Estonia introducing
Digital Nomad Visa
Great news coming from Estonia!

The Estonian parliament adopted on 3 June amendments to the Aliens Act, allowing for the creation of a digital nomad visa. 

The visa would give the right to digital entrepreneurs and workers, who temporarily want to live in Estonia, to reside there for one year (log-term visa), being at the same time entitled to a Schengen visa which allows them to visit member countries for up to 90 days.

For now, most of nomads enter Estonia on a tourist visa and officially are not allowed to work and live in the country. For a longer (legal) stay, they would need to find an employment there.There are already countries which have introduced similar residency permits that remote workers use for the purpose of working and travelling. But Estonia seems to be the first one officially addressing and promoting the visa rights to the community of digital nomads.

After the famous e-residency program, introduction of such visa was just a matter of time.

E-Residency confusions

We always remind that Estonian E-Residency program is a great tool for the remote administration of the company, however it does not bring any tax residency or citizenship rights in Estonia or the EU.  Now many nomads with established Estonian companies can actually try the lifestyle of the country for longer.

On another note, we should also dispel the myth that e-residency is a way to avoid tax responsibilities in the applicant’s home country. Of course, Estonia has the unique corporate income tax system, encouraging the growth of start-ups. It certainly attracts young entrepreneurs with taxation at a flat rate when profits are distributed so there is no tax on profits that are reinvested into the company.

By default, companies established in Estonia through e-Residency become tax resident in Estonia. However, not all e-residents contribute taxes to Estonia. Actually, some of e-residents make a larger tax contribution to their home countries if the source of taxable income is there. For example, if company’s activities create a permanent establishment (a fixed place of business in a foreign jurisdiction) in another country, there might be grounds to taxation there. 

Same clarification is required when it comes to personal residency. Your personal tax on your wage is subject to the rules in the country of your personal tax residency.This is why, in case of doubts about clear understanding of tax obligations, it is always advisable to consult the specific situation with a professional tax adviser to avoid any risks and surprises.

We are still waiting for more details about the new Visa, if and for how long, the 1-year permit could be extended. We will be following the subject and inform about any updates. Undoubtedly (contrary to the German model), the Visa won’t require foreigners to pay taxes in Estonia. Most probably, the applicant will just need to declare that he is a taxpayer in another country.

Surely it is a great move of the government, since with no real cost on the side of the country, expats coming to Estonia are a great good boost for economy. Digital nomads’ visas might quickly become a global trend.

TOP locations to establish your IT business
Our subjective ranking

Are you an IT specialist? Congrats, not only because you provide one of the most desired services in the world…. Your business can be set up anywhere in the world and you, personally can be working (and maybe living) anywhere you want, as long as there is a good Internet connection. Programmers, web developers are just perfect remote professions. 

If you are running your own IT-related business and considering a change of its legal form or location, or maybe just thinking about establishing something on your own, this guidance is for you.

In the below breakdown, we took into consideration the most important factors for start-ups and any new entrepreneurs.

 We focus on rates of CIT (Corporate Income Tax), social insurance costs, VAT constructions and the crucial: cost of running the company, as well as general impression over the jurisdiction. You will see that in some cases, you can be issuing invoices without VAT, which practically means a lower cost of the service for you clients.

GEORGIA

CIT for the IT industry: no CIT.

Yes, that’s right, in Georgia, there is a special ‘Virtual Zone Company’ regime where, after registering limited liability company and applying for a special Certificate, companies have total exemption from CIT if they provide IT services to entities outside Georgia.

CIT for all other industries – in case your business in not strictly IT related is: 15%, but payable only when the dividend is paid. This means that if you own a company in Georgia and run a business, you don’t have to pay CIT advances every month. The tax is payable only when the dividend is paid.

Social Insurance: it does not apply if you do not have employees (this can be resolved, e.g. by ’employing’ contractors).

VAT: not applicable for services provided outside Georgia.

Share capital: only declared, no payment required.

