Portugal tax resident under NHR + US LLC

[disagree]

When you get your LLC⁠ treated as a C-corp you basically satisfy points 2 and 3, right?
What do you⁤ mean with the point 1?
Here you're basically suggesting to evade taxes in the most︁ illegal way. Moreover, this way you're suggesting doesn't allow you to get that money on︂ a personal level.

Important: what about your yearly personal tax return you should file in︃ Portugal? This way, you would be a NHR individual that does not file a tax︄ return because you don't have any personal income, right? Isn't this a little bit suspicious,︅ given that you are NHR but you don't have any kind of personal income to︆ declare?

 

[Legal]

Portugal has a tax︁ haven blacklist (Tax Guide 2023 – Favourable Tax Regimes). Income from this country︂ can not be considered as tax-free foreign received dividends.

LLC is structure which has members︃ and if time comes for you to prove that it was dividend received from LLC︄ and not member remuneration can be complex, accordingly way batter to keep it straight forward︅ and have C-Corp.

 

[disagree]

Sorry, but how⁣ this should answer to my last comment?

 

[Legal]

Can you specify your exact questions? (Then I will answer again).

 

[disagree]

How much will I pay in taxes if I use a C-corp? Let's say I‌ create one in North Carolina which have a 2.5% corporate tax.

I cannot understand these‍ points:
- is there a tax on dividends I can take from the c-corp?
- is there a tax on administrator salary I can take from that c-corp?
- how⁠ much in % and which taxes this c-corp will have to pay?

Then, we should⁤ also talk about the Portugal annual tax return (as a person).
If you have a⁣ US LLC (disregared entity) and you don't take money in your personal bank account (because⁢ you're paying everything with LLC cards) I will not file a tax return - as︀ I don't have any personal income to declare, right?

But in this case: don't you︁ think it would be weird for the Portugal IRS to see a NHR status person︂ that doesn't have any type of income?

 

[Marzio]

While i don't fully agree with the rest‌ of your plan, forming a C-Corp as a non resident is not something that i‍ would do personally.

The corporation itself is taxed on their corporate income at⁤ the federal corporate tax rate of 21%.

Plus, sice we are talking about US dividends⁣ there's 15% US WHT for dividends distributed to non-us shareholders.

I agree with pay some⁢ taxes but isn't 35% a little bit too much?

 

[Legal]

You will pay︃ 2.5% and get a dividend, then declare it in Portugal.

If a company is foreign-owned and is not effectively connected to the U.S. Only 2.5%︊ applies.

 

[Marzio]

A C-Corp isn't‌ effectively connected to the US?

 

[disagree]

This was confusing me too as the answers is obv yes. If you⁠ switch to c-corp is 100% connected to US and that’s why c-corp will be a⁤ normal company paying normal US taxes.

I think that withholding︃ tax can be lowered to almost zero if your personal residency country have some tax︄ treaties with US? Just asking.

If this is doable and you can lower it to︅ zero, and then have your c-corp pay 2.5% corporate tax (North Carolina) I could think︆ about it.

About the 21% you said: is this the same for every state or︇ what?

 

[Marzio]

AFAIK a C-Corp pays 21%⁠ federal taxes by default.

It's already lower than the regular rate which is 30%.

There are no countries⁢ with 0% WHT on dividends.

https://taxsummaries.pwc.com/united-states/corporate/withholding-taxes

 

[disagree]

But Cyprus LTD⁢ dividends do not have any taxes I think... so how this would be compliant with︀ NHR?

 

[tradeall]

Cyprus has 0% tax of WHT on dividends

 

[disagree]

Yes exactly.‌ And NHR “wants” someone else to tax that money right, so how can this be‍ the solution?

 

[Marzio]

This is taken from Cyprus - Portugal double tax⁣ treaty.

Point 2 states that dividends may also be taxed in the contracting state.

In reality the contracting state (which is Cyprus in this case) will not tax dividends because⁢ of its domestic laws.

That's all you need to know.

 

[disagree]

Ok got it. Now what about⁤ the place of effective management problem?

For example this can be a problem with the⁣ LLC disregarded entity. As if the Portugal IRS ask you to prove that this is⁢ a real company and you can’t, the actual work and management of the LLC is︀ in Portugal because you’re working from there, where you have your residency.

What about this︁ with the Cyprus LTD?

 

[Marzio]

The solution to the pleace of effective management problem is simple.

Either you accept the‌ risk of running a non compliant setup (managing US LLC from PT relying on the‍ fact that to this date Portugal's tax agency doesn't go after non residents, especially if⁠ you stay under the radar and don't move millions) or hire somebody to manage the⁤ company (at least on paper) with added bureaucracy and costs.

Cyprus LTD will make you⁣ appear more compliant because you'll have to rent an office and the company will have⁢ its own Cyprus resident director.

 

[disagree]

With the US LLC, you︀ would have to hire a manager that is not working from USA, right? Otherwise you︁ could trigger a taxable event, right?

 

[Marzio]

Not working from US is first requirement.

Second is that he has to be⁠ based in tax friendly jurisdictions like Panama, Paraguay, Monaco, Holy See LOL and so on.⁤

 

[disagree]

Why? He cannot be in Europe?

 

[Marzio]

For the same reason‌ you are looking for a manager outside PT.

What do you think will happen if‍ you somebody will manage a US LLC from Germany? Or France? Or Spain? Or UK?⁠ or [put any EU country here]