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Anyone else had issues logging in with their e-resident card today? I?m just seeing some SSL errors in the console after I select the certificate, wondering if it?s something wrong on the Estonian side?

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Hi, TK! I have no problems with all those sertificates and other crap since i had started to use "mobile Id" instead of residency card (which had a serious security breach) . It is really comfortable, but you need a local sim card to use it. If you ever go to Estonia again, you could try to go to mobile operator Tele2 with your residency card and say you want mobile id. Another option is so called "smart id", you could download smart id app https://play.google.com/store/apps/details?id=com.smart_id , I know it's working well with locals, but have no personal experience.

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@soebusiness I do actually have a Estonian sim card, it?s what I use in Europe for the most part (Telia)

I also have Smart-ID

The problem is logging in to the company registration portal (to submit annual reports), since they don?t support Smart ID

I thought Mobile-ID was only for Estonian Residents, not E-residents, no?

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LHV opens a branch in London: https://www.lhv.ee/en/news/2018/4

I guess they want to play with the fintech companies based there :slightly_smiling_face:

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Hi all, I too have an Estonian company. Can someone tell me how to cashout from Estonian company without paying 20% tax. Estonia got a tax heaven blacklist so invoicing from IBC is not possible.

@vinodgn0088 anything paid as a regular employee salary is tax free in Estonia, so that only depends on your personal tax residency then

I'm intending to open an Estonian company maybe too.The cash out strategy I plan to use is invoicing from a sole entrepreneur in Ukraine (tax is 5% of turnover)

but there is a limit 185 500 USD per year per person who will make invoices

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Who are your preferred corporate service providers in Estonia for company setup/maintenance that have been operating for more than 2 years (excluding FreedomSurfer and LEAPin)?

I don't think freedomsurfer is a corporate service provider. May be simon can help you to setup a company but he don't have the license to act as authorized contact person which every nomad needs from 15 Jan 2018.

Leapin guys are good but there is few difficulties with their accounting system. They want direct access to to payment gateway and bank accounts. Which means you have limited options regarding banking and payment gateways.

Make sure you are following a transfer pricing. Ukraine is not in Estonian black list, so that's a good thing.

The problem is I live in a different country now. So there is some issue with taking money as salary. Dividends are ok, but I will have to pay 20% tax on Estonian side. A profit routing in EU needs to be considered here like Simon using his UK LLP. But brexit is here,so going for a UK LLP is not an option any more

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Hi everyone! I have a question, hopefully anyone could know the answer. Is it possible to run an Estonian company as a resident of any EU country, even those with the highest taxes and international taxation rules (CFC rules or any other)?

And it will stay fully compliant separated corporate entity and tax-resident of Estonia and only Estonia? Also is it possible to obtain a tax-residency license for Estonian company?

AFAIK that?s not entirely accurate. If you choose a bank they integrate with it will be a bit easier for you, otherwise you have to send them CSV files monthly of your transactions.

I?ve seen 1Office recommended a bit, but I?ve never worked with them.

You only need a contact person if you?re not resident of the EEA or Switzerland. Before this change you needed to have at least 50% of the board within EEA, so it?s really an easing of the rules.

On January 15th 2018 there will be new rules in force regarding contact persons for Estonian companies with management residing outside Estonia. Starting from this date, all these companies must have an authorized contact person in Estonia for receiving procedural documents.

Being an EEA or Swizz won't help you I think

What I heard is a different story. They never gave me option about CSV file.

I heard about 1Office as well. But their price is quite high may be good if you are running a high turnover MNC business

Any other suggestions for Estonia service providers besides 1Office, FreedomSurf, LeapIn?

Any recommendations for service providers that are licensed to provide contact person services in Estonia (besides FreedomSurfer, 1Office, Leapin)?

Simon has always being a strong proponent of Leapin.

I know that Leapin dont allow cash transactions, and I heard they insist on paying yourself management board salary on top of ordinary salary, and there are some other restrictions like what you can submit as expenses. Not sure if that's the case for all other providers

Leapin forces you to use them for accounting, even if accounting services are not desired or needed. Any recommendations for providers that are not LeapIn, 1Office, FreedomSurfer?

@mescos Try contacting this Estonian Law firm which offers corporate services there also and seems to be quite affordable: https://www.jurist24.ee/en/ I have heard great things about them.

Question: if an Estonian OU pays a salary to a non-resident individual who has residency in a blacklisted country (i.e. BVI, Cayman, Panama, etc), are taxes owed in Estonia? http://baltic-lawfirm.eu/lv/service-news/estonian-list-of-low-tax-territories.html

If you are drawing salary better do it as 30/70 like Leapin suggest. Also, make sure that you can get a personal tax residency certificate. Then you won't be paying Estonian tax on employee salary ( board member salary still taxable in Estonia).

