Maltese TradeCo and HoldCo - Non-Dom EU Resident

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Hey everyone,



I'm in contact with a few law firms, but it's taking them forever to respond. I appreciate this community a lot, so I thought I'd ask for your advice/recommendations as well. I know my lawyers will tell me it's a solid plan because that's how they make money. I'd like to hear your unbiased opinion and personal experience. So here goes:



I am a Bulgarian resident with an annual service income of ~€2-3 million. I own a US C-Corp that provides services to media companies. They pay my US C-Corp. Then I pay my contractors from the US C-Corp and transfer the remainder (the profit) to a Bulgarian LTD. Then I pay myself from that Bulgarian LTD at a 14.5% effective tax rate.



The Bulgarian tax rate is good, but as I grew my business, the government harassment kept increasing. So I'd like the dual Maltese structure for asset/wealth protection as well. I own ~€8M in residential real estate in Bulgaria, and I don't think having 100% of my assets tied up here is a smart move. I'd like to lower my tax rate and diversify the risk. Maybe set up Bulgarian LTD's that hold real estate that are fully owned by my Maltese HoldCo? So, a two-tier Maltese corporate structure (HoldCo + TradeCo) to manage this income and for future investment might make sense, or am I missing something?



If you can also recommend a few legit law firms that have done this for you + give me a rough estimate of the maintenance costs (I'm hearing 10-15K euros per year atm), that would be greatly appreciated. Thank you!
 
Are you distributing dividends, or are you just billing your Bulgarian LTD for the profits?



You would also need to account for substance costs (employees, office, etc.) in Malta to make it work.
 
bulgarian said:






If you can also recommend a few legit law firms that have done this for you + give me a rough estimate of the maintenance costs (I'm hearing 10-15K euros per year atm), that would be greatly appreciated. Thank you!

Click to expand...

You can do this yourself. But honestly, an office and a director in Malte, you are relatively quickly at 10K per year.
 
Nah, I don't want to do it myelf. I make more by growing my business, plus I'd rather have a reputable law firm do all of it (office, director, accounting for substance). The HoldCo is for asset protection / family office in a way too.



Yes, the idea is US C-Corp -> Malta TradeCo -> Malta HoldCo (5% corp tax) -> dividend distribution to me in Bulgaria (another 5% tax); or skip the second 5% dividend and create a Bulgarian LTD owned by HoldCo to invest in real estate or stocks, effectively making my tax burden only 5%. *Then I can sell these Bulgarian LTD's (1 property per company) and the proceeds will go to HoldCo (0% capital gains)*.



And then I can do it all over again or distribute dividends to myself at 5%.



Am I missing something?
 
bulgarian said:






Nah, I don't want to do it myelf. I make more by growing my business, plus I'd rather have a reputable law firm do all of it (office, director, accounting for substance). The HoldCo is for asset protection / family office in a way too.



Yes, the idea is US C-Corp -> Malta TradeCo -> Malta HoldCo (5% corp tax) -> dividend distribution to me in Bulgaria (another 5% tax); or skip the second 5% dividend and create a Bulgarian LTD owned by HoldCo to invest in real estate or stocks, effectively making my tax burden only 5%. *Then I can sell these Bulgarian LTD's (1 property per company) and the proceeds will go to HoldCo (0% capital gains)*.



And then I can do it all over again or distribute dividends to myself at 5%.



Am I missing something?

Click to expand...

Are you sure everything is fine on the U.S. side?

It seems to me like this could be considered base erosion on US side .

I don't know the exact structure, but I'm fairly certain that you will not satisfy the requirements of Treas. Reg. §1.482-9(b) , if the FRP bills the U.S. corporation for services on a non-arm’s length basis .
 
We have no US base of operation. It's a pass-through C-Corp in Delaware. No office, no representatives, nothing. We pay our franchise tax and that's it. I've had this setup for 5+ years but it was US -> BG, not US -> MaltaTrade -> MaltaHold -> BG
 
bulgarian said:






We have no US base of operation. It's a pass-through C-Corp in Delaware. No office, no representatives, nothing. We pay our franchise tax and that's it. I've had this setup for 5+ years but it was US -> BG, not US -> MaltaTrade -> MaltaHold -> BG

Click to expand...