Accounting expenses: from EUR 40/month (CIT declaration are submitted each month)

Additional benefits of the jurisdiction:

  • 7th place in the world in the ranking of ease of doing business;
  • Low employment costs;
  • Low operating costs;
  • Fast incorporation: one day;
  • Lack of perception of jurisdiction as a ‘tax haven’ despite no / low taxes;
  • Opportunity to enter Asian markets more easily thank to location;
  • Access to Russian-speaking personnel;
  • Not in EU, which can be a beneficial in some cases (no CRS, Common Reporting Standard when it comes to banking).

▶ NOTE For the Georgian company to be resident in Georgia, its management and control must be performed from Georgia and we suggest on appointing a local (Georgian-resident) as one of directors. However, you can be the 2nd director in the company since it is even suggested if the director has IT background.

CYPRUS

CIT: 12.5%, being one of the lowest in Europe.

Social Insurance: it does not apply if you do not employ additional employees (this can be also resolved, e.g. by ’employing’ contractors). Not applicable in Cyprus in case of employees from outside Cyprus.

VAT: obligation to register for the revenue exceeding EUR 15 600 per year. After exceeding the threshold: the rate is 19% in the case of services rendered to entities in Cyprus or B2C. No VAT for the provision of services to entities located outside the EU. No VAT according to EU directives when selling B2B services between companies registered for VAT in the EU.

Share capital: only declared, no payment required.

Accounting costs: from EUR 30/month.

Additional benefits of jurisdiction:

  • No tax on capital gains (e.g., sales of securities)
  • No withholding tax on dividends paid and received
  • IP BOX regime allowing for an 80% CIT exemption for activities related to intangible assets
  • Very stable and flexible legal and tax system, even though ranked as 54th for ease of doing business, the country is business friendly and non-bureaucratic 

▶ NOTE It is a great jurisdiction to run a business when combining with a personal tax residency in Cyprus (60-day rule of tax residency). When becoming a tax resident of Cyprus, you can benefit from no taxation of dividends and interest for non-domiciled tax residents – for 17 years of the residency (exemption from Special Defence Contribution which is a local withholding tax on passive income for domiciled tax residents).

ESTONIA

CIT: 14-20%, but payable only when the dividend is paid. This means that, having a company in Estonia and running a business, an entrepreneur does not have to pay CIT advances every month. The tax is payable only when the dividend is paid (the same system was applied in Georgia). 

Social Insurance: it does not apply if there are no employees (this can be resolved, e.g. by ’employing’ contractors). It also does not apply to the employees who are not residents of Estonia (check our hint below).

VAT: no obligation to register if the revenue does not exceed EUR 40,000/year. After exceeding the threshold:  the rate is 20% in the case of services rendered to entities in Estonia or B2C. No VAT for the provision of services to entities located outside the EU. No VAT according to EU directives when selling B2B services between companies registered for VAT in the EU.

Share capital: EUR 2,500 must be fully paid up.

Accounting expenses: from EUR 50/month.

Additional benefits of the jurisdiction:

  • 18th place in the world in the ranking of ease of doing business;
  • Very good reputation, especially for the IT industry (one of the countries with the largest number of start-ups in the technology industry in the world);
  • Low operating costs;
  • Lack of perception of jurisdiction as a ‘tax haven’, EU member;
  • Possibility of easier entry into European markets and access to Russian-speaking personnel.

 NOTE The famous Estonian E-Residency program has been thought to ease remote administration of the company, however you need to remember that it does not bring any tax residency benefits. E-residency is not connected to immigration and it does not make you a resident of the country from the legal perspective. 

Another hint: in case you employ yourself (or anyone else) as a director in an Estonian company but reside in a country offering remittance basis taxation (like Malta, Dubai or UK), the employment will be free of tax. When your Estonian income is not brought (or ‘remitted’) to the country where you are resident (but not domiciled), you will not pay tax on this foreign income. In practice, the remittance basis helps to prevent double taxation.

GREAT BRITAIN

CIT: 19%.

