Best management location for US LLC

[daniels27]

Yes. But what about me? I⁤ do not live in Dubai and have active income. That's why we are still discussing.⁣ Some people care more about me than others 😉

Also, I guess most people do not⁢ like to live in Dubai for more than 4 months of the year.

 

[JustAnotherNomad]

The lawyer said it has‍ to be linked to an asset outside of Malta. So even if it's passive income,⁠ I would expect that it somehow has to be located outside of Malta. Not sure⁤ how you would do this.
Maybe you have a SaaS and it's hosted outside of⁣ Malta and you sell the license to use the software. I guess something like that⁢ can work.
But if you provide services (or resell services provided by people outside of︀ Malta), the income would be considered as arising in Malta.

 

[JustAnotherNomad]

As mentioned before, the UAE would likely subject the US LLC⁠ income as UAE-sourced and subject to corporate income tax.
Even influencers (acting under their own⁤ name) have to pay corporate income tax. So even if it was indeed treated as⁣ personal income, this doesn't mean it wouldn't be subject to corporate tax.
And the UAE⁢ has made it very clear that entities that are managed from the UAE are subject︀ to corporate tax.
This just isn't enforced at the moment, they are going after the︁ big companies with actual offices etc. first.
But maybe this will change in 10 years︂ and they will then demand that you pay up for the previous 10 years. Or︃ maybe nothing will happen, who knows.
But it's a big risk, and if SHTF, they︄ can place you under a travel ban or put you in jail. This isn't Thailand.︅ Everything is still new, there is no case law for this.

However, the risk would︆ be drastically lowered if you could point to a manager in another country - which︇ is what I was asking about originally.

That would be plenty enough to be considered tax resident.

 

[Marzio]

Lets wait for‌ a reply from @A1988

 

[JustAnotherNomad]

No, that is not correct, as⁤ explained once again above.
Personal income tax is only paid on salaries in the UAE.⁣ If you manage an offshore company from Dubai, it becomes subject to UAE corporate tax.⁢
"But how can a person pay corporate tax?"
Don't ask me, those are the rules!︀

https://kwsme.com/blog/corporate-tax-for-uae-freelancers/
https://www.freelanceinformer.com/news/new-uae-corporate-tax-to-impact-freelancers/
https://gulfnews.com/business/corpo...n-businesses-must-prepare-for-1.1703480392292

 

[DSoz]

Probably the best bet is US LLC + Bahrain residency, where they don't have any‌ taxes unlike the UAE, so there's no concept of PE

 

[JosephLL]

What about Bulgaria and Georgia? Aren't they also not imposing CFC rule for individuals?

 

[daniels27]

Switzerland neither.

But there are PE rules, maybe not that enforced‍ but there are.

 

[JosephLL]

I really struggle to understand the difference between those two...

When you say "there are PE rules" what consequences do you have in mind if those‍ are triggered? Would it be local CIT applied to offshore entity? If yes then how⁠ is that different to CFC ? Or are those consequences something else?

 

[daniels27]

PE rules⁤ apply to permanent establishments. CFC applies on the owners.

If you trigger a PE, your⁣ company is being taxes like a local one.

 

[JustAnotherNomad]

Permanent establishment is about where work is done.

If you register your company in the‍ Bahamas, but you really live in Spain and the company has no other employees than⁠ you and you basically do everything from your apartment in Spain, then the company is⁤ taxed like a local Spanish company. It would be very easy to prove that the⁣ company "is just you" and that you are in Spain, so the company should be⁢ taxed in Spain.

But imagine a company that doesn't do much. For example, a company︀ that owns your company logo/trademark. Imagine this company is registered in the Bahamas and you︁ have a desk in a co-working space in the Bahamas and a part-time employee who︂ checks the mail twice per week. You go there 2-3 times per year to have︃ a board meeting. The company otherwise doesn't do much, it just owns the trademark. Now︄ your Spanish company pays 1M per year to the Bahamas company for being allowed to︅ use the logo/trademark.
The logo/trademark company has no PE in Spain - after all, it︆ doesn't do much. What would the activity in Spain be? No works is done, it︇ just passively owns the trademark, that can be done by your part-time employee in the︈ Bahamas.
So it would be very difficult for Spain to tax this company.