You mean, you elected the C-Corp to be treated as a disregarded entity?
 
bulgarian said:






We have no US base of operation. It's a pass-through C-Corp in Delaware. No office, no representatives, nothing. We pay our franchise tax and that's it. I've had this setup for 5+ years but it was US -> BG, not US -> MaltaTrade -> MaltaHold -> BG

Click to expand...

How can a C-Corp be a pass-through entity?
 
daniels27 said:






You mean, you elected the C-Corp to be treated as a disregarded entity?

Click to expand...

Yes. BG entity invoices the US and we file an annual declaration to the IRS disclosing the connection between the 2 companies and clearly stating we have no US base of operations.
 
daniels27 said:






You mean, you elected the C-Corp to be treated as a disregarded entity?

Click to expand...

This doesn’t make sense.

How can a corporation be treated as a disregarded entity
 
The C-Corp has no US nexus and no US shareholders, so it's been fine until now. But I was generating 3-5X lower amounts up until last year. So I guess the best course of action here is to eliminate the US company and make the Malta TradeCo sign a contract with the end clients?
 
bulgarian said:






The C-Corp has no US nexus and no US shareholders, so it's been fine until now. But I was generating 3-5X lower amounts up until last year. So I guess the best course of action here is to eliminate the US company and make the Malta TradeCo sign a contract with the end clients?

Click to expand...

Most likely yes.
 
bulgarian said:






The C-Corp has no US nexus and no US shareholders, so it's been fine until now. But I was generating 3-5X lower amounts up until last year. So I guess the best course of action here is to eliminate the US company and make the Malta TradeCo sign a contract with the end clients?

Click to expand...

Are you perhaps confusing something?

A C-corporation cannot be classified as a pass-through or disregarded entity
 
aniglo22 said:






Are you perhaps confusing something?

A C-corporation cannot be classified as a pass-through or disregarded entity

Click to expand...

I think he means that all profits will be passed on by invoicing to another company. Not pass-through taxation.
 
daniels27 said:






I think he means that all profits will be passed on by invoicing to another company. Not pass-through taxation.

Click to expand...

But yeah this has to be done under arm's length and has to satisfy Treas. Reg. §1.482-9(b).



@bulgarian Are you sure that you have an C-Corp and not an SMLLC ?
 
aniglo22 said:






A C-corporation cannot be classified as a pass-through or disregarded entity

Click to expand...



I think this too? Only disregarded entities are considered pass-through
 
TheCryptoAnt said:






I think this too? Only disregarded entities are considered pass-through

Click to expand...

An S-Corp is pass-through , but it's limited only to us residents/citizen .

But a C-Corp is not .
 
Yes, you guys are right. It's a C-corp (not a pass-through*). No US nexus, though, and I don't personally get paid through the USCo. The BG company invoices the US company for services. Then there's no profit left at the end of the year. I pay my accountant + a registered agent, and then I pay some Delaware Franchise Tax.
 
bulgarian said:






Yes, you guys are right. It's a C-corp (not a pass-through*). No US nexus, though, and I don't personally get paid through the USCo. The BG company invoices the US company for services. Then there's no profit left at the end of the year. I pay my accountant + a registered agent, and then I pay some Delaware Franchise Tax.

Click to expand...

Are your transactions done under arm's length and do you satisfy Treas. Reg. §1.482-9(b) ?
 
I'm not a tax professional - I trusted my accountant with it and I've had zero issues in the past 7 years of doing this. But the numbers were lower. Am I correct in assuming that I've got a bomb under my seat with the current US C-Corp structure?
 
bulgarian said:






I'm not a tax professional - I trusted my accountant with it and I've had zero issues in the past 7 years of doing this. But the numbers were lower. Am I correct in assuming that I've got a bomb under my seat with the current US C-Corp structure?

