Company will end up as tax resident from the country where it is managed & controlled .
If there is an DTA the tie breaker rule applies and the country from where it is managed & controlled gets the right to tax .
Also you get to enjoy bureaucracy+ dual accounting in both countries .
If there is no DTA it can lead to double taxation .
And if you don't have a fixed place of management/business+ tax residency (basically nomading) a US LLC disregarded for tax purposes is a much better fit .
I never needed to visit since I could use Wise for banking.
The only thing is that surprised me was the tax rate, when I created my Company the advertised rate was 20/80 but in reality it was ~25/75 and it increased since.
Yes, it was stable for a long time but has been changing mainly due to factors associated with the war in Ukraine (spikes in inflation, especially related to energy prices as well as a need for increased defense spending)
> However, some countries have different rules for deciding if a company is tax resident. It is common that, in addition to the place of incorporation, the place of effective management can trigger tax residence. If you run your company from a country with regulations like this, then the company may end up having dual tax residence. This happens when two states believe that the company is tax resident in their jurisdiction and will want to tax the company’s profits.
This 'It is common that [...] the place of effective management can trigger tax residence' is indeed common.
It is still amazing to me that so many people don't get this fact.
It doesn't matter where your company is incorporated, you'll be liable to pay the taxes where you live. And if you think the revenue service of your country is going to forget, you are guaranteed to have a very nasty surprise waiting for you when you least expect it.
The only way to more or less skirt this rule is to keep moving so you're technically never fiscally resident in any country (not even sure if it works), or move your personal fiscal residence to a tax haven like Monaco.
No, I was under the impression that foundations must be established with a non profit goal in mind. I thought you cannot just give beneficiaries cash. I see I was mistaken and that private foundations allow you to treat the structure the same as a trust fund.
Hence the executives/boardmembers-all-fly-to-some-island (Jersey is the one in my mind), have board meeting in the airport, sign the papers, and all fly home?
Company stays "in" Jersey, none of the humans need to live there?
That is unfortunately not how it works. Most commonly the place from which decisions are made on a day to day basis is used. This results in the country in which 50% or more of your directors reside for 183 days a year.
So if 50% or more of your directors spend 183 days per year in the UK then your Estonian based business becomes UK tax resident in the eyes of the UK.
Do not underestimate the complexity of these rules.
If the company is managed 'day by day' by a local director (for example by a company like Intertrust or Trustmoore) then the non-local board and/or shareholders can indeed flyin to have 'a meeting with extensive discussions where all decisions where made and some papers were signed'. I had a company in Singapore for some years doing this.
Its been a few years but I ran BD for the program in '19-'20 -- I would say that people underestimate the difficulty in shutting down the company if that needs to happen, sometimes getting access to a proper bank account can be annoying, and don't always understand the tax implications (ex. if I was resident in Germany, all my customers were in Germany, but I tried to run everything through this Estonian biz and pay taxes only there, that could very well cause you lots of issues/complications).
Also, shameless plug for people broadly interested in the country of Estonia and how it became a leader in e-gov/tech only a generation after independence from the Soviet Union, I wrote a book about it after being curious myself! https://www.rebootinganation.com/
I saw this a lot when I ran BD for the program (I'm also an American) and its good you know there will be US tax complications but I would say that unless you expect to 1) have many EU customers and 2) working remotely globally and redomicile elsewhere so you are not considered US tax resident that it probably doesn't make more sense than using something like Stripe Atlas to just set up an LLC or C-Corp
UK, USA and Singapore are the popular choices for this. UK is simple and cheaper, Singapore is a bit more expensive. I don’t see a reason to go USA route unless you are seeking investment from there.
I’m using UK myself. It takes a few forms and half a day to get a working Wise/Stripe account.
Finally somebody who knows their stuff. I never understood why people preferred Estonian incorporation given that it's almost certainly more expensive and less convenient than the other options.
Its for sure over hyped but its not useless. Its nice that you can reinvest the profits within the company and only pay taxes on distribution (if this works of course depends on where the owner is. But at least in Sweden it works).
