Category Archives: European Tax & Money Havens

Belarus a Tax Haven for the Digital Economy

Belarus has legalized transactions in crypto-currencies, part of a drive to foster private sector growth and attract foreign investment by liberalizing its Soviet-style economy.

The Belarus government will not tax mining, trading of cryptocurrencies, and sale of digital tokens. Activities related to mining, creation, acquisition and sale of digital tokens will remain tax-free until 2023, throughout the next five years. The decree legalizes initial coin offerings and transactions in crypto-currencies, including their exchange for traditional currencies on Belarussian exchanges, while all trades will be tax-free for the next five years.

It also allows local IT companies to operate in part under English law – a gesture to foreign investors, who can struggle to navigate the Belarussian legal system.

The Belarussian IT sector has flourished, attracting foreign workers, expatriate Belarussians and locals to jobs that pay about five times the average wage. Dozens of software companies operate in Minsk’s high-tech IT park (HTP), including U.S.-based EPAM Systems (EPAM.N), founded by two Belarussians in 1993. Belarussian software engineers are also behind the Japanese-controlled Viber messenger and the popular video game World of Tanks.

New Conditions for IT companies

1. The validity period for HTP’s special legal status will be extended until January 2049. The following companies, which specialise in software development or other IT businesses, can become HTP residents:

  • Design, development, support, sale, maintenance of software and (or) firmware based on or using the Blockchain, and distributed databases,
  • Creation, training of neural networks and other algorithms in the specialised sections of Artificial Intelligence, and implementation of the results of this activity,
  • Development, support, maintenance and production of unmanned vehicle driving systems,
  • Development or separate development stages of medical technologies, biotechnologies as well as the implementation of the results of these developments,
  • Business processes outsourcing activity,
  • Software publishing and promotion,
  • Mining, cryptocurrencies exchange activity, cryptocurrency converter activity, other activity using tokens,
  • Cybersport activity. The list is not exhaustive. The HTP supervisory board is authorised to establish other kinds of activity that a company can specialise in to become a HTP resident.

2. Within the framework of the special HTP legal status, the existing tax and NSSF (National Social Security Fund) benefits are preserved and new ones introduced. Among the existing HTP residents’ benefits, the major ones are as follows:

  • Exemption from income tax and VAT (pursuant to the general rule). Instead, HTP residents pay 1% of gross revenues in favour of the HTP administration,
  • Individual income tax is paid at a lower rate (9%), and NSSF fees are calculated according to the average country wages, instead of actual wages (3-4 times lower). Additional benefits, aiming to stimulate Product Development IT companies, are the following:
  • Exemption from VAT, based on the use of foreign entities to provide marketing, advertising, consulting and some other services to HTP residents,
  • Zeroing of foreign entities’ income tax rate, with respect to the income from carve-out of stocks, shares in authorised capital, participatory interest in HTP residents’ property (provided that they continuously possess it for not less than 365 days), as well as royalties, earnings from advertising services and other kinds of income, paid by HTP residents.

3. HTP residents’ activities shall be simplified. Residents shall have a right:

  • To conduct operations with e-money without a range of limitations,
  • To open accounts in foreign banks and other credit and financial institutions, to receive money into these accounts without the permission of the National Bank,
  • Capital can be moved through currency transactions if conducted after notifying the National Bank and with their permission,
  • To execute primary accounting documents personally, when performing business transactions with non-residents of the Republic of Belarus.

Regulations regarding the procedure for the conduct and control of foreign trade transactions do not apply to transactions made by HTP residents.

4. Investment according to English Law will be allowed. HTP residents are allowed to sign agreements with third parties that are actively implemented in international business. For example:

  • Agreement on granting right of first refusal to execute contracts,
  • Convertible loan agreements,
  • Property loss indemnity agreements,
  • Agreements, stipulating liability for labour pirating,
  • Non-compete agreements with employees with payment of compensation for the period of noncompete obligations,
  • To issue irrevocable power of attorney.

5. The set of measures, focused on attracting top-ranked IT-specialists, is finalised.

  • HTP residents do not have to get the permissions related to the employment of foreigners. Foreign employees will receive a temporary residence permit under the simplified procedure,
  • Visas for foreign employees and founders of the HTP residents are cancelled. The maximum time limit of their temporary stay is increased up to 180 days.

Belarus will create an unprecedented ecosystem for the regulation of the circulation of cryptocurrencies and tokens. Major provisions:

  • The rights of physical and legal entities in terms of token circulation are defined. Legal entities are entitled to possess tokens, create and list their own tokens through HTP residents; buy, exchange tokens and perform other operations using tokens only through the cryptocurrency exchanges and cryptocurrency exchange operators.
  • Individuals are entitled to possess tokens; perform mining; exchange tokens, buy and sell them for Belarusian rubles, foreign currency, e-money, as well as present and bequeath tokens. The mining activity of individuals, tokens purchasing and sale shall not be considered entrepreneurial activity.
  • Tokens and revenues from operations with them shall not be subject to declaration by the individuals.
  • Turnovers, profits (income, proceeds) from various operations with tokens are not recognised as taxable items until January 2023.

