Best Country for Trading (Tax efficiency)

[luisHK]

DW, thanks for your previous reply regarding prenups.

I don't think it was mentioned here before, so:

1) In Singapore if you do business thru corporation, they give you discounts: first 3 years it is about 5% tax rate on profits less than SG$ 300k (0% on SG$ 0-100k + 8.5% (17%/2) on SG$ 100-300k). After first 3 years they still give you 50% discount on first SGD300k. Although need to check if they still have these discounts in place.

2) Labuan (Malaysia) - you can pay ~$5k a year and not report to tax authorities at all, or if you make not much money (few tens of thousands usd, I think), you can report and pay 3% tax. That' corporate.

Do you have any input on how to get a residence permit nowadays in Singapore ? It used to be rather easy as long as one wanted to invest 2 million SGD in the country but this scheme was discontinued and last i checked, about 2 years ago, it didn t seem possible for independant traders to move there anymore. A similar scheme was also discontinued in HK btw, but getting a visa in HK used to be rather easy as the director of a local company one would set up, not sure what is the situation right now. but it can t be easier as local start ups find it difficult even to open a bank account.

As of Malaysia, do they ask any question ? my understanding is one only needs to get a residence permit there, quite easy under.the Malaysia my second program, or a similar name, than no tax due on all overseas income. I suspect the people getting this residence permit don t even file tax retturn as long as they don t have local business activities.

 

[swinging tick]

sure, lie

What's that suppose to mean?

 

[Mtrader]

What's that suppose to mean?

Typo, removed it.

 

[swinging tick]

@luisHK

I don't have much info on that, from what I know, it is like you said - it is more difficult and expensive to get PR in SG now. Basically one needs to open business there and hire yourself + 1 or 2 local employees, and from what I understand, turnover/tax from this business has to be sufficient for them to grant you PR.

Maybe someone here from SG or Malaysia can share more info on that?

 

[swinging tick]

@Mtrader
That's true. Places like Russia, Bulgaria, Montenegro are fun to visit, but I'm not sure they are safe enough if you make decent money.
Althou some EE countries like Poland, Czech Rep + maybe Estonia and Hungary seem to be safer in this regard

 

[dw31583]

Our expert DW31583 is missing many essential issues. Not only the tax rate is important.

Some things you should take care of and that were never mentioned here:

• If you have a company, yearly balance sheets have to be published. Information of these balance sheet are freely available to the public (except for a few companies). So everybody will know how much money you make, also the criminals. For at least 75% of the countries mentioned by our expert that is an issue. Paying low taxes and being robbed later can be worse than paying a bit more taxes and stay away from these countries.
• Only open accounts in a Western bank. Check shareholdership of the bank because having the name of a Western bank is not equal as being a Western bank. BNP Paribas Fortis for example is in Ukraine linked with other partners. So not a 100% daughter of the French holding company. ING on the other hand has in most of these countries 100% daughters.
• Move your money out of these low tax countries and put it in a safe country like Luxemburg, Switzerland or similar.
• Trade in your own name. Then you don’t have to publish anything. The number of people that know about you is much more limited. So, less risk. Easier to trace too who is trying to steal from you. Only a few tax people will see your income.

There are more things to take care of (especially about a special status that is available in some countries and give you a much higher security against criminals), but I will leave this to our expert DW31583 who clearly told that I know nothing about low tax countries and how to handle all the problems.
I had PWC as (one of my) consultant. They never spoke to me about all these issues. You can make your own conclusion. PWC is good in what they know. But the problem is that they don’t know everything you need to know.

Mention corporate tax alone, like DW31583 does, is misleading. Because then the money should stay in the company. If you want to spent it and take it out of the company you will pay again. So total taxe rate in Estonia, Hungary and Bulgaria are for 100% sure higher to a lot higher.

Well, this is your first normal, informative and fair answer minus the personal comments. I totally agree with you. I would add only one thing:

Indeed, your effective total combined tax rate (corporate + personal) is higher in most countries since you pay both, corporate tax and personal income tax on the dividends you get from your company but this is still effective if you spend less than you make. If you make more money than you spend, then it's worth to pay the usually lower corporate tax and retain your profits for further trading/investments.

But the tax rates that I've listed on the previous page are roughly valid especially in the case of Estonia, Hungary and Bulgaria.

