in 🤕Brainfuck

I pulled a good amount of money that month and I just didn’t understand why the Spanish government had to take lots of my net gains when I didn’t even live there. So I decided to take action and see which countries are the best to set up a company.

Important thing for me is that I still wanted to keep the health care and pension in Spain, and also I want it to be legal.

I had been researching all I could. Mostly with the list of the tax rates per country. Very useful to have an idea of what to expect in any country. So I narrowed down my options to the following:

  • Ireland (12,5% tax and I was told 0% the first three years).
  • Estonia (0% corporate tax but 20% personal and dividends).
  • Bulgaria (10% corporate and individual tax, 5% in dividends).
  • Discarded: UK, Andorra, Malta and countries outside Europe.

The first thing I did was emailing the same messages to different accountants of those countries. Those who replied the most customized answer were the once I chose for skipping or considering as serious accountants.

Options I’m not going to go with

So here are the countries that after a lot of examination and exploration I decided they weren’t what I was looking for in my case.

Setting up a company in Ireland

In Ireland I talked with Larissa from AccountantOnline and she has been super helful. We talked for 15 minutes on Skype and she really knew well the system in Ireland but also my situation of being a Spanish resident. If you decide to go for Ireland, go with them as accountants and setting everything up.

So at first I was told in Ireland you pay 0% taxes the first 3 years. Well, at first it was but now is not like that anymore… Is under special circumstances. After that you pay 12,5% which is not bad at all.

Larissa explained me lots of things. Honestly I got lost more than once, but I saw that it wasn’t tax free in the beginning so… I decided to skip ahead.

Setting up a company in Estonia

The best guide about Estonia was this one. Reido from Efin gave me a good detailed answer without charging me anything neither. The 0% tax for companies are awesome, specially if you are raising start up. But at the same time then you get taxed 20% for dividends or income so… I would be in the same situation in Spain. Moving on.

What I’m going with. Setting up a company in Bulgaria

I read this amazing guide of Plovdiv and everything made a lot of sense. A few of companies who replied very customized without making me pay anything were Arceland, Legaconsult and lmlegalservices.

Bulgarian accountants break down

So here’s what they had been offering and recommending after a few emails back and forth.

The best quality-price. Arceland

They aren’t the cheapest, but keep reading to see why them.

  • Setting up the company 450€ (one payment)
  • Accounting services: 150€/month
  • Virtual office: 25€/month
  • Annual closing: 350€/year
  • Publish financial statements once a year: 150€/year
  • Extra: 50€ if there’s a tax audit
  • Total: 2.600€/year (+450€ first year for establishing the company)

They sent me all this prices in one document at once, which meant that I almost didn’t have to question anything. After receiving their offer, it made me question if the other companies I asked they were hiding me some costs… So I really appreciated a forward email from Arceland with all the prices. Also they told me I could avoid paying the VAT of these prices using their daughter company. An alternative the others didn’t tell me.

Also they were super honest and gave me their personal opinion. I always appreciate when they are not answering like robots and have some empathy. So they recommended from a honest point of view that contributing with social securities would be a waste of money, time and worries. I would need 30 years of payment and the maximum pension in Bulgaria is currently 400€/month…

I love that. Not that the pension would be that low, but rather than they are advising me from that perspective, since like I mentioned before it was something I was worried.

They said:

If you want to have something aside I would recommend you to make a private investment insurance and private life insurance – they will serve you as (a backup in case of something bad happens and as) a pension one day, hoping that the world will not change dramatically in the next 40 years. As you a young man you have enough time to take care, the other personal advise that I would give you (I wish I knew it at your age) is to keep aside (at least) 10% of your income and not spending it. Keep the money on time deposits, insurances, shares in mutual funds, whatever you want. One day you will have enough money on your own to make a big investment and get passive income which is the best income – it comes without you working.