Click to expand...

An arm’s length transaction means charging the market value (the same amount you would charge an unrelated party).

However, it appears that you are eroding the tax base of the US corporation by not engaging in arm’s length transactions .
 
Also, the IRS is heavily understaffed, so you have to be either very suspicious or very unlucky to get audited.

Just because it worked for 7 years doesn’t mean it’s legal
 
I mean I've got 30+ people working in the BGCo to service the USCo, and it's a lot of routine media work. They're obviously getting BG salaries, not US. A US team would cost 2-3X as much.
 
bulgarian said:






I mean I've got 30+ people working in the BGCo to service the USCo, and it's a lot of routine media work. They're obviously getting BG salaries, not US. A US team would cost 2-3X as much.

Click to expand...

Why do you even have an C-Corp ?
 
Credibility + a lot of Google/Amazon startup credits for servers and stuff (a few hundred K worth) that were never available to BG startups.
 
bulgarian said:






I'm not a tax professional - I trusted my accountant with it and I've had zero issues in the past 7 years of doing this. But the numbers were lower. Am I correct in assuming that I've got a bomb under my seat with the current US C-Corp structure?

Click to expand...

But having no profits for seven years straight is still very suspicious and immediately raises BEPS concerns.
 
bulgarian said:






Credibility + a lot of Google/Amazon startup credits for servers and stuff (a few hundred K worth) that were never available to BG startups.

Click to expand...

You wouldn't get the same Google/Amazon credits with an SMLLC ?
 
I understand completely and appreciate the input. It's a massive tax liability down the line if I continue.



So I guess the ideal structure is Malta TradeCo (this is where the money comes in from my clients) -> Malta HoldCo (5% tax) -> then I either distribute dividends to myself as a BG citizen (5%) or invest through BG LTD's (0%). Then if I sell the BG LTD, it's 0% (because there's no capital gains in Malta).



The catch is that, while I remain a BG citizen/resident, I need to have a Maltese director/office/agent/etc - which will cost me about 10K euros per year for both companies?
 
bulgarian said:






I understand completely and appreciate the input. It's a massive tax liability down the line if I continue.



So I guess the ideal structure is Malta TradeCo (this is where the money comes in from my clients) -> Malta HoldCo (5% tax) -> then I either distribute dividend to myself as a BG citizen (5%) or invest through BG LTD's (0%). Then if I sell the BG LTD, it's 0% (because there's no capital gains in Malta).

Click to expand...

Just ditch the C-Corp .

Yeah this is better .
 
This has been incredibly helpful @aniglo22 - you're the best!



I know very little about Malta. Is this a safe destination to park my money and legally only pay 5% tax moving forward? Can the nominal director basically steal my money, and then move to Aruba or whatever to avoid liability, lol.
 
aniglo22 said:






An arm’s length transaction means charging the market value (the same amount you would charge an unrelated party).

However, it appears that you are eroding the tax base of the US corporation by not engaging in arm’s length transactions .

Click to expand...

Well, the problem here is that there is a US-Bulgaria DTA, which in his case clearly states that his company is only taxable in Bulgaria. Hence, the whole thing would mainly be a massive mess without many consequences?



But then again, why not just use a US LLC owned by the Bulgarian company?
 
daniels27 said:






Well, the problem here is that there is a US-Bulgaria DTA, which in his case clearly states that his company is only taxable in Bulgaria. Hence, the whole thing would mainly be a massive mess without many consequences?



But then again, why not just use a US LLC owned by the Bulgarian company?

Click to expand...

I thought I'd be raising money (and a C-Corp is better for that) but ended up bootstrapping and becoming profitable instead. So I just stuck with the good old C-Corp. But it appreas that it's time for it to go. As for Malta - the catch is that, while I remain a BG citizen/resident, I need to have a Maltese director/office/agent/etc - which will cost me about 10K euros per year for both companies?
 
bulgarian said:






I thought I'd be raising money (and a C-Corp is better for that)

Click to expand...

