Comment by jokethrowaway
2 years ago
I'm not sure this would fly well for Germany.
Generally, in most European countries, if you're resident in one country and open a company in another one (and start paying corporate tax there) you need to prove there's a valid reason to have the company there.
It can be hiring people there, having a director there, having an office, having your board meeting there.
Otherwise the company where you reside can argue that your foreign company is actually done to avoid paying taxes in the country you reside and ask you to pay corporate tax rate as you would in your country of residence.
Maybe having shareholders (Y-comb) is proof enough you can claim to be a Delaware company - but for small German businesses I don't think it's as simple.
Happy to be corrected.
I am wondering, too - how would you actually solve this issue if you have founders living in multiple countries, inside and outside the EU (created a new topic here https://news.ycombinator.com/item?id=31620700)
I started a company across two countries and it's not a big issue. As long as you have some reason to incorporate in one country (eg. Director and shareholder in the country) you're good even if you have foreign partners.
I think there is a way to abuse this by having income of individuals in high tax country be received in low tax countries and held there until the individuals relocate to a low tax country. I believe if you were to accumulate income from different individuals in different high tax countries it would be hard for the tax department to prove the setup is done with the intent to avoid taxes. You could even reallocate shares dynamically to reflect how much money each party brought to the company.
You're trading taxes with trust in who is running the low tax company, though.