Tax Transparency: what business owners really need to know before creating a company

When creating a company, many business owners focus on the name, activity, or initial investment, but forget a critical point: the tax regime into which the company may automatically fall.

One of these regimes is tax transparency, and it can completely change the way profits are taxed.

What does it mean in practice?

In simple terms:

👉 The company does not pay tax on profits
👉 The shareholders pay tax directly through personal income tax

Even if the money remains in the company, the Tax Authority considers that it has already been “received” by the shareholders.

This can have a direct impact:

Increased personal income tax;

Loss of control over the timing of taxation;

Less flexibility in cash flow management.

Which companies fall under this regime?

Not all companies do. However, there are three very common situations among business owners:

1. Service-based companies operated by professionals

Examples:

Consulting;

Architecture;

Medicine;

Design, marketing, IT, in some cases.

👉 If the company depends essentially on the work of its shareholders, there is a risk of tax transparency.

2. Companies with few shareholders, especially family-owned companies

Up to 5 shareholders;

Very closed structure, such as a couple or family.

👉 In these cases, the Tax Authority may consider that there is no real separation between the company and its shareholders.

3. Companies that only manage assets

Examples:

Companies with properties for rental;

Companies created only to manage investments.

👉 If there is no “real” business activity, the regime may apply automatically.

Important: it is not optional

This is one of the most important points:

❗ You cannot choose to enter or leave the regime
❗ If the company meets the criteria, it falls under the regime automatically

Many companies only discover this later, when they are already paying more tax than expected.

How to avoid falling under this regime

The good news: it is possible to prevent this, if the company is properly structured from the beginning.

Here are some key decisions:

1. Do not rely only on services provided by the shareholders

Combine services with product sales;

Diversify sources of income.

👉 The more the business operates like a real company, the lower the risk.

2. Structure the shareholders properly

Avoid having all shareholders as professionals in the same activity;

In some cases, adjust the ownership percentages.

👉 The way shares are divided can make all the difference.

3. Grow beyond a small structure

More shareholders or a more robust structure;

Less of a “personal company in disguise”.

4. Have real business activity

This is especially important if the company owns property:

Construction, renovation, active exploitation;

Not just collecting rent.

The most common mistake

👉 Creating a company “to pay less tax”
👉 And ending up paying more through personal income tax

This often happens with:

Single-member service companies;

Family businesses;

Consultants who move from freelance activity to a company structure.

Conclusion

Tax transparency is not a problem in itself. It becomes a risk when it is not planned.

Before opening a company, it is essential to answer these questions:

Is the activity only service-based?

How many shareholders will there be?

Who will hold the share capital?

Is there real business activity?

👉 The initial structure can define how much tax you will pay over the next few years.