I asked if they would make me a discount if I pay one year in advance. They said that about 10% they could do. Great. The breakdown payment would be the following.

breakdown

Another interesting thing is that there is an option to avoid the 5% tax but the money will not be exactly “incomes” to you. You can increase the capital of the company with the net profit of 9.000€ and then in few months to decrease it to the minimum required capital (1 euro) and this money will be returned to the shareholder (you). As both increasing and decreasing of the capital are legal procedure that must be registered in the Trade Register there will be legal fees. How much? Here’s what they told me.

The two legal procedures are:

  • Increasing the capital with the net profit (250€).
  • Decreasing the capital after few months (250€).

This lawyer is not tax lawyer but professional in the Commercial law. With this you are going to increase and decrease the capital and this is not taxable incomeThis means that if your profit is 10.000 euros you can do both. Either pay 5% tax on dividends or use the capital procedure. For amounts more than 10.000 euros the capital procedure is cheaper.

Other cheaper accountants. Why not them

I spoken to maybe 5 different consultants and accountant companies. A few example prices are the following:

  • Setting up the company: 430€ (one payment)
  • VAT registration: 195€ (one payment)
  • Accountant services: 150€/month
  • Total: 1800€/year (2160€ with VAT) (+625€ setting up)

As you can see, I could almost pay 1.000€ less a year if I go to another accountant, then why? Simple. The first option is the most pricey but at the same time the most reliable. They give me a lot of information I haven’t think of and so on. The second option is cheaper but the communication is not the same as the first on.

For one part I think I’m in this situation because I want to pay less, but I also want to worry less. So Arceland seemed the best deal and most balanced between these two features.

Arceland took action from the beginning asking for lawyers and giving me this customized experience that made me feel I didn’t have to think or worry about it. I haven’t had many experiences in the business world but I think that’s what all should be about. Paying somebody to worry less about that aspect.

So yes, I went with Arceland. Now, let’s see all the process.

Setting it all up legally. Lawyer up!

First tip is save every mail. Show the world that you are constantly asking for how to set up everything in a legal way. For my peace of mind I wanted to structure everything in a way that:

  • I stop paying the self-employee fees in Spain (2640€/year + 20% of net gains).
  • I still have benefits for being Spanish resident (health care and pension).

The first thing I did was calling to 915548770 (Spain treasury) and record the call just in case. If they come after me that way I can show the conversation in case I need to. And it’s legal because I was part of it and I didn’t make it public. I was surprised because they knew their stuff, although they kept me on hold a few times for being able to answer most specifically. Either way they advised me to make a specific consultation and wait for the answer… This will take months. SHIT.

Instead of that, since I want the company in the next 3 months, I checked the double tax agreement between Spain and Bulgaria (here). Of course I’m no lawyer and I have no clue on the points, and Arceland suggested asking their lawyer to look into the agreement and come up with what is the most beneficial in terms of paying less taxes. I said sure. How come I didn’t ask about this beforehand…

Let’s do it. Heading to Sofia

They told me to go there on January of 2017. So I booked the flights before Christmas. I was in Poland at that time, since I had spent three days with some friends from Spain. Most of the flights were 50€ but they weren’t direct, so I figured it was way better to fly less than 2 hours spending 200€ instead of changing planes and so on. I always say how much I hate flying so the less the better.

from warsaw to sofia

I arrived with no problem (who would have thought) and the first thing I did was look for the Airbnb I had booked. It was about 15 minutes from the center by bus, but I paid around 90€ for one week which is pretty good. The accountants in Arceland told me how I would need to go to the center just for a couple of days or so, so it didn’t play much of a roll if I was a little out.

Sofia Airbnb

The room was really warm and cosy ad I had a whole little section for myself, which I really loved for privacy and so on. It was also inspiring for writing while drinking some free black tea they provided. In addition to that, the woman and her son were one of the greatest hosts I ever had. They invited me to eat dinner with them, cooking me typical Bulgarian meals and trying out Rakia. I couldn’t stand more than a sip.

cold in BulgariaWhat I didn’t count on, was the damn cold. In Poland we were -25º and it was still like this in Sofia. My eyes were already suffering from the lack of Vitamin D, but hey, business is business, right? I always said that I prefer this kind of weather, but after enjoying a cup of coffee in a sunny midday in my last Christmas in Barcelona, I think I’m starting to change my mind.

