Client: Self employed consultants (multiple clients)
Industry: Management consultancy and finance
Tax residency: UK
Whether through a company or self employment structure, consultants earning in excess of low six figures trigger effective UK tax rates exceeding 40%.
UK tax residents who own entities in traditional low tax jurisdictions like the UAE and Carribeans are viewed by HMRC with suspicion and face more stringent CFC rules. Flag Ventures proposed Romanian and Bulgarian company structures, as low tax jurisdictions within the EU.
Romanian companies were taxed at 1% on revenue at the time and Bulgarian company at 10% on profits. Leveraging favorable double tax treaties between Romania and Bulgaria with countries such as the UAE; the UK Consultants also had the option to obtain UAE tax residency in the future and withdraw profits from their Romanian and Bulgarian entities at a dividend rate of 3-5%.