This is︉ why CFC rules were introduced: They basically say "Ok, even if no work is done︊ in our country, if the owner of the company is in Spain and the company︋ is in a tax haven, then we still will tax this company like a Spanish︌ company." (a bit simplified, but this is the idea)
Usually there are additional rules like︍ "Only if >50% of the company's income is passive" etc. - they usually wouldn't count︎ it as a CFC if you had a hotel in the Bahamas, for example. CFC️ rules are mostly about destroying setups like the above where someone wants to use a‌ shell company to hold trademarks etc. and thus shift profits to a tax haven.

If you have an operative business, CFC rules usually don't matter, because they can just check‍ where the work/management is performed, and then tax the company based on that.

 

[JustAnotherNomad]

There's a minor distinction here:
Most high-tax countries tax the worldwide‍ income of tax-resident companies and they have both PoEM rules (place of effective management) and⁠ PE (permanent establishment) rules.
If a company has its effective place of management in their⁤ country, the company is considered tax resident and has to pay tax in that country⁣ on its worldwide income.
if a company only has a PE in that country (but⁢ not its PoEM), it only pays tax on the income that can be linked to︀ the PE.
But for a one-man company, there is no difference, obviously.

 

[Anonymous1234]

Sorry for the late reply, so I asked my⁤ lawyer. My US LLC is treated as tax transparent or disregarded entity in the US⁣ and also in Malta but an ELECTION has to be made in malta for the⁢ US LLC to be treated as TAX OPAQUE. This election has to be made within︀ 60 days of Incorporation otherwise it's null and void.

Hence, the money remitted to Malta︁ is only taxed and the money not remitted is not taxed as non domiciled company.︂ There is another tax efficient solution to bring the MONEY as a Shareholder LOAN which︃ is considered as capital and hence it's TAXFREE in malta.

 

[Anonymous1234]

Since I am The sole owner︁ and director of my US llc and a resident of Malta with resident ID and︂ maltese drivers license and a home, I will not have any problem getting a tax︃ residency certificate.

 

[Marzio]

You move to Malta first, then form a US‍ LLC and elect the newly formed US LLC to be treated as opaque entity in⁠ Malta.

Since 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, you basically are⁣ running a tax free company if you don't remit money in Malta.

Best setup in⁢ the world hands down.

This is the cherry on top.

 

[Anonymous1234]

All thanks to your suggestion 2⁢ years ago, sometimes I do want to live in marbella but I'll just remain at︀ resident of Malta and enjoy spain as a lifestyle holiday place and nothing more. I︁ am hearing people being audited after 1 year in spain on beckham law, i believe︂ it's a solid trap by hacienda.

 

[bubbledouble]

Yeah, from the many threads here on OCT and elsewhere, it’s clear that⁤ relocating to Spain is a huge no-go, at least if you like keeping the money⁣ you earn for yourself and not handing it over to the government or the tax⁢ authorities.

 

[MarkusCostigan]

Does anyone know exactly how to︁ elect US LLC as opaque in Malta? What is the procedure exactly?

 

[Anonymous1234]

Speak to a law firm in malta,‍ there are plenty but not that many. Hope it helps. I don't want to share⁠ any names because I was accused of being a service provider apparently by one of⁤ the MODERATORS because I was critical of CYPRUS in comparison to Malta, then the guy⁣ started talking about mountains and hills in cyprus lol, which for me as an Italian⁢ is difficult to differentiate in English

 

[MarkusCostigan]

Thanks for your contribution, very interesting indeed. As I understood, a US⁢ LLC was treated as opaque "automatically" by Malta, but apparently this is not the case.︀

Anyway, it would be interesting to know if with this setup it is still possible︁ to pay 5% for income generated in Malta (For example if the LLC has no︂ substance anywhere)? Or is it only 15%(??) paid on remittances?

For example, US LLC --->︃ Owned by Holding outside Malta ---> Requested in Malta for Opaque status --> Is it︄ possible to request a refund of 6/7?