Montenegro – a Tax Haven in Europe

Montenegro, known as ‘The Jewel of the Adriatic’ has become one of the most friendly places for business in Europe. It is now a decade ago since the semi-autonomous region of Montenegro, declared its independence and went on to become a sovereign state.

Old Town Budva in Montenegro

Much of Montenegro’s allure comes from its shining mix of colors: aquamarine waters, green pine-forested mountains, blazing blue skies and white pebble beaches.

Montenegro was featured in the glamorous James Bond film “Casino Royale.”

 

Sveti Stefan near the town of Budva in Montenegro. Image courtesy of Travel the World, Wiki Commons.

Porto Montenegro – sometimes called the Monte Carlo of the Adriatic – has upgraded this tiny Balkan state from a favorite destination of average Russian and Serbian tourists to a mecca for some of the world’s wealthiest people.

However, Montenegro has also attracted a lot of attention for another reason: it is one of the easiest places to do business in Europe. Starting a company in Montenegro takes an average of about a week and requires no paid-up capital. To form a Montenegro corporation, you must follow six procedures, most of which are simple. The only documents you have to submit to the government are the articles of incorporation, corporate statutes, and list of directors.

There is no such thing as anonymous ownership of a company in Montenegro, as you have to disclose your name, any former names, and your citizenship. However, if you’re looking for a solid company to do regional business, Montenegro is hard to beat. Being a director of company could even qualify you for Montenegrin residency with a little bit of cash.

There are several other steps to form a company here, but the total cost to be paid locally in Montenegro is about USD 100.

Montenegro offers global entrepreneurs a low-tax haven where they can pay a little tax and gain access to a network of treaties.

While countries like Monaco have become less attractive as holding vehicles for patents or royalties, a Montenegrin corporation is suitable for a number of business activities.

In addition, Montenegro has some of the lowest tax rates in Europe and even the world. Corporate taxes in Montenegro are a flat 9%. While royalties and capital gains are also subject to the 9% rate, there are no surtaxes or minimum taxes for companies doing business in Montenegro. There are also no stamp duties, although real property is subject to a 3% tax payable by the buyer at transfer.

Resident individuals in the country pay a maximum 15% tax on salary earnings (9% to about $1,000 per month, 15% on the balance).

Montenegro also offers relief from taxes on foreign source income under an extensive network of tax treaties, although the United Kingdom and most countries in Europe dominate the list, along with China, Korea, India, and Malaysia, and some African countries. The United States, Canada, and Australia are not on the list.

Montenegro Airlines flies to the capital of Podgorica and to the Adriatic Sea airport of Tivat from European cities including Paris, Rome, Budapest, Zurich, Moscow, Frankfurt, Istanbul and Ljubljana. JAT Airways, the Serbian national airline, flies to Belgrade from most European capitals, and has several flights a day from Belgrade to Podgorica and Tivat. A return ticket for a 45-minute flight from Belgrade costs USD 125.

Contact us if you want to set up a Montenegro company.

taxmoneyhavens.com

 

 

0% Corporate Tax in the European Union? Yes. in Estonia.

The Baltic nation plan to build itself as an e-nation, effectively allowing anyone to become a digital citizen and living his digital life within its networks.

Tallin

The country aims to have 5,000 e-residents by 2020. Additional lure is the possibility to get 0% corporate income tax in the European Union. Estonia does not have the reputation of a tax haven which gives companies an additional reason to move businesses to Estonia, an added value is the fact that Estonia is not only a EU and Euro zone member, but also one of the Baltic countries. So you have both legal security and political support of Baltic countries.

Estonia will issue identity cards allowing access to its digital services to people residing outside the Baltic nation as it seeks to boost foreign investment. Lawmakers in the capital Tallinn voted unanimously with no abstentions to let foreigners seek e-residence status to be able to set up a company in Estonia or sign legal documents from anywhere in the world, according to a live broadcast. The law goes into effect on Dec. 1.

Estonia emerge as a global digital leader.

Tallin, Estonia old and new. Picture courtesy of Wiki Commons.

 

Corporate Income tax

Estonia applies a unique and favorable approach on taxation of corporate profits. Resident companies and permanent establishments of the foreign entities (including branches) are subject to 21% income tax only in respect of all distributions (both actual and deemed), including:

  • dividends and other profit distributions;
  • fringe benefits;
  • gifts, donations and representation expenses;
  • and expenses and payments not related to business.