Thanks @vinodgn0088.

Does an Estonian OU have to pay tax on payments made to individual contractors who have no ties to Estonia, if those contractors happen to live in a blacklisted country (BVI, Cayman, Panama) and receive payments in that country?

I think that will require tax withholding. Taking out salary can be justified, other thing will be treated as reduction of tax base. I read somewhere that if you have some solid reasons, Estonian tax department will make some exceptions, but this is not automatic. An application needs to be lodged and costs around 700 EUR. Its better you talk to a qualified Estonian tax adviser about this.

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Which payment processors do you recommend for Estonian companies (besides EveryPay)?

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Sorry, TK, did not see your message. I will clear this today :wink: for sure.

You are, unfortunately right, TK. E-residents are not able to use mobile id (at least with Tele2 and Elisa).

Do not forget to update your e-resident cards

Before the end of this current month

:wink:

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Hey guys, zero tax question time

I have a uk ltd, and it has served me well

but paying corporation tax at the end of the year sucks 19%

could be better spent elsewhere

so my thinking of opening an estonian company, and retain most of the money there, without drawing a salary, and only using it for business expanses and travels, and possibly hiring my UK company to siphon money into the Estonian one

i could potentially use the estonian one to invest, daytrade, anyone aware of capital gains taxes there, versus UK ?

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Just received this: "Today, we welcome Payoneer to Estonia?s digital nation as they begin offering support to our rapidly growing e-resident population across the world. The company already operates in more than 200 countries using 150 currencies and 35 support languages"

What do you guys think?

Full article here: https://medium.com/e-residency-blog/welcome-to-our-digital-nation-payoneer-5fc1976f02de

bullish on estonia

still have no idea if i should open one of the estonian companies for doing stuff in uk

across borders

@aka, What is your plan? Just Incorporate a company in Estonia and live in UK? Then you need to plan much more to have substance for Estonian company.

well i could have e-residency

thats fine

i dont think i will have estonian clients

since mainly clients are from uk

@aka, Then you won't benefit from Estonian Incorporation. Because HMRC will consider that your Estonian company is passive entity with UK income. And it is managed by UK residents.

damn

some of emails i got back

Estonian company is the best onshore tax deferral and investment vehicle for compound interest, preservation of wealth and capital growth. As long as the retained earnings and capital gains stay in the company, there is no taxation. It suits fine for investing when a horizon is reinvesting the proceeds as there is no corporate tax until distribution of dividends. If the purpose is to reinvest and not distribute dividends I suggest Estonia as a solution.

in the question of, setting up an estonian company for some consulting and small invesments into funds from within estonia

what if there is no income, just wealth keeping, and company expenses?

@aka, From where you got those reply?

one of the incorporate in estonia sites

i dont remember right now, but something similar to estonia in

@aka, better email to http://emta.ee ; I asked and they told me that I could create a permanent establishment in my country of residence if I am the sole owner and director who manage business from a country where I reside 183 days +

has anyone been able to run the e-residency card on Ubuntu 18.04?

Hi guys, I've recently created a estonian company to formalize my Marketing Consulting Efforts. Trying to open a Transferwise Borderless e-bank account, this is what they replied: ------------------- Unfortunately we cannot work with the document showing a a virtual address. Due to regulations, we can?t onboard businesses with virtual addresses so we would kindly ask you *to upload a document (issued to the business) showing a different address* ? where the business actually operates from. This can be a utility bill or a bank statement from the last three months showing your business name, address and date. --------------------- So, seemingly they're willing to continue the registration process for my company. Any easy workaround you guys could recommend? Thanks!

You could easily change you company's address online with your ID and paying sth about 20 eurs. Then you just print out the so called

b-card from http://ariregister.rik.ee which states your new address, and provide TW with it. It is much better verification document, than utility bill, as it's governmental.

Another advantage is that you could do this in minutes, without waiting for utility during 3 month

You have to think also about how to get non-virtual address in Estonia. Hmm... you can start from searching for less common, than Leapin accounting companies in Estonia, which could provide you with their address. I think TW detects your address's virtual only because it had been already used for thousands times.

Finally, you can also use any estonian address you like from google maps in format: Street address, house number-apartment number, postcode, if you are not awaiting for any correspondence to be delivered. All governmental documents you can receive with your id online. But this is not an advice, this is more about what you should avoid doing ;)

use Leapin, they have agreement with TW so they accept their address. If you need 100eur promocode for leapin - use REMOTELEADS during registration

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ok

so im gonna go ahead and open a company in estonia

e-residency first?

and any ideas on how to inject some capital into the company, without burning money on taxes?

