Holding Company in Estonia or Lithuania

At what point would it make sense to look into opening a holding company for encapsulating personal investments, and why? I see regulatory clarity and certainty as good reasons. Maybe reporting and accounting would be simpler too, when compared to other countries.

Tax on the individual would affect only the dividends paid out by the holding, right? This is good for those who want to re-invest most of the gains, as it reduces tax friction while the assets are encapsulated by the legal entity.

I’d be interested to know what are the reporting and tax requirements in any of those 2 jurisdictions for:

  • Stocks & ETFs, capital gains and dividends
  • Startup investments via Seedrs and similar
  • P2P lending
  • Cryptocurrency trading, capital gains, treatment of crypto-crypto trades, airdrops, forks, crypto lending, crypto borrowing, etc.
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Here’s some interesting info:

http://www.companyincorporationestonia.com/holding-company-in-estonia

Starting with 2015, the corporate tax rate in Estonia has been set at 20%, however, Estonian holding companies which have not distributed any profits are exempt from taxation. In case the holding company distributes some of the profits to resident or non-resident shareholders, the exemption will be applicable to the remaining undistributed profits.

Another important aspect related to the taxation of holding companies is that non-resident shareholders will not be subject to the withholding tax on dividend payments distributed by the holding.

https://www.companyformationlithuania.com/holding-companies-in-lithuania

  • no capital duties for holding companies buying shares in other companies;
  • a participation exemption regime is available in the case of distribution of dividends;
  • the transfer of shares is exempt from taxation in the case of holding companies, provided certain requirements are met;
  • the holding company will be subject to the corporate income tax which has a rate of 15%.
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Estonia considers crypto as property for tax purposes.

Crypto-crypto trades are taxable, too bad.

Within the meaning of subsection 15 (1) of the Income Tax Act, virtual currency is considered as property.

Income tax is charged on gains from the transfer of virtual currency, including exchange (subsections 15 (1) and 37 (1) of the Income Tax Act).

If a private person receives income from trade, purchase and sale of virtual currency or from the exchange of virtual currency against another virtual or traditional currency, the received income must be declared in the tables 6.3 or 8.3 of the income tax return as gains from transfer of other property.

The gain is calculated based on the transaction as the difference between the selling price and the purchase price, or, in the case of exchange, between the price of received property and the purchase price of the virtual currency.

Some info about Lithuania

For corporate and personal income taxes, “virtual currency is recognized as current assets that can be used as a settlement instrument for goods and services or stored for sale.”

For VAT, it is “considered as the same currency as euros, dollars etc.” For other tax purposes, “other types of instrument, e.g. certain types of tokens, may be recognized as a virtual currency as well.” The document details:

Income received from individual purchases and sales of virtual currencies will be taxed standard 15% fixed income tax rate.

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@m thanks for sharing. These are great questions for an accountant or the tax office :wink:

If your investments are in your personal name then it’s worth speaking with an accountant in your local jurisdiction about this. If you’re holding them in a company or trust structure in another jurisdiction, then it’s worth speaking with an accountant in that jurisdiction (or your local accountant may have partners in that jurisdiction) so you can better understand the tax treaty between your home jurisdiction and the jurisdiction you’re holding your assets in.

In really any jurisdiction you’re required to declare global assets so it really depends on how those assets are taxed in the relevant jurisdictions ie. home and foreign, along with the tax treaty between them - best to get an accountant involved that has experience in tax law.

There’s been a few tax law reforms in Lithuania recently so you’ll want to engage professionals that keep up to date with reforms because usually even if you have an accountant, you’re usually personally held accountable by tax offices.

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