Second point, you're 100% correct, the publicly available registries are a pain in the *ss but there is nothing we could do about them so it's something that all of us have to take into consideration when we decide about our trading structure. Companies usually comes with lower tax rates plus limited liability while if you're trading on your own name then you can remain anonymous and consequently your net worth as well.

Great post @Mtrader !

 

[dw31583]

Do you have any input on how to get a residence permit nowadays in Singapore ? It used to be rather easy as long as one wanted to invest 2 million SGD in the country but this scheme was discontinued and last i checked, about 2 years ago, it didn t seem possible for independant traders to move there anymore. A similar scheme was also discontinued in HK btw, but getting a visa in HK used to be rather easy as the director of a local company one would set up, not sure what is the situation right now. but it can t be easier as local start ups find it difficult even to open a bank account.

As of Malaysia, do they ask any question ? my understanding is one only needs to get a residence permit there, quite easy under.the Malaysia my second program, or a similar name, than no tax due on all overseas income. I suspect the people getting this residence permit don t even file tax retturn as long as they don t have local business activities.

You're correct, it's next to impossible to get a residence in Singapore unless:

• you have a successful track record as an entrepreneur and you can invest SGD $2.5 million into designated investments
• you're going to move there to operate a non-financial business, employ several people and do physical business in Singapore (Entrepass)

Malaysia is really easy and relatively fast. It takes about ~6 months to get your permit. Hong Kong is really hard unless you're going to employ some locals. The investor visa was the easiest entry to HK but it's been cancelled.

 

[dw31583]

DW, thanks for your previous reply regarding prenups.

I don't think it was mentioned here before, so:

1) In Singapore if you do business thru corporation, they give you discounts: first 3 years it is about 5% tax rate on profits less than SG$ 300k (0% on SG$ 0-100k + 8.5% (17%/2) on SG$ 100-300k). After first 3 years they still give you 50% discount on first SGD300k. Although need to check if they still have these discounts in place.

2) Labuan (Malaysia) - you can pay ~$5k a year and not report to tax authorities at all, or if you make not much money (few tens of thousands usd, I think), you can report and pay 3% tax. That' corporate.

1) It's only available for non-financial businesses who can employ several people and do real, domestic business.

2) Well, let me not comment on this one. Try to live there while making a 6 or higher digit amount each year. It's tax evasion, it's up to you to give it a try. Never forget that, companies which are owned by non residents are being taxed differently than those which are both owned by residents and generates domestic income (you're trading there).

 

[Mtrader]

Companies usually comes with lower tax rates plus limited liability while if you're trading on your own name then you can remain anonymous and consequently your net worth as well.

In Bulgaria private name is better then a company. Private name is flat 10% + social security maximum around 5000 lev a year. If you trade thru a company you take a salary which will be same rate as private. But you are not anonymous anymore. And you need a bookkeeper. The money that stays in the company wil be taxed at 5% as dividend if distributed, or if taken as salary again at 10% plus soc security. So in a company structure you should always take all the profits as salary to avoid double taxation. So a company is useless. Waste of money and waste of privacy.
Estonia is not zero rate. When profits are distributed, rate is 20% I think. As long as the money stays in the compnay you don't pay anything. But you make money to spent it, so...

 

[dw31583]

In Bulgaria private name is better then a company. Private name is flat 10% + social security maximum around 5000 lev a year. If you trade thru a company you take a salary which will be same rate as private. But you are not anonymous anymore. And you need a bookkeeper. The money that stays in the company wil be taxed at 5% as dividend if distributed, or if taken as salary again at 10% plus soc security. So in a company structure you should always take all the profits as salary to avoid double taxation. So a company is useless. Waste of money and waste of privacy.
Estonia is not zero rate. When profits are distributed, rate is 20% I think. As long as the money stays in the compnay you don't pay anything. But you make money to spent it, so...

This is what I said except you may be a bit wrong about Estonia although I don't get what's your issue with it. The company is not liable to corporate tax at the time of earning it but it's liable to a 20% corporate tax at the time of distribution however a resident owner shall not pay any further tax on such distribution.

In other words if you make $10,000 with your Estonian company as an Estonian resident then it's tax-free. When you distribute $5,000 then your company deducts $1,000 and you receive $4,000 which is not liable to any further tax and the remaining $5,000 can be used for tax-free reinvestments in your entity.

When it comes to Bulgaria, it's indeed better to trade on your own name for privacy reasons but some may prefer limited liability. Both solution is great.