AFAIK there isn?t any tax on capital or profit until you declare dividend

yes, thats is correct, but to get money into the company

that would be a taxable event

Taxable where? You don?t pay tax on capital contributions. If you?d like you can also lend money to your Estonian company at 0% interest, which can be paid back at any time without creating any taxable events, for you or the company.

That does put a smile on my face

LHV Bank introduced new fees: https://www.lhv.ee/en/price-list-20181101#non-residents

Quite expensive, isn't it? Also, you have to have a total assets of ? 100,000 minimum

They want to politely get rid off of uncomfortable clients

Legal entity registered in Estonia with non-resident owners (1)(2) 200 ?(setup) 20 ?(monthly). Quite expensive.

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Yeah, not happy about the new LHV fees. At the moment I have accounts for my main DK company (now ?20/mo), my EE company (also ?20/mo), and a personal non-resident account (?10/mo). I used to have an account for my DK holding company as well, but moved that to TW borderless when they added a ?10 monthly fee to EU companies. So in the span of six months what I used to pay ?0/mo for has increased to ?70 per month. :-1:

My Estonian company is only being used for investments in ETFs and similar. Wondering if I should try to move it to SEB (I have a personal account there, so they might be willing to open one for the company remotely), but they investment fees seem quite high. Any other alternatives for investments? Perhaps I should try re-opening my Interactive Brokers account that I never actually ended up using. It has $/?10 monthly minimum, but that?s not that bad I guess.

@tkrunning, yes, new fees are not good for small businesses especially when LHV don't provide option to receive USD. The so called upto 100K EUR deposit protection is the only interesting thing left. However, considering the rietumu banka situation, I think this 100K EUR deposit protection thing is just in paper only.

@vinodgn0088 have you been banking with LHV as well? Are you moving your account(s) somewhere else?

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these LHV fees are halved if you sign up via leapin

@alex.bosyj, Any proof to support your claim ?

@vinodgn0088 I'm their client, and got a newsletter few days ago. New pricing seem to start from 1 Novemeber

They have a close partnership with LHV so that's why they are able to offer halved pricing.

If anyone needs a leapin coupon code for 100 eur, let me know :slightly_smiling_face:

Hi guys, I have recently created a Mollie account to serve as my primary Merchant account to my Estonian Company. In order to activate it, Mollie needs a European Bank account under my company's name. As I don't have any as of now nor I plan to open one anytime soon, I was wondering if you guys have been there and which solution you found. A virtual IBAN perhaps? Thanks

@maxsuur, please try adding a Virtual IBAN (Paysera, Leopay, Revoult etc) and let us know the result

@vinodgn0088 unfortunately my application was rejected by Mollie, so I cannot shed any light on this working. But I suspect that having a well-polished website and a real bank account increases the odds of being approved.

I have been hearing of Paddle, PaymentWall and Braintree for this matter. Anyone using any of them?

@maxsuur, Did they reject your application even before you enter the IBAN details?

I entered the details and then right the next day I get this email saying: application denied. My heart broke in 187934 pieces for like a milisecond and then moved on. I have just applied for Payoner, Leupay and Paysera. Let's see what kind of combo I came up with these tools.

I would appreciate the code please

@vinodgn0088 Payoneer and Leupay accepted the application though. I have heard if you already possess a Stripe account, you can add your Estonian Business details later on and voilà, you've got a neat system to process your online payments.

Do you already have access to stripe?

@bitesak use REMOTELEADS during the signup on their website

Yep

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seems like new LHV fees work per client, you don't pay for each account you own with them

If anyone is from Australia and had trouble extending the validity of their ID card and require a new one it took around 2 weeks from when I emailed the Estonian Police and Border Guard for the card to be ready at the Embassy in Canberra to pick up. Originally when asked how long it would take the answer was "no idea as we can't control timings, overseas embassy etc", I was thinking several months. N.B. if you are traveling or live outside Australia they hold the card for *6 months* before returning it to Estonia, so you don't have to go and get it right away.

Dear document holder, We would like to remind you that as of 1 November 2018 it is possible to digitally extend the validity of your digital identity card No XXXXXXXX by two years. The validity extension is linked to an amendment of the Identity Documents Act (subsection 203 (1) and section 407) and can be done online. To extend the validity of your document, please download the latest DigiDoc4 software from https://installer.id.ee/. To launch the process, the document must be valid according to UTC time and you must know its PINs. If a launched process is not completed within 30 days or before the end of the validity period of your document (if the validity period of your document is currently less than 30 days, then you have a shorter period to complete the process) , the digital identity card will be no longer usable and you will need to apply for a new document, which includes the payment of a state fee. Once a digital identity card has expired, it cannot be extended. If the validity of a digital identity card is not extended, it remains valid until the date indicated on the document. For more information on extending the validity of your document, please see https://www.id.ee/index.php?id=38741 Please note that this is an automated notification sent to the document holder?s http://eesti.ee email address consisting of the personal identification code followed by @eesti.ee. Sincerely, Police and Border Guard Board

I tried about 50,000 times on 3 different machines, Windows, Linux, had issues with the SERIAL being too low a number, fixed that then extension error, submitted logs blah blah, was a lost cause. Quite impressed with the quick turn around to get a new ID, even better I'm not far from the Embassy, it does have to be picked up in person however.