Social Insurance: it does not apply if you do not have employees (this can be resolved, e.g. by ’employing’ contractors).

VAT: no obligation to register if for the revenue below GBP 85,000/year. After exceeding the threshold: 20% when providing services to entities in the United Kingdom or B2C. No VAT for the provision of services to entities located outside the EU. No VAT according to EU directives when selling B2B services between companies registered for VAT in the EU.

Share capital: only declared, no payment required.

Accounting costs: from EUR 30/ month (CIT declaration are submitted once per year)

Additional benefits of the jurisdiction:

• 8th place in the world in the ranking of ease of doing business

• Excellent reputation

• Low operating costs

• The possibility of entering global markets more easily

▶ NOTE The incorporation process is very fast and easy. It takes only 24 hours to have the company registered and everything is done through the electronic system. There is even no need to sign any corporate documents.

 

Company advantages over self-employment 

As you see, all the proposed countries have good reputation, stable legal system, no bureaucracy, and low taxation and at the same time are not considered as tax heavens.

Many freelancers are afraid of establishing their first business as a company. We see it as the most convenient way of running a business, for couple of reasons, depending of course how beneficial a simple self-employment/sole trader in your country is for you.

It is a myth that company formation is a solution only for those who already have an impressive portfolio of clients and hire employees. But you can easily be the only person working under your own brand and a company is a safe form of doing a business, even from the very beginning. What is important, you can separate company’s operations from your personal wealth and protect yourself, since all the liability is on the name of the company.

What are further benefits of establishing a company in a new location?  Of course, great international exposure and possibilities to expand on new markets. On another note, it offers risk diversification by placing some funds abroad and limiting your personal liability. As self-employed you would take a full responsibility for your business as a physical person and would be held responsible yourself personally for any (financial) liabilities.  

How can we help you?

We are here to answer your questions regarding forms of running a business or its (re)location combined with your personal tax residency. We can assist with all the stages of your business set-up and its daily operations, like accounting or banking services. We cooperate with many partners providing companies’ administration services in all the mentioned countries.

Last, but not least, we are always happy to connect you with other professionals and clients who are searching for IT solutions, since in our network there is always someone who needs a little help of IT specialists.

 
#StayHome and set up your business
Is it possible to do everything online?

Is it possible to setup a company online and operate if fully remotely?

The answer is YES, but as always…it depends on many factors. Let us show you some examples of business incorporation in some of our favourite jurisdictions.

Georgia

Registration of a company can be done in one day. You can either send us apostilled set of documents and we register the company remotely as your attorneys, or you can use nominee services that will shorten the process. Georgia is a great choice: companies don’t pay any corporation tax if they don’t distribute dividends, so you can operate totally tax free. Georgian government also introduced some interesting regimes, like Virtual Zone Company, Special Trading Company or Free Zones that give you total exemption from corporation tax. So, even if you withdraw profits: you pay zero tax, legally!

Estonia

For e-residents the company can be registered in one day, all can be done electronically. If you are not an e-resident, we can register your company through a power of attorney in just few days. In case you use a nominee service, it is the same as for e-residents: one day registration. Estonia also doesn’t tax the company unless it pays dividends, so you can operate the company tax-free. No wonder that Georgia followed the Estonian taxation model and implemented the similar benefits for entrepreneurs.

United Kingdom

It takes only 24 hours to have the company registered and everything is done through the electronic system. There is even no need to sign any corporate documents.

Cyprus

Incorporation takes around 1 week, and it can also be done remotely. If you will be a director or a shareholder, we just need scanned documents from your side. There is no capital gains tax on sale of shares, no withholding tax and the corporation tax is a fixed rate of 12.5%, so there are huge tax benefits of establishing in Cyprus.

IN A HURRY?

You can speed up the process of registering the company by:

  • Purchasing a ready-made company: this shortens the process to minimum: with the moment of signing the transfer documents, you can start using the company.
  • Using nominee services: if you use nominee director and shareholder services, your involvement in the incorporation is not needed at all. You just need to sign the trustee agreements between yourself and the nominee. If is very efficient and you still have full control over the company.
City Hall

Tbilisi City Hall, 

here we register Georgian companies

Tbilisi, Georgia

DO-IT-YOURSELF? 