Yes, Delaware Corp. would be best in this case.











bulgarian said:






But it appreas that it's time for it to go. As for Malta - the catch is that, while I remain a BG citizen/resident, I need to have a Maltese director/office/agent/etc - which will cost me about 10K euros per year for both companies?

Click to expand...

Well, but you have 30 employees in Bulgaria? Of course enforcement in Bulgaria is weak for some. But will this work?



Have you checked this one






D





Thread 'Tax Residency for Companies and Individuals: Permanent Establishments, Place of Effective Management, CFC and Certificates'



Jun 14, 2025





There already have been many discussions about how to stop paying taxes. We then often discuss that avoiding CFC rules and getting some mighty certificates won't do the job. But that's not how the magic works.



This summary won't necessarily apply to US citizens as they are subject to taxation no matter where they live. For those concerned, they need to file annually and pay taxes on their world-wide income while accounting for tax credits for taxes paid abroad, the foreign-sourced income exemption (FSIE), foreign bank account reporting (FBAR) and for high-earners also alternative minimum...






  • daniels27
  • Replies: 7
  • Forum: Tax, Accounting, Licensing & Legal






 
daniels27 said:






Yes, Delaware Corp. would be best in this case.





Well, but you have 30 employees in Bulgaria? Of course enforcement in Bulgaria is weak for some. But will this work?



Have you checked this one






D





Thread 'Tax Residency for Companies and Individuals: Permanent Establishments, Place of Effective Management, CFC and Certificates'



Jun 14, 2025





There already have been many discussions about how to stop paying taxes. We then often discuss that avoiding CFC rules and getting some mighty certificates won't do the job. But that's not how the magic works.



This summary won't necessarily apply to US citizens as they are subject to taxation no matter where they live. For those concerned, they need to file annually and pay taxes on their world-wide income while accounting for tax credits for taxes paid abroad, the foreign-sourced income exemption (FSIE), foreign bank account reporting (FBAR) and for high-earners also alternative minimum...






  • daniels27
  • Replies: 7
  • Forum: Tax, Accounting, Licensing & Legal












Click to expand...

I'll keep the BulgarianCo and the employees or incorporate a new LTD that is owned by the Maltese HoldCo and transfer all the workforce there.
 
daniels27 said:






You mean, the will work in Malta?

Click to expand...

No, they will continue to be in Bulgaria and hired by the BG company. So the Maltese company will hire the BG one for services. And then all the tax will be paid in Malta anyway (for the 5% gain). Is this not a sound plan?
 
bulgarian said:






No, they will continue to be in Bulgaria and hired by the BG company. So the Maltese company will hire the BG one for services. And then all the tax will be paid in Malta anyway (for the 5% gain). Is this not a sound plan?

Click to expand...

I guess as both is EU, you won't have big transfer pricing issues. But still, your setup may get contested in the sense that they claim that all profit arises in Bulgaria. And at the amounts you quote in your first post, we are not talking about little amounts. You will most likely at least need some management in Malta for it to work.
 
bulgarian said:






I'm not a tax professional - I trusted my accountant with it and I've had zero issues in the past 7 years of doing this. But the numbers were lower. Am I correct in assuming that I've got a bomb under my seat with the current US C-Corp structure?

Click to expand...

Sort of yes. You cannot just move funds like that because of transfer pricing and the correctly suggested arm's length pricing principles (as covered by @aniglo22)



You could set up a US SMLLC with the Bulgarian company member – all funds go into the Bulgarian company without US taxation and this is legally compliant. But the current structure is not because you are most probably billing more than a market-defined rate.









daniels27 said:






I guess as both is EU, you won't have big transfer pricing issues. But still, your setup may get contested in the sense that they claim that all profit arises in Bulgaria. And at the amounts you quote in your first post, we are not talking about little amounts. You will most likely at least need some management in Malta for it to work.

Click to expand...

Yes, this is a good point. Having the Bulgarian PE means the Malta company will not change much unless the primary domicile of activities is moved there.



