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Ask HN: Founders of estonian e-businesses – is it worth it?

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Re: Ask HN: Founders of estonian e-businesses – is it worth it?

#81

Post by littlecranky67 »

zeroq wrote: post #70
plantain wrote: post #68

Earlier quoted context omitted.

Have you never heard of fringe benefits tax?

Have you read my post? Let say I am a junior SWE in EU. I incorporate in Estonia and issue my employer with an invoice from said company. That company pays for my house, my car, my dental service and whatnot, and what's left I take as a employee salary. I pay local tax for that salary, but that's only a fraction of what I've billed my employer.

That would not be possible at in Germany, everything you just listed is considered a "geldwerter Vorteil" and falls under income tax - even if the company gives you a car that you need to do your job, you will have to pay taxes on it.

Re: Ask HN: Founders of estonian e-businesses – is it worth it?

#82

Post by littlecranky67 »

KellyCriterion wrote: post #79
zeroq wrote: post #61

Earlier quoted context omitted.

You're not wrong, but you're missing the best part. Estonian company does not pay taxes (*). As long as the money stays within the company he's golden. The company can pay for his car, his apartment/office, etc. It is only when he decides to withdraw the money the problem occurs. What you're saying applies to most EU countries. Here where I live you have to reside for majority of the year in given residency to pay ta…

> You can easily create a reality in which you reside there for majority of time. Cautios when dealing with German tax officers: They are checking the 183-day-limit very very strictly, includin invoices/bank statements if required, hotel bookings etc. They even apply intelligence colleagues if in doubt for big fishes.

183-days rule is NOT a thing in germany for corporate taxes, and I think it is not in income taxes either. It may be an indicator, but it is not a hard proof. Important is, where you have your social life set up ("Lebensmittelpunkt"). That is, you can reside more than 183 days abroad, but if you have a family, golf club membership, permanent residence, your stock brokerage account etc. still in germany, you still count as a german tax resident. There are no hard laws with X days around it, german law revolves a lot around that "Lebensmittelpunkt" which will be decided on a per-case basis.

Re: Ask HN: Founders of estonian e-businesses – is it worth it?

#83

Post by petesergeant »

zeroq wrote: post #70
plantain wrote: post #68

Earlier quoted context omitted.

Have you never heard of fringe benefits tax?

Have you read my post? Let say I am a junior SWE in EU. I incorporate in Estonia and issue my employer with an invoice from said company. That company pays for my house, my car, my dental service and whatnot, and what's left I take as a employee salary. I pay local tax for that salary, but that's only a fraction of what I've billed my employer.

> that company pays for my house, my car, my dental service and whatnot, and what's left I take as a employee salary ... I pay local tax for that salary

Until you get audited by your local tax authority who rules that all of that is disguised salary, or the Estonian tax authority says that that's technically (taxable) profit being paid to the director.

If you're currently doing this, I suggest throwing yourself at the mercy of your local tax authority with the help of a lawyer and an accountant, as it's possible they'll show some leniency if you go to them first and not add penalty fines in addition to needing to back-pay the tax and late payment fines.

You've got to get up pretty early in the morning to fool The Revenue.

Re: Ask HN: Founders of estonian e-businesses – is it worth it?

#84

Post by pithtoken »

I'm in a similar situation — building a SaaS (API proxy for LLM cost optimization) and evaluating Estonia vs UK LTD. Leaning towards UK for Stripe compatibility but the 0% tax on retained profits in Estonia is very tempting. Would love to hear from anyone who's used both.

Re: Ask HN: Founders of estonian e-businesses – is it worth it?

#85

Post by Marciplan »

ipnon wrote: post #62
Bluestein wrote: post #7

I professionally have been helping folks set up and maintain e-Residence and businesses, and all said here in the comments so far tracks: Estonia is absolutely unsurpassed qua administrative ease (this giving you a clear and lasting business advantage), the tax advantages are real, and the jurisdiction only gets better .- Banking and being scrupulous on your personal taxes at your place of personal residence are issu…

Hopefully the program continues its success and becomes basis for 25th EU regime

28th EU Regime

Re: Ask HN: Founders of estonian e-businesses – is it worth it?

