Entity Setup
Setting Up the Ideal Entity for Remote Entrepreneurs in a Changing Tax Era
Choosing the right jurisdiction and entity structure has never been more critical for remote founders navigating withholding, treaties & minimum taxes.
By NomadicTax Research Team • 5-8 min read • September 10, 2026
## 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](https://taxation-customs.ec.europa.eu/news/european-commission-proposes-landmark-tax-simplification-package-streamline-compliance-and-boost-2026-06-24_en?prefLang=fi&utm_source=openai))
- 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](https://www.oecd.org/en/publications/tax-policy-reforms-2026_43d18a55-en/full-report/tax-policy-reforms_82075677.html?utm_source=openai))
- 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](https://www.oecd.org/en/publications/tax-policy-reforms-2026_43d18a55-en/full-report/tax-policy-reforms_82075677.html?utm_source=openai))
## 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
1. Review your current structure's exposure to withholding and VAT
2. Consult with local counsel in candidate jurisdictions about treaty access and substance
3. Prepare financial projections to see if savings from new rules justify the structural costs
4. Establish bookkeeping and digital accounting tools aligned with e-invoice & VAT rules
5. Formalise contracts and agreements to align with tax residency, substance, and treaty expectations