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Consider the following scenario.

I am an independent Turkish game developer and I make profit by developing games for ios devices and app store. I am not happy about the high income tax rate in Turkey so I open a company in another country(say Bulgaria for convenience) with low tax rate. I stay in Bulgaria for 1 year during the development of the game and then I submit the game to app store. After that I return back to Turkey. I pay the income tax of the money that I get from Apple to the Bulgarian government every month.

Can I transfer money from Bulgaria to Turkey and spend it freely in Turkey? I appreciate answers for other countries instead of Turkey to get an idea.

  • I don't know about Turkish or Bulgarian income tax law, but in every jurisdiction I'm familiar with, any money that you make from selling your app after you move into the jurisdiction is taxable in the jurisdiction where you reside, even though you developed the app while residing in a different jurisdiction. That is, most jurisdictions tax their residents on all of their income. Any payments from your Bulgarian company to you will be either earned or unearned income, depending on the nature of the payment. – phoog Aug 2 '16 at 6:38
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Taxation is entirely dependent on jurisdiction

It is entirely possible that what you are proposing will result in you paying tax twice – once in Bulgaria and once in Turkey. It is highly unlikely that you will avoid a tax liability in Turkey.

The problem is that the money in Bulgaria is owned by a Bulgarian corporation and needs to pay tax in accordance with Bulgarian law. This corporation is not you even if you own 100% of it.

To transfer the money to you it needs to pay you a salary or a dividend. This would be subject to taxation in both jurisdictions.

  • I think "subject to taxation" means that the jurisdiction can tax the salary or dividend, not necessarily that it will. Is that correct?] – phoog Aug 2 '16 at 6:42
  • Why do I have to pay tax of salary in both jurisdictions? If I pay tax of my salary to Bulgarian government doesn't this mean that the salary is my money and I can do whatever I want with it? – Alp Hancıoğlu Aug 2 '16 at 6:49
  • @phoog yes can but may not – Dale M Aug 2 '16 at 7:00
  • @AlpHancıoğlu because, if Bulgaria is like every jurisdiction I know, you company will be required to pay income tax on your behalf – Dale M Aug 2 '16 at 7:01
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    @AlpHancıoğlu each jurisdiction can tax people and transactions that are subject to the jurisdiction. In most cases there are credits or exemptions or treaties that allow you to avoid double taxation, but the default position of any government is to reserve the right to tax everything it can get its hands on. For example, people who live in New York and work in New Jersey have to pay income tax to both states. New York gives them a credit for the tax they pay to New Jersey, so the total tax ends up the same, but there is nothing that requires NY to do that other than the will of NY voters. – phoog Aug 2 '16 at 8:44

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