Why is it not always safe to do it on your own?

  1. Registered office address: instead of having your company registered in a garage or at some random place, you should have your company registered in a proper office, with facilities and with possibility of visiting, receiving correspondence and in the way that it doesn’t damage the reputation of your business.
  2. Directorship services: if you need a nominee director either for tax or marketing purpose, make sure who would be appointed on this position. The director of your company should be professional, trusted, qualified, have good reputation and not to appear as a nominee in 1000 other companies.
  3. Accounting, legal and tax services, professional advice: make sure these are taken care of properly, so that your business can operate legally and in compliance with all local regulations. Also, since you will have an international exposure, make sure the firm you choose to register your company has experience with tax structures on domestic and international level.
  4. And one last piece of advice: don’t believe everything what internet says. Always check if your advisor is telling the information that are reliable and exist in both: local and international legislation.
  5. Also, forget offshore companies. They just create more complications and risks and it’s probably not worth it. Choosing an onshore jurisdiction which offers no or low tax exposure is always a better idea.

WHO CAN GO REMOTE?

Can you do business remotely for all activities?

No, only certain businesses can work remotely (and without risk of double taxation).  Some examples of activities for remote businesses can be: IT services, consulting, design and creative works (e.g. architects), marketing, PR services or social media related (social media managers), any online businesses (online shops, teaching, couching, translations), trading companies and trading intermediaries, and many other jobs for contractors and freelancers.

If you have a great idea in mind, you can build up your own business straight away. Every moment is good to start!

Hello from the other side!
Welcome to the trial period
of the nomadic era.
WE ARE BACK!

We will be very honest, the current situation inspired us to write more about remote working.

Before, it seemed to be a privilege of a small group of people or those from our environment: friends, clients, partners. But all of the sudden, this type of work became necessity for millions of people all over the world.

CDX SPIRIT

We are not going to repeat the great advises or talk about the “work from home” savoir-vivre.  Many others already shared their experiences and helpful guidelines in the recent weeks. Of course, we cannot agree more with the fact that a nice, tidy desk far away from bed will make your work more efficient. And no, don’t believe the photos of relaxed digital nomads working from the beach… In real life it is not that easy as it looks on Instagram. Anyone who tried, knows what I am talking about.

Also, we are not the ones to give you travelling advices… Not because it is not possible at the moment. There is a pretty big nomads’ community out there, that already mastered the digital work with travelling, showing its challenges and benefits. And we strongly believe this will be possible again…. in a while.

As you already know, we are more focused on specific aspects of the nomadic lifestyle, and probably on its best benefits…. The subjects that scare and concern many who think about going remote: taxes, regulations, formalities. We will try to discuss them very soon. 

And today, we are sharing some thoughts about advantages of these challenging times.

FORTUNE TELLER

There is no doubt that the meaning of work started to shift some time ago with a development of a gig economy. Many have already discovered freedom of remote work, decided to quit their full-time jobs, to work independently, setting up their own businesses or working as contractors, freelancers and switching to more flexible forms of employment.

It seems to be a global trend and not only in the context of recent challenges.

I started writing a post on the blog weeks ago, describing benefits of the digital lifestyle and judging that we would need to face a new era sooner or later, well….Who could expect this would become so fast a reality for millions of people?

TRIAL PERIOD

Being thankful for a possibility to continue to work as usual, we believe that, for some of us, it is a good time now to see how to adapt to the new conditions and check if we are able to work remotely. Don’t forget that the crisis will not last forever…. No matter how much we are craving a traditional day at the office (are we?), remote work is still a great tool. Especially when it is combined with travelling or is a form of having a side business.

It can turn out to be suitable for you to stay at your house, maybe not permanently, but when needed, having in mind that not everyone wants to sacrifice stability for freedom.