Mine worked, it took several attempts, I think I got on a VPN and tried then it worked ok.

My friend picked hers up and it was issued for 5 years on the card

I'm hoping they may issue me a new card with a brand new 5 years, instead of just adding 2 years to my old ID card validity. We'll see!

The hassle is getting to an embassy for pickup. I would extend the current card 2 years.

Spend $800 Aud going to Canberra to pick mine up.

English version of the e-Residency 2.0 White Paper > https://s3.eu-central-1.amazonaws.com/ereswhitepaper/e-Residency+2.0+white+paper+English.pdf

My understanding of board member salary in Estonia has been that it?s not strictly required, especially if you do very little board member tasks. I even confirmed this with the EE tax authorities. Yet, some service providers, like LeapIN, claimed for a long time that you had to pay at least 10-30% of your salary as ?board member salary?, meaning you?d have to pay both social and income tax to Estonia on it (totaling about 40%). It seems like they have changed their opinion now, after a discussion with the tax authorities. LeapIN sent the following email to a friend of mine a few days ago: --- Hi XXX, We?d like to inform you about some exciting changes to the rules relating to salary payments. As you?ve paid yourself a salary from your Estonian company in the past, these should apply to you. We?ve been in discussion with the Estonian Tax and Customs Board, looking to clarify their interpretation of current tax laws in Estonia, specifically in relation to our typical customers (one-person businesses run by e-residents, operating mostly outside Estonia). Based on these discussions, we?re happy to say that *you can now pay yourself a salary which is classed as 100% employee salary*, if: - you (as the receiver of the salary) operate outside Estonia on a permanent basis, and - you spend most of your time/efforts on tasks which contribute directly to your company?s core business (deliver service, build a software product, promote your service etc) while keeping the proportion of management/administrative tasks at a minimal level. - In addition, if you operate outside Estonia on a permanent basis and take a business trip, no daily allowance is available for you. This means: - As you can now pay an employee salary only, you?ll no longer need to pay a compulsory board member salary as well. - As an employee salary is reported and taxed in your actual location, no salary-related taxes will be paid in Estonia anymore if you operate outside Estonia. So, all your salary-related taxes (income tax, social contributions) are paid in one country and not split between multiple countries. - Please note - Even though salary payments are not declared in Estonia, they are not tax-free. It is still your responsibility to seek tax advice in the country where you are a tax resident to understand the local rules and regulations regarding how personal income from a foreign company is taxed. - If you operate outside Estonia, you can still take business trips and register the costs directly related to the trips (e.g. travelling, accommodation), but daily allowance payments are no longer applicable. You can use your employee salary to pay for food, drinks and other everyday necessities during the business trips. - If you already operate in Estonia on a permanent basis and are a tax resident in Estonia, there are no changes in the existing rules for you. The new rules will apply as of January 2019. To help us make sure you go into the new year correctly, please answer the following questions: - Are you still based in XXXX and are a tax resident there? - The next time you pay yourself a salary, should we consider it as a fully employee salary (with no board member salary included)? If yes, do you understand and accept it is your responsibility to report and pay the relevant taxes in your actual location? - Finally do you also understand and accept that no daily allowance will be available for you if you take a business trip from the beginning of 2019 onwards? Once we?ve heard from you we?ll make the necessary changes in Estonia, if required. Thank you in advance! Best regards, XXXX

Hey alll

Need some help, my current mailing address for Estonia wants ?1000 a year now for the post box.

Any ideas who I can move my business to?

I have an existing business account with Swedbank

So I don?t want to go with a packaged agency.

Do you receive a lot of mail? I got a quote for ?125 per year for registered address, contact person, and scanning/emailing of up to 5 pages of mail per month. Extra pages ?1 each. Sending mail via priority mail ?25.

That was from Nordic Consult

Cheapest I found so far

+1 for Nordic Consult

+1 too. I registered the whole shebang with him

I receive rare mail from bank etc.

