foreign income in the latter (the 30% expat deal), you effectively pay no personal income tax on whatever you earn through the UK company.

ChuckNorris89 4y ago

Indeed. Many EU countries expect to pay the corporate tax levels of where you live, not where your company is registered. Like say you have a company tax rate in your country of residence of 40%, but you open a company in a country where you'll pay just 5%, then your country of residence will expect you to pay the difference to the local 40%, minus the 5% tax you paid in the country where your company is registered so you save nothing in the end while also making life more difficult for you in attorneys and accountants fees. I knew people doing this without reporting their foreign company income to their local tax authorities, but if they catch you you're looking at severe fines and possibly jail time. I knew a British guy living in Sweden making money from his UK company without fully paying Swedish taxes on his gain from the UK. He later got slapped with a equivalent ~80k Euros fine by the Swedish tax authorities. Turns out, governments don't like you cheating your tax dues. Legally avoiding taxes in the EU is pretty difficult for the average person without completely relocating to a tax heaven. So be careful and hire dedicated tax attorneys with experience in international/EU tax laws before you think you're clever and dream of dodging taxes like you're Amazon all on your own.

Xylakant 4y ago
It’s not “where you live” but where the company operates. I happen to (indirectly) co-own a UK ltd. It does business in the UK and has UK resident employees. It pays taxes in the UK only. But if that Ltd. would operate in Germany from a German office and have German resident employees, it would likely be classified as German tax subject.
- ramtatatam 4y ago
  I was considering to incorporate in UK (not for tax reasons but for transparency of their laws compared with the place where I live). My accountant told me that recently there had been laws introduced making it basically impossible to become significant shareholder unless you relocate. I have not confirmed this myself as I'm yet to review regulations.
  - Xylakant 4y ago
    We have formed our Ltd in the UK pretty much exactly one year ago and it wasn’t a problem for us - however, the Ltd is a subsidiary of our German company, so I’m not a direct shareholder. This may or may not change things.
- ChuckNorris89 4y ago
  It depends how you extract the company profits (as salary? as dividends? do you reinvest them? etc.), and where you move them after you've taken them out. If you live in Germany but operate a UK company and all those profits never leave the UK, then you'll pay no German tax on those gains. But if you were to take those profits from the UK to use in Germany, then the German gov will want a sizable piece of your foreign gains.
  - konha 4y ago
    > If you live in Germany but operate a UK company and all those profits never leave the UK, then you'll pay no German tax on those gains. From my limited understanding this is wrong and you should consult a tax advisor before attempting do set this up. “Ort der Geschäftsleitung” (smth. like “location where business decisions are made”) seems do be a recurring topic when it comes to taxation of foreign companies in Germany. They might argue you are “unbeschränkt steuerpflichtig” in Germany. (You owe taxes just like if your company was registered there.)
    - Xylakant 4y ago
      Yup, that’s what I took from discussing this with our tax accountants. The reason our UK ltd is taxed in the UK is that it does it’s business in the UK and our German business is served from the German GmbH which owns the UK ltd.
andrepd 4y ago
It's very easy for companies. Netherlands and Luxembourg are tax havens inside the EU, and of course Ireland tailors her laws specifically to "sell" tax evasion products.
- ChuckNorris89 4y ago
  For companies yes, but not for individuals. As an individual, your gains are taxed by your country of residence. Paying taxes in the Netherlands, doesn't absolve you from also being taxed in your home country, if that's where your profits from the Netherlands will end up eventually.
  - varispeed 4y ago
    Not necessarily. If you are rich, then there are many ways to get around that. For instance having another company in a tax haven charging licensing fees to your company in Netherlands or whenever and then loaning money to the individual, which in many countries still is tax free. Of course you don't have to repay the loan or pay just the small interest. These taxes are designed to keep working class being working class and ensure they'll never jump the class ladder.
varispeed 4y ago
It's funny that these measures only catch small businesses. Big corporations can register all over the place and divert profits where tax is the lowest and don't be bothered by these laws.
hakanensari 4y ago
This is a tricky subject, and I’m certainly not expert on this, but my understanding is that where a company is resident depends on where its central management and control are based. So if you are the sole director of a UK registered company but reside in the Netherlands, your company is tax resident in the latter. However, if your board are majority in the UK, hold meetings there, etc. your company is resident there, even if you reside in the Netherlands. Then, if you don’t pay income tax on your foreign income in the latter (the 30% expat deal), you effectively pay no personal income tax on whatever you earn through the UK company.