@bulgarian could maybe consider an Estonian OU doing business via a Bulgarian branch, that way it is only 10% CIT and no WHT on distributions.
 
ilke said:






Sort of yes. You cannot just move funds like that because of transfer pricing and the correctly suggested arm's length pricing principles (as covered by @aniglo22)

Click to expand...

I think we once had guys like @Hydrox here who were running a US LLC and reporting all income in Germany as self-employment income. I think in this case, we are in about the same case. While technically wrong, it is still very close to what should be done legally. Due to the DTA US-Bulgaria, all income in the US is actually taxable in Bulgaria. While technically he would have to register the US company in Bulgaria and only pay taxes there, he did it a bit differently. I guess in an audit, it will be some long discussions and then they will accept it being done that way. Or what do you think on that?
 
bulgarian said:






...



The Bulgarian tax rate is good, but as I grew my business, the government harassment kept increasing. ...

Click to expand...

Hello bulgarian, could you give some details on government harassment? i am considering establishing a base in Bulgaria for residence and business and wonder what to expect from the government.
 
What I would do personally is following :

Malta company → Branch in Bulgaria (operating ),

or

Malta holding → owns a significant stake in your Bulgarian LTD.

In both cases, you would qualify for a 100% tax exemption on income arising from the branch or the LTD.

Then you can use the holding to invest .



Use the Malta’s participation exemption ( also applies on Branch profits ):










The participation exemption may also be applied to any gains or income derived by a company registered in Malta that attributable to a permanent establishment, including a branch situated outside of Malta or to the transfer of such permanent establishment, whether such permanent establishment belongs exclusively or in part to the company registered in Malta.

Click to expand...

You can’t avoid taxation in Bulgaria because the real economic activity is carried out there.
 
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bulgarian said:






Yes. BG entity invoices the US and we file an annual declaration to the IRS disclosing the connection between the 2 companies and clearly stating we have no US base of operations.

Click to expand...

This is not what pass through entity means
 
AndyAresa said:






Hello bulgarian, could you give some details on government harassment? i am considering establishing a base in Bulgaria for residence and business and wonder what to expect from the government.

Click to expand...

You get your accounts/assets frozen for no reason (without any guilt or court order). It's called preliminary collateral measures, lol. You're frozen an unable to operate while they "conduct due diligence". It's also slow as s**t. It's how they bribe you after that. Even if you've done nothing wrong, once you start making a certain amount of money (say over a mil a year), you become a target instantly.
 
bulgarian said:






You get your accounts/assets frozen for no reason (without any guilt or court order). It's called preliminary collateral measures, lol. You're frozen an unable to operate while they "conduct due diligence". It's also slow as s**t. It's how they bribe you after that. Even if you've done nothing wrong, once you start making a certain amount of money (say over a mil a year), you become a target instantly.

Click to expand...

thanks for these details. it does sound bad. but if someone starts out as a small fish , single member limited company, and stays in the range of 300-600k EUR per year, do you think he can still be a target for the authorities (or mafia)?
 
AndyAresa said:






thanks for these details. it does sound bad. but if someone starts out as a small fish , single member limited company, and stays in the range of 300-600k EUR per year, do you think he can still be a target for the authorities (or mafia)?

Click to expand...

Safe for lower amounts but as soon as you get in the millions the problems begin. From cops bribing you on the road if you drive a nice car, to regular invasive audits of your company and you as an individual. Better get a good accountant and lawyer (not cheap). The bureaucratic burden is immense, almost nothing electronic and absolutely nothing in English
 
bulgarian said:






Safe for lower amounts but as soon as you get in the millions the problems begin. From cops bribing you on the road if you drive a nice car, to regular invasive audits of your company and you as an individual. Better get a good accountant and lawyer (not cheap). The bureaucratic burden is immense, almost nothing electronic and absolutely nothing in English

Click to expand...

thanks. as my questions are off topic here, i wrote you a question on your profile page, hope you can see it.
 
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