Thanks, I?ll get in touch

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Picked up the new card the other day. They didn't reset the 5 year period from the the new issue date, so card still expires in 2 years time for me (5 years from my original cards date). FYI if you have to go to Canberra, Australia to get your card the Estonian and Finnish Embassy co-share the building. One on each side. I waited for about 30 minutes on the Estonia side wondering if anyone was home and then walked over to the Finnish side to see if they knew anything. Turns out they were all working on the Finnish side and I was able to get my card. Card also comes with a new card reader which is different to my original one > https://www.acs.com.hk/en/products/160/acr38u-n1-pocketmate-smart-card-reader-usb-type-a/

Haha I did exactly the same thing ;)

Doh!

I recently received e-resident id, and now I am going to setup Estonian private limited company (OU). My configuration is quite simple - single shareholder, micro business, few transactions every month. How complicated and time-consuming are the company formation process and further accounting? I am considering just to purchase ?legal address/contact person? service from Nordic Consult and do the rest of the work by myself. Please advice.

Super easy, Nordic consult should be able to assist still if you want to go your own way.

By the way Stripe is in beta in Estonia now - https://medium.com/e-residency-blog/it-takes-people-of-all-stripes-to-build-a-digital-nation-f03e59396ff0

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Did you ever dream of being an e-resident in Azerbaijan? Now you can. I stumbled upon this: https://dth.azexport.az/become-resident.html. It looks like a copycat of the Estonian program, but with none of its advantages: Not known brands in its banking services industry Estandar corporate taxes: http://taxsummaries.pwc.com/ID/Azerbaijan-Corporate-Taxes-on-corporate-income Withholding taxes on dividend distributions: http://taxsummaries.pwc.com/ID/Azerbaijan-Corporate-Withholding-taxes Tax treaties: http://www.taxes.gov.az/modul.php?name=beynelxalq&cat=54&lang=_eng

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Anyone have a holding company in Estonia? I'm wondering if it's a good jurisdiction for holding a US LLC

I had the same idea, but know of no one doing it

@otkeedca - did you ever find an answer about whether or not Estonian OU is good choice for holding a US LLC or shares of other companies elsewhere?

I haven't heard from anyone else doing it, but from the little bit of research I've done it seems like the idea has potential.

Stripe is now available in Estonia - https://stripe.com/en-ee/blog/stripe-expands-in-europe

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Hey guys! I'm about to open my company in Estonia. I'm already an e-resident and I'm looking for advice here. Since I need to do it remotely (I have a bank account in Italy), how would you suggest me to do it? Also, what are the best way to tax optimise in Estonia? Does someone has some good resources in what are the best practices there?

(tagging @simon as I know you have some experience there)

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anyone can help me

@alessio.pieroni89 what kind of business are you running?

hey! @tkrunning I'm opening a marketing consulting business where I'll be consulting people from all over the world from my Estonia company). I just finished opening a company with Xolo

Cool! Did you get their new banking product built in or were you too early for that? (Apparently it's only available for new customers at the moment) Opening and running with Xolo works well. I use them myself and it's really painless and also good value. Regarding tax optimization, it depends on where you're based and your lifestyle? Do you have a tax residency anywhere? Are you staying there most of the year, or are you more nomadic?

Regarding the profits you make, you can do a combination of: ? Paying yourself a regular salary ? Paying yourself a board member salary ? Paying yourself dividends next year ? Leaving money in the company (can be invested with e.g. Interactive Brokers to grow the money before taking it out of the company) You also need to be careful to avoid that the company either is deemed tax resident where you live, or get a PE (permanent establishment) there. What makes sense to do depends on your personal situation.

@tkrunning, @simon Are you familiar with reporting Annex 2 of TSD form? What payment type code should be selected for "Regular salary of non resident for work done outside Estonia. " I don't have a form A1 or similar either.

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Yes! I just opened the bank account option as well. In couple of days everything should be confirmed and done. That's interesting about Interactive Brokers. I have an account in Malaysia with IB. Will I pay capital gain tax in Estonia if I invest money of my estonian company there or will I be subject to Malaysia taxation (no taxation on capital gain)? @tkrunning

You'll have to open a new IB account in the name of the Estonian company. You don't pay any "capital gains tax" in the hands of the company, but you do pay corporate tax if you distribute gains as dividends.

and is there any way to distribute profits without paying the classic 20%? I saw some options online (like transfering the company to Cyprus) in order to avoid that, but no sure how legit is that

You can always pay yourself a salary. If you live in/move to a low/no tax country that could work.

in 2020 I'll not have a residency (not living in any country fr more than 6 months), but for 2021 residency should be in Barcelona

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Has anyone opened an Estonian company remotely via power of attorney? Experiences/Recommendations? My e-resident card has been waiting for me to pick it up for months, but because of Covid I can't travel to pick it up. :triumph:

@otkeedca I haven?t done it myself but from what I?ve heard it?s pricier and requires you to notarise documents and mail them to Estonia, meaning it takes a lot longer than with the card. It?s also trickier to handle compliance (although I imagine that it?s possible to add your card number later on, so not a major issue if you can pick it up before the first annual report is due).

