Key Considerations in 2026
Remote entrepreneurs and startups operating across borders face a rapidly evolving tax regime shaped by:
- The EU’s proposed omnibus directive, removing withholding taxes on cross-border payments among EU companies, which makes intra-EU holding structures more appealing. (taxation-customs.ec.europa.eu)
- The global movement toward digital transaction and VAT reform, with many jurisdictions requiring foreign suppliers of digital services to collect and remit VAT in the buyer’s country. (oecd.org)
- Heightened pressure from Pillar 2 / GloBE rules and minimum effective tax regimes globally, meaning low-tax jurisdictions are increasingly regulated and subject to top-up taxation. (oecd.org)
Entity Type Options & Trade-offs
| Entity Type | Pros | Cons / Risks |
|---|---|---|
| EU Holding Company | Reduced or waived withholding on dividends/interest/royalties under the omnibus directive; access to EU single market; treaty benefits | Legal compliance, substance requirements, cost overhead; may trigger country-by-country or DAC disclosures |
| Foreign LLC / Hybrid Entity | Flexibility; potential tax advantage depending on your base country’s treatment of foreign dividends; wide treaty network | Risk of double taxation; reverse hybrid or mismatch rules; Pillar 2 / minimum tax levy; disclosure obligations |
| Branch vs Subsidiary | Branch avoids separate corporate filing; easier profit repatriation | May expose owner to local taxes; less protection of liability; complicated withholding at source |
How to Choose Wisely
- Tax Residency & Substance: Ensure the entity has substantial presence (staff, premises, governance) where required. Avoid structures seen as shell or treaty abuse under BEPS or EU rules.
- Treaty and UE alignment: Pick jurisdictions with robust treaty networks and those participating in major global agreements (e.g. EU IIRs, Pillar 2) to reduce withholding and tax liability.
- Minimum tax exposure: Operate in jurisdictions with effective rates above global minimum or have top-up tax planning ready.
- Administrative burden vs tax savings: Factor in compliance costs, filing regimes, reporting, VAT burdens, currency risk, and fees for international operations.
Example Structure
- Scenario: A tech entrepreneur based in Latin America, serving EU and US clients.
‣ Step 1: Form a holding or service entity in a EU country with low effective tax and treaty access so that EU clients can deliver payments without or minimal withholding once omnibus directive comes into force.
‣ Step 2: Use tax treaties to reduce withholding from US clients (often 15% or reduced treaty rate), set up proper bank and contract structure to claim benefits.
‣ Step 3: Set up digital service platform to comply with VAT or sales tax in customer jurisdictions; invoice accordingly.
‣ Step 4: Monitor Pillar 2 status of your locations—if one location has a low rate, ensure your home country or others may impose top-up tax.
Steps to Implement Before Year-End
- Review your current structure's exposure to withholding and VAT
- Consult with local counsel in candidate jurisdictions about treaty access and substance
- Prepare financial projections to see if savings from new rules justify the structural costs
- Establish bookkeeping and digital accounting tools aligned with e-invoice & VAT rules
- Formalise contracts and agreements to align with tax residency, substance, and treaty expectations