Best management location for US LLC

[MarkusCostigan]

So since a⁢ US LLC is considered non-dom, there would be no need to open a branch (overseas︀ company) since the money is not remitted to Malta? Is it enough to pay the︁ famous 5k per year?

Are you sure that Malta treats US LLC as non-dom company︂ and not as personal income?

 

[JustAnotherNomad]

That would only be relevant if the member was‍ tax resident in Malta.

 

[Anonymous1234]

Yes correct,⁤ Malta does not treat any LLC or any company as tax transparent unless incorporated in⁣ malta, so a US LLC qualifies as a non dom company.

You pay flat 5k⁢ a year as minimum tax and you are good. You can also pay 5k a︀ year jointly with your spouse so it allows an excellent opportunity to optimise.

Malta also︁ works well with gibraltar, you can be a shareholder and director as maltese resident and︂ pay nil. So it qualifies as non dom company in malta and non resident company︃ in Gibraltar.

 

[Anonymous1234]

Yes I am using it, yes I am a resident of malta‍ and director as well.

 

[JustAnotherNomad]

If it really works like this, why wouldn't all businesses in Malta, or at least‌ those without local customers, be set up as US LLCs?
Does this only work if‍ the director and/or member is a non-dom resident?

 

[Anonymous1234]

Good question,⁠ 3 aspects which are very important here.

Non domicile company? Yes or no?

Non domicile⁤ individual? Yes or no?

Maltese Source income? Yes or no?

The answer to your question⁣ is YES. You have a lot of advantages if you are non dom individual in⁢ malta and if you dont have any Maltese Source income then you are very well︀ placed. Probably nothing beats it in Europe.

 

[JustAnotherNomad]

My original question was where to have the director for a US LLC where the‌ member of the company does not live in Malta.

So non-domiciled company: YES
Non-domiciled director:‍ Not sure - does it matter?
Maltese source income: How is this defined? If there⁠ is only one employee (the director) and there are no Maltese customers?

 

[Anonymous1234]

Where is the beneficiary/ owner / shareholder resident?

 

[Anonymous1234]

The blanket answer would be any territorial tax country which does not apply CFC or‌ PE rule. But, to get a more precise answer the shareholding pattern needs to be‍ disclosed.

 

[JustAnotherNomad]

Why would it matter where the owner is resident? If it's not Malta, Malta would‌ have even less reason to tax the company.
Let's assume the owner is a resident‍ of Monaco or Qatar for the sake of the argument.
Certainly there can't be MORE⁠ tax in Malta than if both the owner and the director were living in Malta?⁤

 

[JustAnotherNomad]

As mentioned above, CFC rules are about the location of the shareholder.‍
The intention of CFC rules is to tax companies in low-tax jurisdictions that would otherwise⁠ escape taxation.
So you live in a high-tax country A like France or Spain, but⁤ you own a company in a country that is located in a territorial-tax country B⁣ where passive foreign income like royalties are not taxed.
That company has only passive royalty⁢ income and it has a local director in country B. The shareholder flies to country︀ B once per quarter for a board meeting.
The substance criteria would be fulfilled, it︁ is actually managed from country B. There is no PE in country A.
Such a︂ company would not be taxable in country A under any other rule.
CFC rules were︃ introduced to tax such companies, and that is why they only cover passive income in︄ many cases.

Malta's CFC rules are completely irrelevant if the owner of the company does︅ not reside in Malta.

Malta could already tax the company due to management and control︆ being exercised in Malta, or a PE in Malta, so there is no need for︇ CFC rules either.
If Malta does not apply such rules to US LLC's, then I︈ wonder why not every business in Malta - at least if they don't have local︉ customers or whatever the criteria for "Malta-sourced income" are - is set up as a︊ US LLC.

 

[daniels27]

I think what he wanted to say is that if there are CFC rules for‌ active income, you could get into troubles. But only if you live in countries like‍ France etc. You probably hand more imminent problems if you are still there anyway. Also,⁠ your resident country can tax your US LLC profits ether as income it dividends.