Hi Simon, thank you for your insight. I do imagine it's more of a hassle, but I think it's my only option right now until travel opens up a bit.

@otkeedca I started to go through the process because I was in the same situation. I decided to wait until the world returns to normal and just get a new e-residency card sent somewhere. It was a lot of notorised documents etc and a big pain to do it, but it's definitely possible if it's your only option. It can also be easier/harder depending on what country you're currently in.

Ah I see. Okay, maybe I'll wait a bit longer. My e-residency card won't be sent back to Estonia until the end of the year. Thank you!

I did it back in 2014

Used a notary in Estonia and I filled/notarised all the paperwork with a legal office they felt comfortable wtih me using in Japan. As I understand laws have changed a lot in Estonia since then, especially regarding opening bsuiness bank accounts with SEB and swedebank

I'm in the process of liquidating my company there now, one thing to note is after you appoint a liquidator it takes upto 6-8 months for the procedures to go through for winding down before the liquidator will release your bank balances, etc.

Hi @simon @everyone else. I've read the articles regarding https://www.freedomsurfer.com/wyoming-llc/ and https://www.freedomsurfer.com/estonian-business/ and I still haven't concluded the best solution to my concern. I plan to incorporate a US Wyoming LLC or an Estonian OU for the pure purpose of using it as a holding company as 100% owner of a UK LLP and to invest in financial assets, real estate, etc. Since I currently live in Spain as EU citizen and plan to move back to my home country, Denmark within the next 5-10 years, I want to create a company structure where the assets are being protected from personal income tax, until I decide to take out dividends (the power of compound interest ftw!). Is creating a 1 person owned Estonian OU the best option for this situation? Or are there better options for this specific case?

@brian.ppcmanagement Do you live / work full-time in Spain?

@simon, yes that's the case for now

Assuming you are aware of the tax implications / risks if the income isn?t reported in Spain (as your income will likely be deemed Spanish-sourced if that is where you work), Estonia will be a better option for your holding company. It?s easier to exclude EU companies from CFC taxation, you?ll be able to do everything in EUR and it?s a pretty easy structure to run if there is no active income.

Does anyone here have experience with combining an Estonian OÜ company with Cyprus non-dom residency under the 60-days rule, and registering the OÜ company as a tax resident of Cyprus?

It seems a lot more convenient, and less costly, to use an OÜ company (non-Cyprus-based company in general) rather than setting up a company in Cyprus, even though the effective tax of 12.5% remains the same of course (assuming non-dom residency and 0% capital gains tax).

@je I?m not sure if anyone here has used an Estonian entity for this, using a UK LTD is usually the way to go as it?s fairly well documented.

@simon Ok, in this case I specifically need it to be EU-based. It would work with a Cyprus-based company as well, it just seems to be more costly to set up and maintain.

Ok, updated plan. I will go with a Cypriotic company for my regular business, combining that with non-dom residency there under the 60 day rule, and ensure that I don't become a tax resident anywhere else (due to staying >183 days there in a year, etc), but I still want to combine it with an Estonian company for a side-business buying/renting properties that I can rent out on airbnb etc. If my initial investment is a property in Tallinn, and I hire a property manager that takes care of welcoming guests / coordinating cleaners / managing airbnb listings etc, that should be enough for having substance in Estonia and ensuring that the OÜ is tax resident there, right?

I don't want to let anyone else have control over bank accounts etc though.

Ideally, the Cypriotic company would own the shares in the Estonian company, and I would invest some of the earnings of the Cypriotic company into the Estonian company.

Does anyone see a problem with this setup? Obviously if I would want to take out profit from the OÜ to the Cypriotic company, that profit would be taxed 20%, but as long as I keep reinvesting there's no extra tax.

And the OÜ would also be covering travel expenses when scouting new properties etc.

I could, of course, use a Cypriotic company for this as well, the main issue I have with Cypriotic companies is that the fees associated with accounting and auditing in Cyprus are insane. In Estonia, it's much more reasonable and I would be able to take care of the accounting myself (which I'm doing for my Swedish company at the moment, using an external accounting firm for putting together the final accounts & have an external auditor, but that's pretty much a fixed fee per year, rather than how it works in Cyprus where I would have to pay a fee to both the accountant and auditor for each transaction, which can add up if there are many small posts (which doesn't make sense to put up as company expenses in Cyprus, even when they _are_ company expenses, due to this).

