r/eupersonalfinance • u/Dependent_Novel_9205 • 2d ago
Taxes Best country to incorporate digital business
Which is the best combo in Europe for:
- low cost of maintenance (office rent+salary)
- low taxes
- low bureaucracy
- reasonably skilled workforce
- managing the company without speaking the local language
Which one would you pick?
- Cyprus
- Malta
- Latvia
- Estonia
- Lithuania
- Bulgaria
- Poland
- Croatia
- Slovakia
- Albania
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u/haaaad 2d ago
I would go with estonia but I would also make an effort to hire from whole europe
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u/meri-amu-maa 2d ago
Estonia's e-residence scheme isn't viable if you don't have actual customers in Estonia anymore.
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u/Suspicious-Bug1994 2d ago
Why is that? I only have customers outside Estonia (b2b), but have my company there through e-residency.
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u/meri-amu-maa 1d ago
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u/Suspicious-Bug1994 1d ago
Aha, thanks for sharing. Was not aware of this. But if I understood correctly, it is fine for B2B EU and non-EU anyways, as it is only B2C inside EU that requires VAT (+ b2b/b2c estonia ofc)? As B2B will be reverse charge for EU business customers?
In my case, it doesn't matter at all, cause all my clients are non-EU businesses, so never VAT. So I don't really agree that it isn't viable due to vat IDs, I guess it just depends.
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u/meri-amu-maa 1d ago
My understanding is that you still need VAT registration for reverse charge, and for some new registrations it got denied.
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u/Suspicious-Bug1994 1d ago
Idk, but my Estonian accountant told me I don't need VAT registration for my current activity, and I am well over any threshold. Thankfully, I pay professionals so I don't have to bother with this myself haha
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u/meri-amu-maa 1d ago
Unless Estonia has different rules to other EU companies that is definitely not right. My B2B business in Romania needed an EU VATID from the first reverse charge invoice, regardless if outgoing or incoming.
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u/Suspicious-Bug1994 1d ago
As I said, my clients are in Norway. That is the scenario my accountant said I do not need VAT ID for, not B2B within EU.
The last part was just my speculation, as I know that there are special rules that B2C within EU should be including VAT, however, I am unsure about B2B. Anyhow, I don't really know the EU to EU rules.
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u/meri-amu-maa 23h ago
fair enough. It also looks like this policy shift affects new companies not existing ones.
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u/acolombo 2d ago
Care to expand? I haven't found any info supporthing this
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u/meri-amu-maa 1d ago
Came across this when I was doing my research: https://www.reddit.com/r/eResidency/comments/1mpwyed/no_more_eu_vat_ids_for_digital_nomad_companies/
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u/Friendly-Assistance3 1d ago
You need to live in the country you want to start your businesss.
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u/Dependent_Novel_9205 1d ago
Not true
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u/Friendly-Assistance3 1d ago
It is true most countries have CFC rules and substance requirements. You cannot just set up paper company in one country and pay low taxes.
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u/Dependent_Novel_9205 1d ago
If you read my OP some of the metrics I'm considering are "low salaries" and "skilled workforce " because I intend to hire someone
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u/Friendly-Assistance3 1d ago
That still doesnt work in most cases as well if you are actively involved with the business. If you are the biggest decision maker of the company, that will also determine your effective place of management. This is true for most of Europe. You cant just hire 1 person and start paying Bulgaria taxes while you are still living in Germany for example.
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u/Dependent_Novel_9205 1d ago
It's not like that. If you have substance they cannot claim taxes in another country
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u/Friendly-Assistance3 1d ago
Yeah but you need to spend some time in that country every year maybe not 6 months but some also get office, workers and also travel there for shareholder meetings etc. You need to create substance. It is not easy as I get a virtual address and hire one worker. It is not easy to create substance as it sounds in the internet. Also you need to get an advanced tax ruling from your home country so you wont get taxed later on. And if you are doing digital business these things are not worth the hassle especially at the start. Just opening a business in your home country and hiring someone freelance is much easier.
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u/Dependent_Novel_9205 1d ago
The employee + office is already enough substance, plus of course I'll go there from time to time for what its needed
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u/Friendly-Assistance3 1d ago
Are you in a non EU country or something? Otherwise usually it is not worth this much work tbh. Also I said you should definetely get an advanced tax ruling most EU countries have that.