But I think for the discussion here, it is about stupid l setups without those problems.⁤ Like travellers it people living in places that won't tax dividends nor extra territorial income.⁣

 

[JustAnotherNomad]

That's a good point.
But CFC rules in⁠ EEA countries typically have exceptions for EU-based companies due to EEA rules.
From PwC:

So if you have enough substance in Malta, I would︄ expect that this could be avoided. Maybe you would have to register a branch?

That as well.

Definitely.
I actually wonder what would︇ happen if you were living in a country that views US LLCs as opaque (which︈ many European countries do), but then you have substance in Malta, and Malta only taxes︉ remitted income of the company.
They probably would have no other choice but try to︊ apply CFC rules ("artificial arrangement").

Exactly. It probably wouldn't︍ be a good idea to be living in France with such a setup.
But if︎ you live in Dubai, having a director in Malta might be enough substance for the️ UAE authorities to agree that the company doesn't have a PE in Dubai.

 

[marioIT]

Everyone I knew that moved to malta in the last decade was using US LLCs‌ and declaring nothing or remitting just a little, enough to have a tax return in‍ case their home country would question them...
never had any trouble. And some of them⁠ had 7-8 figures businesses.
I cannot write what I saw or heard from Maltese officials⁤ regarding taxes or the EU would nuke the island out of this planet rof/%
many couldn't⁣ live long term there so pretty much all of them moved elsewhere and upgraded their⁢ setups.

 

[Anonymous1234]

If you are trying to find a golden structure for US LLC then⁤ the only answer is depending on the residency of the respective shareholder/s and not the⁣ director. Only then you can discuss further about having a director in xyz location, but⁢ if the shareholder is already residing in a tax hell country, nothing will save him︀ even if he has multiple employees.

With my experience of dealing with lawyers from different︁ jurisdictions, its important you are one step ahead of the tax authorities and give them︂ no reason whatsoever to audit you. Once they start with audit, consider yourself done

 

[JustAnotherNomad]

Nice.

CFC risk then?

Any idea what they upgraded to?

 

[Marzio]

That's interesting.

I assume you pay 0% CIT for the resident non domiciled company if‍ income is not remitted to Malta.

BTW did you speak with somebody that explained what⁠ is considered Malta source income?

You then only pay 5K taxes yearly if your personal⁤ income kept outside Malta is > 35K

What about director salary?

Do you pay yourself⁣ one?

If yes are there any tricks to lower PIT on your salary?

 

[Anonymous1234]

Malta sourced income is considered when a service is performed inside Malta and the payment‌ is received from either a maltese resident individual or company.

Malta offers generous deductions, the‍ 5k minimum tax is anyways the minimum, you can adjust that with your salary and⁠ so it allows decent savings from a tax perspective. Another thing is, tax filing can⁤ be done jointly as well in case one has a spouse and then if you⁣ have kids then upto 50k euros would not have a large tax leakage considering you⁢ are already paying 5k minimum.

 

[JustAnotherNomad]

Yes, of course. Or actually, it depends, like I wrote above.⁠
If you have a lot of substance and you live in a country that views⁤ them as opaque, you may still be fine, if you can escape CFC rules.

Depends. If you are a passive︀ owner, your residency country views US LLCs as opaque and the company has an office︁ and employees in Malta, with a proper director, you could probably get the same treatment︂ for the company as if it was a Maltese company. But then it would likely︃ also be taxed as a local company by Malta.

My thoughts exactly. That's why I'm not a︇ fan of any crazy setups that can be seen as red flags and that will︈ only raise questions.
But Malta is already a huge red flag in itself. If a︉ Maltese resident is the UBO of a company, this can already lead to questions and,︊ possibly, an audit, if that company is related to companies in high-tax countries.

 

[Anonymous1234]

Any country will be a red flag if your company is established in a high‌ tax country with draconian laws, Malta or any country will not be a saving grace‍ in this scenario.