If you are forced to work from home, use the situation to test if it would be also possible for you to work from any destination in the world…when it all comes back to normal. And we dot necessarily mean traveling with laptop, when running from one hostel to another, from Chiang Mai to Santa Marta. “Slomads” are trending now and from our observations the concept of slow travelling is an interesting experience for those who prefer to stay in a place for longer. Working permanently from one country can be a very different experience than moving from place to place, just to check-in.

We strongly suggest benefiting from this time and encourage you to check if independent work is something for you, to rethink how and with who you would like to work. So many employees feel stuck or burned out at their positions.  Unfortunately, we can already see people losing their jobs or waiting anxiously for the results of crisis, some already search for alternatives, learning skills that are useful for digital jobs. Maybe this is a time to start planning a business you have been always thinking of? In many cases it is possible to set up a company remotely and to run it online. 

When it comes to entrepreneurs, this is for sure very challenging time for many of them. Some have already adapted their businesses to the current conditions, in clever ways, without waiting for a governmental support. This is another topic of discussion, leaving us with the reflection that nowadays we should not expect any support from the government. We need to be self-sustainable as never before, not even mentioning social security systems which are simply going to fail (and are already failing) in many countries.

Social distancing by a digital nomad

 Molos in Limassol, March 2020

PLAN IT WISELY

Take time to plan your scenarios: setting up a company or moving abroad – it all requires a good plan and knowledge. We are here to listen to your ideas, share our knowledge and experience in international tax and law. And most importantly: to guide all nomads in need on where and how they should do business in the way that is legal, safe and efficient from tax perspective.

More and more people decide to move abroad, constantly travelling and working at the same time or living in two, three or more countries during the year. In consequence, they change their residency, which very often goes with changing the tax residency.

Let us tell you a very important thing: ignoring your tax situation is a bad idea, even if you have planned a Travel Around the World ….  And we advise to think about it in advance and to decide where and how you are going to declare your revenue.

Even if you do not want to have a permanent home, you still should think about a tax residency for yourself or your business. No point to run away from it, since there are already rules to follow and scenarios to create.

For now, let’s show an example of expats that relocated to a tax (and not only) friendly place, and changed their life, forever. Us, founders of CDX, permanently residing in Cyprus, enjoying the weather and great lifestyle of the island, but also travelling and…. not paying any dividend tax for 17 years of our stay here.

Digital nomads are privileged as they have the luxury to choose their tax residency country and legally save on taxes. In our next publications we will prove that you don’t have to be on a constant tour to benefit from nomadic lifestyle.

 LIFE “AFTER”

We realise that for many people remote working brings some negative connotations. Indeed, we all noticed how important is the daily contact with people, even introverts are now craving for interactions.

At the same time, I wonder how many of us discovered that the recent concept of 4-hours working day is actually possible. That when skipping chit-chats at the office, we can be very productive and how many meetings can really take place by phone or e-mail. Some might feel a difference when working in more flexible hours, not under an eye of a supervisor. Many of us already see that with a good organisation the whole idea makes sense. Finally, this experience shows how important is trust in professional relations.

The pandemic will finish at some point and we will all need to find ourselves in the post-crisis reality. Most people will go back to their offices, some will not.

In normal circumstances, working digitally will not disconnect us from real life anymore, on the contrary, we will be able to discover more. It will be only an option, offering a luxury of working from any place we want.

We really hope that we will all be again free to choose very soon.

WHAT’S NEXT?

Stay tuned for more articles and check out YT channel that is launching soon!

And of course, ping us on Instagram, Facebook, LinkedIn if you want to have a chat.

Where to establish a taxwise business
A SHORT GUIDANCE

Choosing a jurisdiction offering low or no taxation and some flexible rules might be sometimes tricky. There are many things to be taken into considerations, such as: the business activity of the company, tax residency of the owner of the company, anti-avoidance rules, substance requirements, tax risks, etc.