I think the main reason is to have a business incorporated within the EU if that's relevant for the person. Delaware is great, and UK filled this role until Brexit but after that if you needed an EU incorporated company it was a massive pain basically everywhere except Estonia which was relatively cheap and everyone in the industry speaks English
It has been a great experience. Setting up the company was online, and it took 3 days, including the time spent to change the name because the initial name was rejected. You can use Wise for banking, but LHV is also visible but there is an account limit if you don’t live there. Accounting is easy, but you will need an accountant for tax reporting if you have a VAT ID. My accountant charges me 60 euros per month and does an amazing job.
Any tips for a 2 person European company. One founder based in Amsterdam, the other in London. We are close to setting things up, some input from other founders would be great
I can't speak about all EU countries, but the one country I looked into (Spain), I couldn't find a way to do everything remotely. It required being physically present for some things, so that's why I am asking about whether Estonia actually delivers IRL on the e part of e-residence.
I think banking is still the biggest issue if you’re not an Estonian resident.
Honestly, I’d avoid the EU in general. There are only about four or five good places to set up a company and stay connected to the financial system: the US, especially Wyoming or Delaware, Dubai, Singapore, and Hong Kong.
It was great until they turned racists and stopped me from using the service because of my nationality (Russia), even though neither me or the business had anything to do with Russia.
Then you really can't say you has nothing to do with Russia. Citizenship is a very big thing in banking, and legal services. And it's certainly not about race. You could be ethnically Japanese for that matter, it's Russian passport which is the dealbreaker here.
For better or worse, our world has the concept of "citizenship". It is not ideal, but it is what we have settled on. You reap the benefits of your passport (citizenship), but you also bear responsibilities. It is possible to switch nationalities, and I would heartily encourage anyone whose conscience has trouble accepting what their country does to do so.
I sympathize with all Russian citizens living abroad. While citizenship is something you can get out of, it is a long process and circumstances may not easily allow it. I don't think it's fair to discriminate against Russian citizens without hearing their story, even the ones still living in Russia, for actions taken by their rogue government. Do US Americans really want to be held individually accountable for everything Trump does or will do?
I understand how comments like yours and other sibling comments will generate feelings of being treated unfairly: We do not choose our birth country. We do not know the individual's actions, we do not know their political stance, and it is not racist but still discriminatory to use their nationality against them. They're already punished enough by being associated with their government. That's at least how I see it.
Then again, it is probably due to EU wide legislation, so not something Estonia can do much about even if they wanted to. I hope they find emotional support to detach their individuality from how Russians (and Ukrainians!) are treated in general in the current dynamics. It's not their fault as individual, and I'm sorry that they became victims.
Useless + overhyped .
Company will end up as tax resident from the country where it is managed & controlled .
If there is an DTA the tie breaker rule applies and the country from where it is managed & controlled gets the right to tax .
Also you get to enjoy bureaucracy+ dual accounting in both countries .
If there is no DTA it can lead to double taxation .
And if you don't have a fixed place of management/business+ tax residency (basically nomading) a US LLC disregarded for tax purposes is a much better fit .
There is no cake will drop from sky, and if there is, well it came with gravity
Username checks out.
I was surprised how amazing it is ?
Your yearly financial data is public, everyone will know your income / profit. And you will get spammed, your email will be public too. Great Only visited once to open bank account LHV but I closed it since then and can use remote banking YesSame experience for me, it's been great!
I never needed to visit since I could use Wise for banking.
The only thing is that surprised me was the tax rate, when I created my Company the advertised rate was 20/80 but in reality it was ~25/75 and it increased since.
Yes, it was stable for a long time but has been changing mainly due to factors associated with the war in Ukraine (spikes in inflation, especially related to energy prices as well as a need for increased defense spending)
Wise is not a bank.
Wise isn't a bank but you can use Wise for banking operations (i.e you get bank accounts)
Please beware:
From: https://learn.e-resident.gov.ee/hc/en-gb/articles/3600007215...
> Corporate tax residency
> However, some countries have different rules for deciding if a company is tax resident. It is common that, in addition to the place of incorporation, the place of effective management can trigger tax residence. If you run your company from a country with regulations like this, then the company may end up having dual tax residence. This happens when two states believe that the company is tax resident in their jurisdiction and will want to tax the company’s profits.
This 'It is common that [...] the place of effective management can trigger tax residence' is indeed common.
It is still amazing to me that so many people don't get this fact.
