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.
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;
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.
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%.
The Liberian foundation, modeled on the 1993 modern Austrian law of foundations (Stiftung), is a useful and flexible vehicle, used for various purposes, including charitable, public and personal.
Liberia have since WWII been one of the worlds largest and most well reputed international shipping bases. Many of the worlds leading cruise operators, tanker owners etc. are formally based in Liberia. Legal entities like a foundation is an expansion of the types of legal vehicles available from this jurisdiction.
Similar to all foundations, the Liberian private foundation is a separate legal entity and all assets transferred to it, usually in the form of a gift by a donor, are irrevocable and the sole property of the foundation. The private foundation is established through the memorandum of endowment, and an initial endowment (Donation/Gift). The donor(s) cannot withdraw the assets once they are donated or endowed to the foundation. The assets are placed at the disposal of the foundation.
Treasure Chest, Courtesy of Wiki Commons
As with the donor, there are no statutory restrictions on the residency or nationality of the officers or secretary. Moreover, there are no requirements for assets to be located in Liberia.
There are minimal filing requirements with Liberia, thus protecting the privacy of the beneficiaries and the donor. Once formed, there is a mandatory annual return for the privatefoundation, which must be signed by the Secretary and submitted to Liberia. The annual return confirms that the information filed in the extract is correct and that proper accounts are maintained. Liberia does not require submissions of financial accounts, nor are they required to publically file such information. Any changes or amendments to the extract must be filed with Liberia.
A foundation domiciled outside Liberia may, if permitted to do so by its constitution, apply to migrate its domicile to Liberia. In the same way, Liberian law allows for conversion of any recognised entity to a private foundation, provided its own constitution allows for this.
Liberia imposes no gift tax on the donated assets at the time the private foundation is established. Moreover, any income generated by the assets of the private foundation is exempt from tax in Liberia. However, there may be tax implications for the beneficiaries in their respective places of domicile for any income they receive.
In conclusion, a foundation is useful for preserving wealth and for asset protection, and allows for flexibility in international tax planning. The above gives a brief overview of how a Liberia foundations.
A new law exempt immigrants from capital gains taxes in a bid to attract new wealthy residents. The island nation has join other offshore locations, like UK territories Jersey and the Cayman
Islands, in helping wealthy individuals pay less tax. Puerto Rico is a US territory, which means it is technically part of the United States but largely administered by an insular local government. It is a four-hour flight from New York City, offers a nice climate, and doesn’t have another obvious strategy for economic growth. But most important is the law passed a year ago, which exempts new residents from the island’s already small 10% capital gains tax.
Picture of the in Puerto Rico, Courtesy of Wiki Commons
The local government is luring investment managers, who can often treat their salaries as capital gains, along with other wealthy Americans whose income is largely investment returns, on moving to the island, with the hope that their arrival will coincide with investments in real estate, more service consumption, and perhaps new businesses forming here.
The law does offer a significant financial advantage, but before it was enacted, capital gains were taxed at only 10%—still more than fifteen percentage points lower than the American rate, which could have still attracted wealthy residents. People taking advantage of the law must live on the island for 183 days a year, among other residency requirements, and depending on how strictly they are enforced, Puerto Rico may be more of a retirement destination for the super-wealthy than the kind of place where they operate a business.
The issue, though, are Puerto Rico’s economic woes: 14% unemployment, little in the way natural resources, growing pension obligations, and a robust grey market have the country on the budgetary ropes, with raters looking to downgrade its already junk-level bonds. Those high yields are attracting investors, but they are essentially betting on the expectation that the US won’t let its territory go under. They might not be wrong: The UK, after all, rescued the Caymans when that country foundered financially, but it attached a number of strings, including efforts to limit tax avoidance. While the government guarantees the capital gains tax break through 2035, a country looking to raise revenue will find a way to tap the pockets of its wealthiest residents.
Indeed, tax incentives have proven to be both a boon and a bane to Puerto Rico: The country’s recent economic troubles can be traced in part to the end of costly manufacturing tax breaks the US government gave to companies who made goods on the island. But when those breaks ended, in 2006, many companies kept their facilities on the island while transferring ownership to Cayman Islands subsidiaries, avoiding taxes in both Puerto Rico and the United States.
The best countries for Snowden, the following countries have extradition treaties but do not always comply with US requests: Bolivia, Ecuador, Iceland, Nicaragua, Switzerland, Venezuela, and Zimbabwe.
São Tomé & Príncipe
Bosnia and Herzegovina
the Central African Republic
the Marshall Islands
Dem. Republic of the Congo
United Arab Emirates
Cote d’ Ivoire
Snowden could have taken the steps we recommend on our site and publications on the best countries to obtain a second passport, open an offshore account, and more. Internationalizing is a strategy for anyone who does not want to be under the total control of the whims of one particular government – especially one that is desperate and bankrupt.