#86

Post by jnsaff2 »

aerhardt wrote: post #16
Bluestein wrote: post #7

I professionally have been helping folks set up and maintain e-Residence and businesses, and all said here in the comments so far tracks: Estonia is absolutely unsurpassed qua administrative ease (this giving you a clear and lasting business advantage), the tax advantages are real, and the jurisdiction only gets better .- Banking and being scrupulous on your personal taxes at your place of personal residence are issu…

I've considered it as a Spanish resident, but don't you have to live six months there to be considered a fiscal resident? Are people regularly operating them from outside Estonia?

The "e" in eResidency does a lot of work. The scheme will not give you any residency rights or obligations in the physical sense. Just forming and running a company in the EU, including tax and banking systems that are aware of your non-resident status and making running a company easier.

As others have said, it mostly makes sense for people outside of the EU. If you have personal residency in Spain then it is questionable whether the easier paperwork in Estonia will offset the need to do some paperwork in Spain as well.

Re: Ask HN: Founders of estonian e-businesses – is it worth it?

#87

Post by alde »

Please read up on what a permanent establishment means from a tax perspective. Most countries tax laws, especially EUs unambiguously state that the Estonian company will be taxed as if it was a company in your primary residence country.

The e-residence website repeats this many times, with many examples focusing on Germany.

https://learn.e-resident.gov.ee/hc/en-gb/articles/3600025428...

The whole e-residence thing only makes sense if you are from a non-EU country which doesn’t model its tax code on the OECD model.

People do get away with it until they get audited.

Re: Ask HN: Founders of estonian e-businesses – is it worth it?

#88

Post by jnsaff2 »

pithtoken wrote: post #84

I'm in a similar situation — building a SaaS (API proxy for LLM cost optimization) and evaluating Estonia vs UK LTD. Leaning towards UK for Stripe compatibility but the 0% tax on retained profits in Estonia is very tempting. Would love to hear from anyone who's used both.

The 0% tax on retained profits is nice as long as your own residency country does not try to tax it. Some countries like the US don't consider this as a shelter and if you are the beneficial owner then still want to tax your company profits there.

Also the 0% retained profits system will come to an end in the next few years due to a worldwide push to have minimum corporate income tax.

Re: Ask HN: Founders of estonian e-businesses – is it worth it?

#89

Post by codethief »

samus wrote: post #72
codethief wrote: post #35

Earlier quoted context omitted.

> I'm fairly sure the German tax authority will claim that you have a local German branch office since you live and work there. That might be OK tax wise? If you work from home, your office at home usually does not qualify as a company office unless you make it one. In particular, that alone would not force you to pay Gewerbesteuer to the city, which is the tax specifically addressing local presence. However, you're…

> Could you elaborate? How is this illegal if you declare taxes? Dividends are treated differently from the salary by tax laws.

Sure but that doesn't make them illegal?

Re: Ask HN: Founders of estonian e-businesses – is it worth it?

#90

Post by KellyCriterion »

littlecranky67 wrote: post #82
KellyCriterion wrote: post #79

Earlier quoted context omitted.

> You can easily create a reality in which you reside there for majority of time. Cautios when dealing with German tax officers: They are checking the 183-day-limit very very strictly, includin invoices/bank statements if required, hotel bookings etc. They even apply intelligence colleagues if in doubt for big fishes.

183-days rule is NOT a thing in germany for corporate taxes, and I think it is not in income taxes either. It may be an indicator, but it is not a hard proof. Important is, where you have your social life set up ("Lebensmittelpunkt"). That is, you can reside more than 183 days abroad, but if you have a family, golf club membership, permanent residence, your stock brokerage account etc. still in germany, you still cou…

Its a little bit more complicated:

https://www.vlh.de/wissen-service/steuer-abc/183-tage-regelu...

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