It doesn't matter where your company is incorporated, you'll be liable to pay the taxes where you live. And if you think the revenue service of your country is going to forget, you are guaranteed to have a very nasty surprise waiting for you when you least expect it.
The only way to more or less skirt this rule is to keep moving so you're technically never fiscally resident in any country (not even sure if it works), or move your personal fiscal residence to a tax haven like Monaco.
Also estonian law doesn't recognize trusts, so if you want to save your assets for your children that's a problem.
I assume we are taking about a foreign trust and not an Estonian one. In what regard? When it comes to money laundering? Profit distributions?
No, I was under the impression that foundations must be established with a non profit goal in mind. I thought you cannot just give beneficiaries cash. I see I was mistaken and that private foundations allow you to treat the structure the same as a trust fund.
You mostly use foundations for that purpose in civil law countries (which are also not part of the hague trust convention )
Hence the executives/boardmembers-all-fly-to-some-island (Jersey is the one in my mind), have board meeting in the airport, sign the papers, and all fly home?
Company stays "in" Jersey, none of the humans need to live there?
That is unfortunately not how it works. Most commonly the place from which decisions are made on a day to day basis is used. This results in the country in which 50% or more of your directors reside for 183 days a year.
So if 50% or more of your directors spend 183 days per year in the UK then your Estonian based business becomes UK tax resident in the eyes of the UK.
Do not underestimate the complexity of these rules.
If the company is managed 'day by day' by a local director (for example by a company like Intertrust or Trustmoore) then the non-local board and/or shareholders can indeed flyin to have 'a meeting with extensive discussions where all decisions where made and some papers were signed'. I had a company in Singapore for some years doing this.
That does not work necessarily work in the UK anymore.
Its been a few years but I ran BD for the program in '19-'20 -- I would say that people underestimate the difficulty in shutting down the company if that needs to happen, sometimes getting access to a proper bank account can be annoying, and don't always understand the tax implications (ex. if I was resident in Germany, all my customers were in Germany, but I tried to run everything through this Estonian biz and pay taxes only there, that could very well cause you lots of issues/complications).
Also, shameless plug for people broadly interested in the country of Estonia and how it became a leader in e-gov/tech only a generation after independence from the Soviet Union, I wrote a book about it after being curious myself! https://www.rebootinganation.com/
Where are you located? Where will you administer the company from? That impacts your tax situation quite a lot.
See https://www.e-resident.gov.ee/understanding-cross-border-tax..., look for “Permanent Establishment”
I am in the US currently, would be managing initially from the US. I understand there will be US tax complications, but I can/would deal with those.
I saw this a lot when I ran BD for the program (I'm also an American) and its good you know there will be US tax complications but I would say that unless you expect to 1) have many EU customers and 2) working remotely globally and redomicile elsewhere so you are not considered US tax resident that it probably doesn't make more sense than using something like Stripe Atlas to just set up an LLC or C-Corp
The point is serving EU customers as a EU company yes.
The worst thing you could do as an us citizen (I assume ) and resident is to incorporate outside of the US.
I can think of worse things myself.
Unless you have some specific reason for being in the EU, I suggest you also look into Singapore.
This is a terrible idea. please hire a professional with direct experience on these matters and not blog posts from influencers
Any suggestions or alternative ways to setup a EU company remotely in your extensive experience and wisdom?
UK, USA and Singapore are the popular choices for this. UK is simple and cheaper, Singapore is a bit more expensive. I don’t see a reason to go USA route unless you are seeking investment from there.
I’m using UK myself. It takes a few forms and half a day to get a working Wise/Stripe account.
None of those countries are in the EU, which is important for my use case.
Finally somebody who knows their stuff. I never understood why people preferred Estonian incorporation given that it's almost certainly more expensive and less convenient than the other options.
Its for sure over hyped but its not useless. Its nice that you can reinvest the profits within the company and only pay taxes on distribution (if this works of course depends on where the owner is. But at least in Sweden it works).
I think the main reason is to have a business incorporated within the EU if that's relevant for the person. Delaware is great, and UK filled this role until Brexit but after that if you needed an EU incorporated company it was a massive pain basically everywhere except Estonia which was relatively cheap and everyone in the industry speaks English
This is indeed the main reason for the question, and for the reasons you mention.