I think maintaining 2 companies is more expensive and much more paperwork and stress. You should be able to find a cheap freelancer accountant though, the salaries in cyprus are extremely small , so it shouldn't be too difficult to bring these costs down. Also one negative side effect of the estonian company is, that even its a huge advantage to reinvest your profits without caring much of taxes, at one point you have to pay them and these are 25%, not 20%! 12.5% more then for the cyprus one. However, rental income also should be taxed at the place where the apartment is located, its not that easy if you think you can rent something via airbnb in Germany with your estonian company and pay the taxes in estonia. Thats not how things work! (Probably a good but a very difficult business in my eyes) I would triple check the current strategy.

The taxes when distributing profits as dividends is 20%. Where did you get the "25%" figure from? Edit: Ok, I think I know what you meant, 25% of the sum that's distributed, but 20% of the gross. Yeah, I'm aware of that. Is there ever any situation where tax is not calculated on gross profits? :stuck_out_tongue:

I'll already be having someone take care of the paperwork in Cyprus.

The accounting+auditing costs are hard to bring down though (and the fact that they charge _per transaction,_ which is really annoying).

Anyway, my goal is not even to distribute profits from the Estonian company, I'm fine with just reinvesting them indefinitely, since I'll also be able to take related expenses on that company.

Regarding the rental income, my end goal is rather for self-sustainability, where the airbnb part of it helps to pay for the costs associated with the apartment, while giving me a place to stay "for free" when I'm there.

+ being able to cover travel expenses in general, since I can scout for new apartments on any travel I do. :stuck_out_tongue:

(except for travel directly associated with the Cypriotic business, of course, which I would charge on that)

Regarding maintaining two companies, maintaining the one in Estonia seems to be much less of a hassle & less costly than maintaining the one in Cyprus, but I'll be maintaining the one in Cyprus regardless (and have people that takes care of most of the paperwork / administrative tasks, at a cost). As for the business in Estonia, it seems like I should be able to maintain it myself quite easily.

I am doing really hard to imagine that the accounting fees could be higher than the 12.5% taxes you could save. Thats the question only you can answer, however it could really make sense if you want to compound profits overtime if you really don't distribute anything. Why you don't try to bring your taxes down to nearly zero with other options?

The accounting fees add up when you have a lot of small transactions. 10-20 EUR here and there, and then you pay X EUR per transaction for the accounting & auditing so it's not worth it.

In Sweden, I do most of my accounting myself, and have automated most of the process so it's easy and not time-consuming. I use an accountant to prepare the final books & an auditor that verifies it, which is pretty much a fixed fee per year since I have already done the "heavy lifting", there's no silly fixed fee per transaction that there is in Cyprus.

I have about 300k EUR per year in revenue, out of which maybe 80k EUR is costs associated with an employee besides myself. Out of the 200-220k EUR per year that is profit, I pay about 50k EUR in taxes on salary and dividends. I.e. even though Sweden is a very high tax country, I ultimately pay about 25% taxes here, when taking this into account, since a lot of expenses are business related in one way or another. Any computer / technology / software / etc related expense = business-related, and I can take pretty much any travel-expense (including a bunch of small taxi/uber rides etc, which would not be worth taking as expenses with a Cyprus company) = business-related, since I usually travel for conferences / business meetings etc (but also, obviously, try to maximize what I get ouf of the trip by doing a lot of non-business:y things as well).

I'm making a big life-changing decision by moving to Cyprus from Sweden, one of the reasons being that I'll be able to minimize my taxes while also being able to travel a lot (before the pandemic I was outside Sweden more than I was in Sweden, but still had to pay like 60% effective tax in total on any salary I take out & ~37% effective tax on dividends, i.e. corporate tax + the personal capital gains tax). The only way to minimize the tax was to have a lot of business-related expenses, which is easy for me since I love what I do and my business is pretty much the same as my hobby).

12,5% tax on profits in Cyprus is great, but it's ultimately "only" half of what I'm effectively paying now, and I'll also be losing a lot on not being able to take as much expenses on my company (even though they _are_ business related) just because the accounting+auditing fees are so high.

So to me it seems like a perfect setup if I can have one company in Estonia, that I can use to pay for travel (flights/hotels/airbnbs/taxis etc) related expenses, and scout around a bit for properties when I'm on the road, and without a large overhead for accounting.

And only take larger tech-related expenses & conferences etc on the Cypriotic company, so the amount of transactions is kept low and thus the accounting+auditing fees as well.

Anyway, I appreciate your input, but I'm not really here to "defend" why I think the setup would be a great one for me personally. I'm more interested in practical feedback regarding how the substance requirements work and are enforced, as a non-dom Cypriotic resident with a business in Estonia (and one in Cyprus, which would own the Estonian company, and where profits from the Cypriotic company would be invested in the Estonian one).

Thats fine, its your choice, I just wanted you to triple check about it, so that you don't overlook other possibilities.