Profit retained in the company is taxed at 0%.

As of January 1, 2009 dividends paid to non-residents are no longer subject to withholding tax at the general rate of 21%, irrespective of participation in the share capital of the distributing Estonian company.

Estonia does not impose any estate taxes. Local governments have the authority to impose local taxes, but effectively only few municipalities have introduced these.

 

Tax Treaties

Estonia has effective tax treaties with 51 countries. Under the double tax treaties a significant reduction of withholding taxes on various payments to non-residents is available.

 

Considerations for the investor

  • Main principles of Estonian tax policy: simple tax system, broad tax base and low rates.
  • The aim of the current Estonian tax policy is to shift the tax burden from labour to consumption.
  • Flat income tax rate since 1994 (flat income tax rate at 21% applies to both individuals and companies).
  • Unique corporate tax system since 2000: all undistributed corporate profits are tax-exempt. (0%)
  • Individuals can have investment account to benefit from 0% corporate income tax.
  • Local taxes play an insignificant role in the Estonian tax system.
  • Electronic tax administration is well established. Business taxpayers can file, view and correct their tax returns online using the eTaxBoard (eMaksuamet). They can also use it to view their tax account balances and VAT returns, and submit VAT refund applications.
  • Vast majority (92% – 2010) of yearly personal income tax declarations are submitted electronically.
  • The standard VAT rate is 20% from 1 July 2009 and the reduced rate is 9%.

taxmoneyhavens.com

Isle Of Man First To Sign UK FATCA-Style Agreement

The Isle of Man has become the first British dependent territory to sign an agreement with the United Kingdom extending the automatic disclosure of tax information.

Isle of Man map

The intergovernmental agreement was signed in London on October 10 by Chief Minister Allan Bell and HM Treasury Exchequer Secretary David Gauke.

It is modeled on the requirements of the Foreign Account Tax Compliance Act (FATCA) introduced by the United States to ensure the tax compliance of its citizens with international interests.

On the current timetable for implementation of the new agreement, the two Governments have agreed to start exchanging additional information from 2016.

Map courtesy of FamilySearch Wiki Commons

The Isle of Man already shares information automatically on personal savings income with the UK and other European Union countries, having been the first non-EU jurisdiction to make a public commitment to this under the EU Savings Directive in June 2009. The Island was also the first to commit, in December last year, to the FATCA-style agreement with the UK extending the scope of automatic disclosure to include, for example, companies and trusts.

The Chief Minister said: “In signing this historic agreement with the United Kingdom we are underlining the message to our neighbors and the wider world that our Island is a responsible center for top quality international business.

“The Isle of Man was the first to strike this agreement with the UK and we are now the first to sign, demonstrating the clear commitment of both countries to the development of a new global standard in automatic exchange.”

Mr Bell added: “Today’s signing is a significant step towards that global standard and further proof that the tax haven moniker in relation to the Isle of Man is well and truly dead, as David Cameron recognized recently in the House of Commons.”

He went on: “The Isle of Man is a forward looking country with a diverse, dynamic economy and a track record of leading the way in the field of international tax co-operation.”

“We have a long-established policy of complying with global standards, and we saw some time ago that enhanced automatic exchange of information on the FATCA model was becoming the new global standard in tax transparency.”

taxmoneyhavens.com

Program Brings Young Entrepreneurs To The UK

Nineteen young entrepreneurs from 13 countries have become the first batch of applicants to come to the UK to set up businesses as part of the Government’s new Sirius Programme.

The scheme, which is run by UK Trade & Investment, recognizes graduates with innovative start-up ideas,

London Big Benand aims to attract hundreds of talented entrepreneurs into the UK in its first two years. Successful teams receive start-up support including a 12 month place on one of the best business accelerator programmes; mentoring; help gaining clients; financial support of GBP12,000 per team member; and a visa endorsement. Enterprises remain completely owned by the graduate teams, and no equity is taken.

The first round of the scheme attracted 160 applicants. Winners came from countries including Canada, China, Germany, India, Italy, Kenya, New Zealand, and Nigeria, and they will launch businesses in the sport, energy and health technology sectors. Winning ideas included green energy from waste coffee ground; a low-cost smartphone battery charging solution; and a device for enabling consumers to instantly verify whether a branded product is counterfeit via their mobile phone.

Big Ben, London. Picture courtesy of Doco, Wiki Commons.

The Government believes that the scheme will create new jobs, promote foreign investment and have “a significant cumulative impact” on the economy. It adds that businesses based in the UK have access to 500m customers across Europe, and that these customers tend to be “early adopters” of innovative technology.

Minister of State for Trade and Investment Lord Livingston said that the UK “is fast becoming the country of choice for talented graduates to start and grow their businesses.”

The Sirius Programme is open for entries in January 2014.

taxmoneyhavens.com