Best option for low corporation tax and investments

aisoftwareanalytics said:

I live in Spain

I'm sorry to hear.

aisoftwareanalytics said:

I would like to stay as a tax resident in Spain

Then things are nice and simple for you. You pay taxes in Spain or you risk getting Shakira'd.

Anything else is just wishful dreaming... A mere gentle whisper of a possible reality that you have chosen to forego in favor of living in Spain.

aisoftwareanalytics said:

for now as I've been here 10 years and thinking about getting a passport.

You can kiss the passport goodbye if you get busted for tax evasion. 10+ years down the drain. But maybe that's worth the risk to save a few thousand on taxes?

aisoftwareanalytics said:

My revenues are roughly 160k per year.

This is a good income and you're doing well for yourself. Clearly very good at your profession. Don't mess that up. You can live comfortably in Spain on that income, even after you register as an autónomo and pay taxes.

However, it's nowhere near enough for a legitimate offshore structure to even be viable. All you're proposing are varying degrees of Tax Evasions 101, maybe Tax Evasion 102. If/when the hacienda finds out, they're going to take one look at it, find the highest number, assume that's your income, and send you an invoice based on that being your corporate and personal income. 30 days to pay. See you in court.

aisoftwareanalytics said:

I understand that Spain is very aggressive at going after that kind of setup so looking for options.

Only sensible option is to sell your house and move away from Spain ”” or pay Spanish tax.

aisoftwareanalytics said:

I have friends and family who can help own and / or run the company.

It's a cruel thing to involve friends and family in a tax evasion scheme where they in a worst case (and, in this situation, unlikely) scenario could end up on the hook for money laundering and facilitation of tax evasion charges. Awkward family gatherings.

aisoftwareanalytics said:

I have a Italian friend who lives in Norway, is moving to japan and later canada.

None of those are particularly tax friendly, except Japan's 5-year rule which wouldn't work in this case.

aisoftwareanalytics said:

My girlfriend is from Argentina, lives and works in Spain, but has a Italian passport. Her Argentinian passport has never been used in Spain or registered here.

All terrible places for tax.

aisoftwareanalytics said:

Options I've researched so far or been suggested:
UK company owned by myself 100%, brother as director, owning a Romanian microcorporation company (3% corporation tax on revenues below 500k) with a Romanian resident as administrator. UK and Romanian don't have CFC rules so UK company can take dividends from Romania to UK and only pay the 8% dividend tax. However, apparently Spain will not like that I own a company that has a subsidiary paying less corporation tax than would be expected by a spanish company and will make proving substance of the Romanian company very difficult. Not sure how likely Spain would be to discover this.
Romanian company owned by my girlfriend using her Argentinian passport, potentially with her becoming a tax resident there. What would be the risk here that Argentiana, spain or italy discover this and have issue? What would be good ways to get the money afterwards? Her taking personal dividends to a Romanian bank account?
BVI company with nominee shareholder and directors. Not sure how risky this is or how easy to get banking will be?

Just... No.

aisoftwareanalytics said:

What do I need to be aware of as far as CFC, banking regulations and PE / proving company substance?

Substance good enough to keep the hacienda at bay is probably going to cost about as much as your taxes would be.

aisoftwareanalytics said:

Which is the best option? What other options are there?

Accept reality. You have chosen a life in Spain. That means complying with Spanish law.

aisoftwareanalytics said:

Where can I find good information to learn more about this? What should I be reading or who should I be contacting?

Speak with a good Spanish tax adviser. Get yourself registered as an autónomo, make sure you maximize all your deductions/incentives, and pay the hacienda in full and on time. If you do that, you'll live a happy, peaceful life where you can focus on growing your business.

No need to live with the worry of what would happen if information one way or another leaks about your unholy UK”“Romania”“Spain”“Argentina”“Italy”“Norway”“Japan”“Canada conglomerate. Each jurisdiction is a potential point of failure. You even have clients in Spain? Dios mío...

It's no secret that Spain misses a lot and people get away with tax evasion. Maybe what you propose would work. Not because it's particularly crafty, clever, or compliant. Rather because of a combination of luck and being low profile (current revenues aren't that to pursue unless it's an easy win). But when they find someone, the gloves come off right away. They are aggressive, powerful, and ”” worst of all ”” incompetent. A deadly combination to go up against. I'd rather have a dispute with a Scandinavian tax authority than the Spanish. Competent people can be reasoned.

You can reach out to Sovereign Group and their ilk. However, while they may be happy to set you up with structures outside of Spain that achieve the client's goals on tax reductions (abroad), secrecy, asset protection, estate planning, and so on, they will always insist that you seek independent legal advice where you live.

aisoftwareanalytics said:

I was suggesting those people and places to understand what would possibly be the least risky of those options, not to interconnect them. Which of those options are least likely to get investigated? What would the risks be if they did. Especially if I do not get involved and they are more typical setups i.e. my brother in uk owning a Romanian company with a local romainian adminstrator / employee and not taking any personal dividends.

Least likely to get investigated is hard to answer without knowing all the surrounding circumstances. We only know what you tell us. Don't know how trustworthy the people involved are. Would they cave under pressure? Would they lie to the government for you? Could they be enticed with financial compensation? Are they going to make a mistake and spill the beans to a bank?

On paper, owning a Romanian company which has genuine substance in Romania shouldn't draw much attention, as long as you pay taxes on your dividends. No one bats an eye at that, most of the time. Romania is a bit of an outlier, but it's not unheard of.

But if you're actively working for the company or have effective control over it (beyond just what a majority shareholder would), you're headed towards tax evasion territory again. Your structure goes from being founded in law to being reliant on secrecy. Secrecy is a weak link.

It all comes down to whether you're OK risking your 10+ year investment for a Spanish passport, big fines/penalties, expensive court battle, and/or whatever else the hacienda throws at you.

At an income of 160,000, you're taking home around 90-100,000, IIRC. When you factor in all the costs (incorporation, accounting/filing, salaries for economic substance, legal fees, and taxes), I'm not sure you'll come out much ahead.

aisoftwareanalytics said:

What is the safest way or structure for a BVI company, is that even feasible?

Safe in what sense? You're not going to (legally) get away from your tax obligations in Spain and any company that you own/control (directly or indirectly) from Spain is tax resident in Spain. Having nominees doesn't change the fact that the company is tax resident in Spain if you continue to exercise effective control over it. If the company has a bank account, the nominees will declare you as UBO, and the bank will likely report the company/bank account to Spain.

aisoftwareanalytics said:

What would be some more crafty, clever, or compliant ways? Or how would I go about finding them?

Speak with Spanish tax advisers about it to start with.

I'd say it comes down to two things:

1. Move away from Spain: don't like Spanish tax? Don't live in Spain. It's totally legal, very easy, and can be adjusted to whatever budget you have in mind.
2. Set up genuine substance somewhere. And don't just focus on the substance requirements in the place of incorporation. Look at how Spain defines it.

For example, you can easily set up a company in Labuan that pays little to no tax and has economic substance in Labuan. But that doesn't mean the Spanish tax authority is going to agree and reach the same conclusion. The two have different ideas of what's required.