Understood, and in a lot of cases the concerns you raised would be completely valid, of course. :slightly_smiling_face: Thanks anyway.

Regarding accounting+auditing fees in Cyprus btw, to me this looks insane: https://www.sfm.com/cyprusrate-foraccountingtaxfiling (as an example). For a small number of transactions, it's the worst, of course. 1000 EUR in total for 1-10 transactions!

With the auditing fee 3 times higher than the accounting fee. _Per transaction!_

I have only 10-20 invoices per year, but I have a lot of expenses, both large and small. So it's around 700 transactions in total per year.

Doing the accounting myself, I only have to pay my accountant for filing stuff to the tax agency etc & preparing the final books, which turns out to be about 1000 EUR in total per year or so + about 1000 EUR to my auditor each year which is about the same fee regardless of the amount of transactions. Before I started taking care of the day-to-day accounting-part myself, I paid about 7000 EUR to my accountant & then still around 1000 EUR to my auditor.

If I could have just continued doing it similar to that in Cyprus, I would, I was quite surprised to see that the audit part is so expensive and per transaction in Cyprus.

In Estonia you don't even need to have an auditor unless you have something like 4M EUR in revenue or 50+ employees etc, from what I've understood (in Sweden the limit is ~300k EUR, you can have it regardless just in case though).

So even if I would get a cheap accountant in Cyprus, or do it myself if that's possible, I would still have to pay a lot to the auditor if I have many transactions.

I was initially thinking about moving to Estonia instead, even if 20% (of the gross profit) is higher than 12,5% in Cyprus it would probably even out considering the other costs involved in Cyprus. The main reason I went for Cyprus instead is that I will be able to travel a large part of the year without losing my tax-residency there.

Which is why I'm considering this "combination" setup.

i dont think anybody can check that, or would even be interested in how long you really stay there. for me that was a reason to avoid islands, so i can travel by car which is harder to track. and i dont want to confuse you haha but georgia or bulgaria might be interesting as well, depending on your business model you might pay zero taxes there and its a lot cheaper and easier to maintain

Guys, does anybody knows how much realistically a OU owner can pay himself as salary?

You can pay yourself any salary you want meantime it?s corresponding with your company income. However According to Estonian regulations you are the responsible to declare about salary in your residency country.

@simon i know you used estonian companies to be the shareholders of LLPs and LLCs, may I ask, for the case of a US LLC, how realistic is one never repatriate the profits back to the Estonian company, but rather earn and spend directly at the US LLC level. If its a non-USTB non-ECI non-resident US LLC, potentially the UBO of this LLC (the single shareholder of the estonian company) could just treat it as his/her personal slush funds, right? And by doing so profits will never be taxable in the Estonian company at all. Is this feasible?

@joe It?s not a compliant strategy, obviously, but I?d say the risk of getting ?caught? is close to nil (assuming you aren?t an Estonian resident).

@simon thanks

Did anybody read that article? https://tax-free.today/blog/estonian-company-2021/

I mean i don't know who wrote that but imho is inaccurate at best. What's the point of obtaining a tax certificate for an Estonian company if you manage it from another country making the estonian company resident in that other country?

under most double taxation treaties Estonia has made Estonian company is still resident in Estonia even if managed from abroad, but there are other issues like anti-abuse clauses or permanent establishment

@michal.opoka, can you please share few DTAA files which supports this? Usual clause between Estonia and other countries are "*3.* Where by reason of the provisions of paragraph 1, a person other than an individual is a resident of both Contracting States, then the competent authorities of the Contracting States shall endeavour to resolve the case by mutual agreement due regard being had to its place of effective management or to any other relevant criterion. In the absence of such agreement, such person shall not be considered to be a resident of either Contracting State for the purposes of enjoying benefits under the Agreement.". This means the company will be tax resident in country where effective place of management happens

@vinodgn0088 Thailand https://www.riigiteataja.ee/aktilisa/2201/2201/3006/538XII_EV_ja_Tai_kuningriigi_vahelise_ratifts_s_leping_IK_L2.pdf "Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident only of the Contracting State in which its place of incorporation is situated" Poland https://www.rahandusministeerium.ee/sites/default/files/document_files/maksud/poola_topeltmaks_eng.pdf "Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident of the Contracting State under the laws of which it derives its status as such." Bulgaria https://www.riigiteataja.ee/akt/13096427 "3. Where by reason of the provisions of paragraph 1 a person is a resident of both Contracting States, then it shall be deemed to be a resident only of the State under the law of which it is established; this does not apply to a natural person."

but yes, looks like it's not "most" as I had thought so my mistake

@michal.opoka, Good find regarding Thailand. But possibility of a PE is still there