One thing for sure: forget offshore! This is the most common mistake that digital nomads and entrepreneurs do. Making a research on the internet among hundreds of ‘advisors’ proposing registration of companies offshore is (in most of the cases) a huge mistake. There are plenty of reputable onshore jurisdictions, like Cyprus, Estonia, Georgia, Lithuania, Malta, UAE, Singapore and many others that are white-listed, and offer very low (or even zero) taxation.
Important thing to consider when choosing a jurisdiction are potential tax risks. It is important to distinguish the tax risks on two levels: corporate and personal. Let’s start with corporate: Tax residency of the company, Management and Permanent Establishment – these are the most important elements when considering the tax risks.
The personal risks relate mainly to the tax residency of the Ultimate Beneficial Owner.
Depending on the location of your personal tax residency, you must consider if there in your country exist rules that prevent doing business in low/no-tax jurisdictions. First, you should consider CFC (Controlled Foreign Company) rules, GAARs (General Anti Avoidance Rules) and other anti-avoidance legislations. Consider also who is a director of the company and how do you do business via the company. In many cases these can create a huge risk on a corporate level.

Double Tax Treaties (DTTs) are another piece of legislation you should be aware of, when going cross-border. Having no DTT between the country of your personal residency and the country of the residency of the company might have serious tax risks (e.g. double taxation), so it is (almost) always wise to choose doing business between countries that have DTTs signed.

Banking and opening of bank accounts for non-residents and companies owned by non-residents might be a tricky & often bureaucratic process, so it is another factor to be considered when choosing jurisdiction to register your company. There are many alternatives like opening a bank account in different jurisdictions or using Electronic Money Institutions (like Revolut). However, banking should be always on the ‘tick’ list when choosing the best place for your business and residency.

The last (but not least) advice is to get a professional advice from a lawyer/tax advisor/professional firm. There are plenty of bloggers across the Internet who have no idea about tax, and they sell advice on where to register a business, where to relocate and where to pay tax. Ideally these should be people with experience in international matters and at least a basic knowledge of regulations and consequences of scenarios that they offer. In addition to that, you should always get a professional advice in the place of your tax residency and check if it makes sense to relocate abroad or setup a business abroad from the legal and tax perspective.
We almost forgot about one more benefit of going abroad. In addition to low taxation and friendly business environment, you could enjoy a nice warm weather, relaxed atmosphere, nice food, interesting people and cultures.

Is choosing tax residency for yourself and your company easy? It is not, but it is possible to be done effectively and to bring great results when doing this properly and investing in real substance. The times have changed. Governments are now fighting for their taxpayers and for the last years global organisations have been introducing new rules and forcing transparency. Therefore, entrepreneurs and businesses must adapt to the new conditions and focus on building strong structures. 

Need more information? Feel free to reach us at CDX Trust. We will help you to plan your personal or business relocation in tax-efficient, safe manner and to secure your assets, so that you can enjoy travelling and doing things they way you like!

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Bank of England warns of one in three chance of Brexit recession

Britain has a one in three chance of plunging into recession at the start of next year as the heightened uncertainty over Brexit drags down the economy, the Bank of England has warned.

Where to establish a taxwise business – a short guidance

Bank of England cuts UK growth forecast

It also warned that a no-deal Brexit would hit the economy and trigger a further drop in the value of the pound. The Bank left interest rates unchanged at 0.75% against a backdrop of weaker global growth and ongoing trade tensions between the US and China.

News from around the world, advices & information - Sign up to our Newsletter today!

This week's best reads

Take a break and read the most popular stories right now.

The Bank

Bank of England warns of one in three chance of Brexit recession

Britain has a one in three chance of plunging into recession at the start of next year as the heightened uncertainty over Brexit drags down the economy, the Bank of England has warned.

Weaker global growth

Bank of England cuts UK growth forecast

It also warned that a no-deal Brexit would hit the economy and trigger a further drop in the value of the pound. The Bank left interest rates unchanged at 0.75% against a backdrop of weaker global growth and ongoing trade tensions between the US and China.