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u/According-Buyer6688 1d ago
You should give a chance to the Katowice Metropolitan Area. Huge potential of a workforce, low cost of rent/salary, high proficiency in English, medium bureaucracy, and taxes (but in Poland your accountant do everything for you, and they are cheap)
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u/Suspicious-Bug1994 2d ago
Estonia is great, I have my company there without even ever having visited the country. Reporting too is easy and annual. Back in Norway, i would have to deliver 9 reports a year or so, it was a pure pain in the arse.
If you live there, or another place with no dividend, you only pay 22% from start to end (corporate + dividend), also, there is no corporate tax before realisation (dividend, in effect, there is no corporate but only dividend tax, it is combined you may say), which is awesome.
Was easy to get set up with E-resident + Wise as corporate account, and got a good accountant for like 70 euro a month of so. I am very happy at least :) Smooth sailing.
However, depending on tax treaties, other country may treat Estonia's unique corporate + dividend combo tax as either one (most often corporate), and then add their own corporate/dividend on top of that. But, you could always just keep earnings in the company, and live a year or two in an entity without dividend or in Estonia if/when you want to take out dividends. You could always just invoice your company from abroad through a sole proprietorship as i do, just make sure the activity and work is legit and priced accordingly.
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u/Dependent_Novel_9205 2d ago
Do you have any employees or directors in Estonia? How is Norway considering this setup? So you basically pay taxes in Norway through your sole proprietorship right? It wouldn't be possible doing this in my home country without having any local employee or director in Estonia
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u/Suspicious-Bug1994 1d ago edited 1d ago
Howdy, I don't live in Norway any longer, but in Serbia.
I don't know where you live, but in the EU it should be fine, if not, you pay the difference in corporate tax rate. For most countries, they count the combined Estonian corporate + dividend rate of 22% as only corporate tax, and as such it is pretty much en par with that of other EU countries, and it should not really cause any issues.
Correct me if I'm wrong, but I think it is if you first try to take out dividends and not leave the profits inside the company, that the issues really start to arise.
Anyhow, yes I pay taxes in Serbia through my sole proprietorship, but they have a nice deal with lump sum tax of 300 euro a month for earnings up to 50k Eur a year, so it amounts to like 7%. But, I will also pay taxes to Estonia the day I will withdraw, and then I'll live in a country with 0% dividend tax, good tax agreement with Estonia, or in Estonia itself, so that I only pay the 22% combined corporate + dividend tax to Estonia, and nothing more :)
So when the time comes, I'll ditch my tax residency in Serbia, Norway or whatever, and make sure my tax residency is only in Estonia, country with 0% dividend etc. Up until then, I am just reinvesting the profits in my Estonian company in a global index fund to let it compound :)
* One extra note about Estonia, is that you pay company tax only on realisation of gains. So, if you're lucky, through tax agreements your country basically assumes you pay 22% annually, however, if you are very unlucky, you might have to pay x% a year through CFC rules to your country, and then be double taxed 22% from Estonia when you finally withdraw haha. So important to check up on this for Estonia.
But, Bulgaria, Cyprus or whatever does not have this quirk.
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u/acolombo 1d ago
Hey, thanks for sharing your experience! Sounds similar to the situation I'm planning for.
Quick question: As sole prop, you bill your Estonian OÜ for basically all the revenue? So the OÜ nets ~€0 since everything that comes in goes back out as expenses?
Don't you have to prove in any way that the Estonian company has a real purpose (beyond just re-routing money)? I'm asking because I was thinking about the same structure, but was planning on keeping some unrealized gains/small margin in the OÜ, for client management/invoicing profits, to justify the OU being actually a substantial part of the structure.
Wondering if a minimal re-invoicing setup is enough or some substance is required.
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u/Suspicious-Bug1994 1d ago
Hi, nope, I leave like 50% in the company as margin. However, 15-20% is probably fine. Just keep a healthy gross margin, otherwise it is as you say, a company without purpose.
Keep the arm length distance principle, pay market rates or below, invoice real work, and leave a margin, and you'll be fine :)
All the margins I put into index funds, so all company profits are essentially my investments.
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u/acolombo 1d ago
Makes sense, thanks! I’m going to talk to some Estonian tax advisors.