Your username is cool
Ha, thank you!
It has been a great experience. Setting up the company was online, and it took 3 days, including the time spent to change the name because the initial name was rejected. You can use Wise for banking, but LHV is also visible but there is an account limit if you don’t live there. Accounting is easy, but you will need an accountant for tax reporting if you have a VAT ID. My accountant charges me 60 euros per month and does an amazing job.
Any tips for a 2 person European company. One founder based in Amsterdam, the other in London. We are close to setting things up, some input from other founders would be great
Probably a UK limited liability partnership would be an option .
But you have to investigate how the Dutch will treat it .
You could apply for a advance tax ruling with the Dutch tax authorities before doing anything
Why LLP over Ltd?
Because it's transparent so you pay income tax ( which is lower than corp+dividend taxes especially at lower incomes ) .
Later on when you scale, you can convert the LLP into an LTD.
Also you might avoid exit taxes as it is an partnership , if you move between countries.
Also there is basically no information in the post besides 2 founders in different countries.
Incorporate in one of the two countries. If you're serving EU, with GDPR it might be easier to do Netherlands instead of the UK.
https://news.ycombinator.com/item?id=47500239
Question: are OÜs particularly beneficial even for non-Estonians (EU), and in what way?
I can't speak about all EU countries, but the one country I looked into (Spain), I couldn't find a way to do everything remotely. It required being physically present for some things, so that's why I am asking about whether Estonia actually delivers IRL on the e part of e-residence.
For SaaS business, HK is definitely the best, 0 taxes, very low maintenance requirement, Stripe accepted, solid banking system.
I think banking is still the biggest issue if you’re not an Estonian resident.
Honestly, I’d avoid the EU in general. There are only about four or five good places to set up a company and stay connected to the financial system: the US, especially Wyoming or Delaware, Dubai, Singapore, and Hong Kong.
London post-Brexit is problematic outside of the legacy stuff in City of London, but why not Dublin?
Why not London/UK?
I switched to 1Password after the last one.
The LastPass thread is over there -----> https://news.ycombinator.com/item?id=48671468
(you'd probably be downvoted anyway because of the insubstantial anecdote)
It was great until they turned racists and stopped me from using the service because of my nationality (Russia), even though neither me or the business had anything to do with Russia.
Oh I wonder why they don’t wanna do business with Russians. Could it be because Russians are threatening to invade, bomb and occupy Estonia?
It’s your choice to decide to keep your Russian citizenship. Then you have to pay the price of being a Russian citizen.
russian is not a race.
If you are Russian, you have something to do with Russia
are you a russian speaking estonian? or russian citizen?
Russian citizen living abroad
Then you really can't say you has nothing to do with Russia. Citizenship is a very big thing in banking, and legal services. And it's certainly not about race. You could be ethnically Japanese for that matter, it's Russian passport which is the dealbreaker here.
For better or worse, our world has the concept of "citizenship". It is not ideal, but it is what we have settled on. You reap the benefits of your passport (citizenship), but you also bear responsibilities. It is possible to switch nationalities, and I would heartily encourage anyone whose conscience has trouble accepting what their country does to do so.
I sympathize with all Russian citizens living abroad. While citizenship is something you can get out of, it is a long process and circumstances may not easily allow it. I don't think it's fair to discriminate against Russian citizens without hearing their story, even the ones still living in Russia, for actions taken by their rogue government. Do US Americans really want to be held individually accountable for everything Trump does or will do?
I understand how comments like yours and other sibling comments will generate feelings of being treated unfairly: We do not choose our birth country. We do not know the individual's actions, we do not know their political stance, and it is not racist but still discriminatory to use their nationality against them. They're already punished enough by being associated with their government. That's at least how I see it.
Then again, it is probably due to EU wide legislation, so not something Estonia can do much about even if they wanted to. I hope they find emotional support to detach their individuality from how Russians (and Ukrainians!) are treated in general in the current dynamics. It's not their fault as individual, and I'm sorry that they became victims.
Michael Scott: I am a victim of a hate crime. Stanley knows what I'm talking about.
Stanley: That's not what a hate crime is.
Michael Scott: Well, I hated it, a lot, okay.