[memnips]

Is there a tax advantage here? Estonia's tax system is supposed to be very simple, and allows for a 0% corporate income tax on all profits that are re-invested into the corporation (source: http://www.incorporate.ee/why-estonia/low-tax-jurisdiction).

Does this mean I can form a corporate entity in Estonia and gain all the tax benefits without any physical presence?

[markvdb]

You will have to be very very careful about making Estonia the real physical center of the commercial activities deployed by your company.

If you don't - let's say you're Dutch, living in Holland and consulting mostly for Dutch clients, then forget it.

But let's say you're Dutch, you have a girlfriend in Estonia, you work from there a week every month, and you have clients in several EU countries, with NL only one of them... Maybe you even have a local employee in Estonia. That will work no problem.

[agilebyte]

Or you and your girlfriend are both directors and you meet at least 4 times (from what I've read) there to discuss company business. Hey, the company can pay for the trip from Netherlands too.

[markvdb]

It's definitely not as simple as that. To get an idea of some complexities, just read the double taxation avoidance treaties between the two EU countries involved to start, and have a look at the EU posted workers directive http://ec.europa.eu/social/main.jsp?catId=471 .

Those should convince you that you need good fiscal advice and a somewhat conservative attitude when it comes to fiscal grey areas.

If you want to avoid paying a lot of taxes, build a multinational and set up tax avoidance schemes like the Double Irish with a Dutch sandwich. https://en.wikipedia.org/wiki/Double_Irish_arrangement . But hurry, because some of this might actually become a bit more difficult starting from next year...

[patrickk]

> If you want to avoid paying a lot of taxes, build a multinational and set up tax avoidance schemes like the Double Irish with a Dutch sandwich.

It's probably cheaper to simply pay Irish corp. tax (12.5%) for all but the biggest companies. You have to setup 2 Irish companies, a Dutch company and a Caribbean-based company, a battalion of tax lawyers and advisers to exploit the loophole legally....etc

[ricardobeat]

Can you elaborate on why exactly that would be a problem?

[jarek-foksa]

I'm not sure if this applies to Holland, but generally countries with high taxes implement Controlled Foreign Corporation (CFC) laws which force you to pay local taxes even if company is registered offshore.

Whether a company is considered to be CFC depends on many factors such as double taxation treaties between the two countries, the amount of shares you own and the level of taxation in the offshore country.

[jkaljundi]

Yes, you can keep the corporate profits in the corporate entity until their distribution. There is a 21% tax though on distributed profits like dividends. Until you keep the money in the company or re-invest to subsidiaries, it's ot taxed. http://www.investinestonia.com/en/investment-guide/tax-syste...

The rest depends on various double-taxation treaties which affect more individuals.

[xmr]

TL;DR No.

You're likely to run into domestic Controlled Foreign Corporation rules. Basically if you or your family own a large portion of a foreign registered company and that company is taxed less than domestic tax rates, it'll be classed as actually residing in your home country for corporate tax purposes.

[agilebyte]

If you want to pay taxes only in Estonia, consult a Double Tax Treaty between Estonia and your country of physical residence. Usually you would be able to employ a person in Estonia to close deals/contracts to qualify. But read the document.

As soon as you distribute the profits, 10% tax applies from the Estonian end.

[alvarosm]

Usually, if your country has a DTA with estonia you'll have to pay whatever your country takes for dividend distributions anyway. The DTA means you can pay 10% to Estonia and the rest to your country but in total you're still paying whatever your country wants, in total. There might be other advantages, however, but repatriating dividends is not going to be one of them.

[agilebyte]

Exactly, so you keep the money in the company, reinvesting the profits (and repatriate when you are a resident of say Bahamas or BVI if you build up quite a nest egg).