Trading via own remote company in a no-tax-country

[marsman]

I and a friend, both Eurolanders, are seeking for ways on saving (ie. legally avoiding) capital gains and income taxes.
For this we want to set up a small firm (a Ltd) in a foreign country outside the EU, with no corporate and also no income taxes,
for example in Kuwait or the UAE or in similar countries with no or minimal taxes.
The earnings of the firm would come from online trading (equities & options) in international markets, mostly US markets.
The firm would be ours, albeit in the foreign country, and both would be employees of the firm
and would get paid a monthly salary in the foreign country.
Then, we think we would have no income tax obligation in our home country.
We would like to do that from home in Euroland, ie. as remote-workers of the firm.
Can this work out, or what else is necessary?
Any further tips welcome, especially if someone has already gone this route.
Thx

 

[Al_Bundy]

As long as you're a resident of an EU country, how are you not required to pay tax on any income, whether it's coming from within that country or abroad ? You'd have to be domiciled in a low tax country in order for such arrangement to work, see Richard Branson, he didn't buy and he isn't living on that island just for the fun of it.

 

[marsman]

As long as you're a resident of an EU country, how are you not required to pay tax on any income, whether it's coming from within that country or abroad ? You'd have to be domiciled in a low tax country in order for such arrangement to work

Suppose the company is in a low-tax country, and pays it's taxes, also the employees of that company get taxed there. Then, I think the home country can't demand any taxes, as everything has already been taxed in the foreign country.

This is IMO similar to foreign workers earning their money abroad, and when they return home they won't be taxed a second time.

In our case not only technically but also according to the employment contract we are employed by the company abroad and get our payment to a local bank account there (of course which the owner can access online from anywhere... ).

 

[Xela]

I think the home country can't demand any taxes, as everything has already been taxed in the foreign country.

I don't think that necessarily follows; I think it's far more complicated than that.

The most important thing for you, in my opinion, is to take professional advice from someone qualified and licensed to give it, in your own country.

This is IMO similar to foreign workers earning their money abroad, and when they return home they won't be taxed a second time.

IMO it's very different indeed, the key difference relating to the country in which the work that produced the income was done. (That's the view of the tax authorities where I live, too. It might be different in your country, but I'll be surprised if it is. A local accountant will easily tell you, anyway.)

 

[marsman]

All tax havens work that way. For example the US tax haven Delaware has more incorporations than citizens!
And these incorporations are usually subsidiaries of the companies from all around the world, ie. doing some "creative bookkeeping"...
Our case is IMO no different than that. If it's legal for them, then why should it not be legal for us as well?

Ok, we have to differentiate between corporate taxes and income taxes. I think the latter one is the problem case to solve...

 

[marsman]

I don't think that necessarily follows; I think it's far more complicated than that.

The most important thing for you, in my opinion, is to take professional advice from someone qualified and licensed to give it, in your own country.

IMO it's very different indeed, the key difference relating to the country in which the work that produced the income was done. (That's the view of the tax authorities where I live, too. It might be different in your country, but I'll be surprised if it is. A local accountant will easily tell you, anyway.)

Now imagine this: we set up a trading robot (software) that does the job fully automatically there. Our contract says that we will get paid (and income taxed) in that other country based on the profit our robot makes. So, technically as well legally we don't produce any work in or from the home country, as all work gets done in the foreign country...

 

[Xela]

all work gets done in the foreign country...

I hear you, but that's an "interpretation", not a fact, I think? Tax authorities have a lot of state machinery on their side when it comes to contesting those "interpretations". They tend to issue tax demands first, and ask questions later. Just my opinion.

This is why a qualified, experienced, local accountant is so important.

 

[marsman]

@Xela, yes a local accountant of course will also be contacted; just collecting information and experiences for such a meeting...

 

[conduit]

Now you are onto something and yes you are correct. As long as the button is pushed or decision made to buy or sell in a specific jurisdiction that specific jurisdiction will tax capital gains or assess corporate taxes (unless there are no capital gains taxes. That is precisely why initially many Japanese trading houses had algorithms trading in HK and Singapore and why they later hired a few employees outside Japan to push the buttons before they beefed up their staff abroad. However, you will have a harder time paying yourself income while you live in Europe without being subject to the income tax code in your country of residence. So, the smartest way to go about it would be to not pay yourself income and rather accumulate equity in the company in which you hold ownership and upon liquidation you can then move your proceeds back to Europe without being subject to taxation. But the devil is in the details and I second other posters in that you need to get solid tax advice from a professional.

Now imagine this: we set up a trading robot (software) that does the job fully automatically there. Our contract says that we will get paid (and income taxed) in that other country based on the profit our robot makes. So, technically as well legally we don't produce any work in or from the home country, as all work gets done in the foreign country...

 

[sakisf]

You will have to find out how to avoid being considered as resident taxpayer in your source country first. Usually, but not always, you will have to live outside your country for 50% of the time, i.e. 183 days, in order to gain non-resident tax status (you will still be liable for income received in your country such as rent, property taxes etc). In some instances, your might have to show a contract with the foreign entity for at least a year and prove that you stayed in the destination country for more than the country's tax residency time limit (this applies to UK citizens, but could also be applicable to other EU states' citizens).

Best scheme is either what conduit said above, have the equity accumulated in the company and then find ways to bring the money back avoiding the local tax authorities, or the below:

Cyprus International Trust (with about 10k Euro capital) (fixed trust, 50% distribution of assets)

Beneficiaries > 1. Cyprus or BVI company (you as director & employee) 2. Cyprus or BVI company (friend as director & employee).

Trading profits go to trust. No dividends are issued to companies, esp. if they are Cyprus ones as they will be liable to tax after 1st year. The money is accumulated only in the trust.

When the trust is dissolved, each person's company receives 50% of the funds and it is taxed in Cyprus. Due to double taxation avoidance treaties, you are not subject to tax in your home country. Get a card from BVI or Cyprus bank linked to your company, use it wisely. Problem solved (if you can live through the yearly fees ).