After arriving on the 8th and getting settled in the cozy apartment, right on the 9th in the morning I headed to Arceland offices. I took the bus without paying ticket and not seeing a proper way to check it (later I figured out I had to pierce the paper with a weird metal thing on the bus pole), and found the place very fast thanks to Maps.Me, one of my favorite GPS apps. If it wasn’t for them I would have been lost in any country (even in my hometown).

arceland officesI arrived at 10am and once I entered the offices with a “Hello” they answered with a welcoming “Hello Pau! How are you?”. We entered right away in one of the rooms and they offered me something to drink. The water was nice, just like their treatment. But I guess after paying 3100€ in advance is the least you can expect, but I could tell they were a really happy team.

accountant meeting

My view after she went to print the documents I had to sign.

The account manager answered me any question I had regarding the creation and the management of my company. After that, the accountant who had given me the water, grabbed the documents we signed and we left to an office next to where we were while chatting about the snow and life. In the office next door I met the notary who only spoke with my accountant. Then I signed a few more papers, showed my passport and I left.

After a couple of days I received an email from the accountants telling me that everything was ready and my company (named Pau LTD in a spark of originality).

confirmation

Bulgarian bank. A Bunch of thieves

We want to authorize Power of Attorney to the Notary and afterwards to Piraeus Bank. There, with the help of one of the accountants, we opened two accounts. One in Lev and the other in Euros with the following features. Although I thought twice about it and after a couple of days I went there to cancel the Lev account.

Euros account
5.11€/month
50€reserved balance
Total: 65€/year

After that I had to wait around 10 days for the debit card to arrive. I sent them an email and they confirmed that I got it, so I went to pick it up in a moment.

Piraeus Bank gave me a lot of shit. I had to call to one of those super expensive phone numbers because the card didn’t work for a long time.

In addition, they get a commission for every single damn transaction. So far I have 25€ (for 2x 1.000€ top ups on Revolut), 15€ for receiving money in euros in February…

  • So far then, banks commissions have been: 426€ (5/7/17)

So, the best way is sending money to my Spanish bank account every 1-2 months. So at the end, not using the debit card again. At least the bank fees are counting as business expenses. Something I didn’t consider when I had my business back in Spain. Basically because I had none.

After seeing all this money they were getting from me I just wanted to use some Bulgarian on them:
pederás: fagget
copele: bastard
dati eba maikata: to fuck your mother
date eba và gàsa: to fuck in the ass

Spain & Bulgaria breakdown

In case I have a salary of 10.000€/month or 120.000€/year, what is more beneficial in my case?

Spain €/year: 24.140€
Bulgaria €/year: 8.470€

Spain self-employee
Accounting: 120€/year
Bank: 20€/year
Self-employee rates: 3204€/year
20% taxes: 24000€/year
Total: 27.344€/year

Bulgaria LTD
Accounting: 2340€/year
Bank: 130€/year
5% taxes: 6000€/year
Total: 8.470€/year

  1. Why do you calculate with 5% taxes (6000€/year) and not with 10% in your Bulgaria breakdown?

    Are you tax resident in Spain and get a wage from your Bulgarian company? …and are you paying your social security/pension/tax from this wage in Spain?

    • Because the 10% is corporate tax while 5% is on dividends which I’m paying to myself. So no, I don’t get a wage from the company. And I’m sure i will end up paying some taxes at the end of the year in Spain. Will report back when this happen to see how it went 🙂 The first year still counts as an experiment. Thanks for stopping by!

      • ok now I am confused because above you wrote about, how to avoid the 5% dividend tax 😀
        but never mind.. I am happy to see further blog posts and updates about this topic!

  2. Most Greek developers I know including myself are paying 60 euros/month to our Bulgarian accountant and 150 euro for yearly account closing, and 20 euros/month for 2 bank accounts (1 leva 1 euro).

    I understand that your accountant is good, but he’s too damn expensive.

    • Could you post a link to your accountant website or recommend someone? Thanks.

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