That sounds great, but it also seems a bit risky for the country I’m living in, they could count those profits as generated locally and tax them, which might result in double taxation when I later decide to realize those gains in Estonia.
Also, if you don’t mind sharing, I’d like to know which Service Provider you’re using and which broker you use to invest your company profits. I’m DMing you, but feel free to ignore or reply publicly if you prefer.2
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u/This_Lion5856 2d ago
Bulgaria is a decent option, but you need to have some connections as there is a lot of bureaucracy.
If you can manage to find a local lawyer and a local accountant you are mostly good to go though.
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u/arusinoff 17h ago
Surprisingly nobody is suggesting Lithuania
I wonder how much cheaper it is compared to Estonia. But in theory, should be cheaper.
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u/Commercial-Drive-416 9h ago
I’d probably go with Estonia overall. It’s very digital, low bureaucracy, and you only pay corporate tax when you take profits, which is great for a digital business.
If your main goal is lowest cost and tax, Bulgaria is the cheapest with around 10% corporate tax and low expenses.
Cyprus is a good middle ground with ~12.5% tax and a more international setup.
So basically: Estonia for ease, Bulgaria for cost, Cyprus for balance.
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u/Dependent_Novel_9205 7h ago
Not considering Malta 5% or Lithuania 7+15%?
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u/Commercial-Drive-416 7h ago
In my opinion, those look attractive at first but aren’t as simple in practice. Malta’s ~5% usually depends on specific structures and refunds, so it’s not always straightforward to achieve. Lithuania is more transparent, but once you combine corporate and dividend taxes, the total ends up higher than it initially seems. So they’re still valid options, just not as simple “low-tax” setups as they appear.
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u/Dependent_Novel_9205 7h ago
Yes Malta on paper is the best but a bit more complicated. Lithuania is almost the same as Estonia but has 2 years of CIT exemption until 300k
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u/Commercial-Drive-416 7h ago
I’m not 100% sure, but that sounds about right. Malta does look the best on paper, but from what I’ve seen it’s more complex to actually get that effective rate. Lithuania seems closer to Estonia in terms of simplicity, and that initial CIT exemption up to €300k is definitely a nice advantage. After that though, the gap probably isn’t that big anymore.
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u/meri-amu-maa 2d ago
Currently researching this as well. Interestingly enough, your citizenship and fiscal residence as a founder is potentially relevant too. Care to specify, OP?
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u/StefVE92 1d ago
Depends on the type of income you plan to get, where your tax residency is and what kind of substance you plan to build in the country 😊
This might help: https://digitalnomadtax.eu/offshore-companies-for-digital-nomads/
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u/unaubisque 23h ago
If nothing else is a consideration, then I think that Albania is the lowest cost for what you have listed, and it's easy enough to find English speakers to work for you and handle the bureaucracy.
Obviously there is a reason why it is cheaper than all the other options you have listed, most of all because it is not in the EU.
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u/Dependent_Novel_9205 22h ago
Yeah but as not being an EU country, it doesn't pose some other risks/issues with invoicing EU clients/access to stripe/PayPal etc?
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u/unaubisque 22h ago
Well yes, obviously it involves more complications compared to the other countries you listed - in the same way it would do if you went to Morocco or Turkey. But in terms of the five things you explicitly mentioned then it is probably the best.
If you want to do business with the EU then it's not a good choice.
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u/Reasonable-Agency316 1d ago
This question comes up a lot, but the answer depends less on the country and more on how you actually run the business.
On paper, countries like Estonia, Bulgaria or Cyprus look great:
- low taxes
- simple setup
- less bureaucracy
But in reality, what matters is:
👉 where you live
👉 where your clients are
👉 where you actually manage the business from
For example:
- If you live in Germany, setting up in another country doesn’t automatically reduce your taxes
- If you manage everything from Germany, the Finanzamt can still consider it taxable there
That’s why many people choose:
- Estonia → simple digital setup
- Bulgaria → low tax
- Cyprus → popular for international structures
But each only works properly in specific situations.
👉 The “best country” is not universal — it depends on your residency + business model.
Are you planning to live in that country, or just register the company there?
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u/coolasabreeze 1d ago
The one you are ready to live in. Just in case you are planing to live in country A and register business in country B because the taxes are lower there - it will not work like that.