US Delaware/Wyoming or Dubai Offshore company with US/Dubai bank account and IRS 5472 form

[jahmac]

Hello, any good advise for online based digital service selling only....Like server/vpn/remote IT support and all. For US offshore and US bank account is that IRS 5472 form straightforward simple or complicated. I am UK TAX resident. Looking for best low tax with No accounting/book keeping jurisdiction. Also Dubai looks good option as well. Just need you guys thought from your personal experience on Offshore.
I am aware I will have to pay income tax in uk on any dividends/income I will bring to UK as my income.

 

[Sols]

jahmac said:
Hello, any good advise for online based digital service selling only....Like server/vpn/remote IT support and all. For US offshore and US bank account is that IRS 5472 form straightforward simple or complicated.
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The form is available online, so have a look and see if it's something you feel comfortable handling yourself: About Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business | Internal Revenue Service

jahmac said:
I am aware I will have to pay income tax in uk on any dividends/income I will bring to UK as my income.
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The company will also have to pay corporate income tax in the UK because the company is tax resident in the UK.

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This is the probably the answer to your question.

 

[jahmac]

Sols said:
The form is available online, so have a look and see if it's something you feel comfortable handling yourself: About Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business | Internal Revenue Service


The company will also have to pay corporate income tax in the UK because the company is tax resident in the UK.
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The company is not tax resident in UK. Its me who is tax resident in UK. Why company has to pay corporate tax in UK. Company has nothing to do with UK. Its only the dividend or any salary (if taking any salary from company)/any kind of income I bring in UK, only those will be taxable as my personal income.

 

[jahmac]

Sols said:
The form is available online, so have a look and see if it's something you feel comfortable handling yourself: About Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business | Internal Revenue Service


The company will also have to pay corporate income tax in the UK because the company is tax resident in the UK.
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I will probably engage professional account to handle that IRS 5472. Just wanted to find out more from someone who has personal experience on this. Also any legal issue if I try to do legally as UK tax resident forming Offshore company in US/Dubai or any other offshore location. My preference with good reputed location for Stripe+paypal as my 99% sales will be via payment gateway.

 

[Sols]

jahmac said:
The company is not tax resident in UK. Its me who is tax resident in UK. Why company has to pay corporate tax in UK. Company has nothing to do with UK. Its only the dividend or any salary (if taking any salary from company)/any kind of income I bring in UK, only those will be taxable as my personal income.
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If you live in the UK and control a company from the UK, it is tax resident in the UK and must pay UK tax. There are tonnes of articles and literature about this which you would be wise to research before committing tax fraud.

HMRC has this to say for example (INTM120210 - International Manual - HMRC internal manual - GOV.UK):

ITH300 Company residence: the law: basic residence rule​

There has never been a statutory definition of what makes a company resident for the general purposes of the Taxes Acts. Yet it has long been recognised that the residence of a company is determined according to where its central management and control is to be found. That is still so even though since 1988 a company incorporated in the United Kingdom is, with some exceptions, regarded as resident in the United Kingdom for the purposes of the Taxes Acts. That rule overrides but does not eliminate the test of central management and control.
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This is the probably the answer to your question.

 

[jahmac]

Sols said:
If you live in the UK and control a company from the UK, it is tax resident in the UK and must pay UK tax. There are tonnes of articles and literature about this which you would be wise to research before committing tax fraud.

HMRC has this to say for example (INTM120210 - International Manual - HMRC internal manual - GOV.UK):
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Thanks for your valuable info. But those mainly for those company who has physical business activities in UK with official premises/factory/Uk employee/shipping and all. Only service based like digital product has no physical residence activities. So how it will be determined as UK residence company. Just because company director lives in UK doesnt mean company is UK resident.

 

[jahmac]

payment/bank/all business activities with suppliers /customers all with offshore bank/company. so no business activities in UK. So how it will be UK resident just because director lives in UK.

 

[jahmac]

I checked all examples there but cant find a single example with IT related service company. How can I show the control from overseas as well as I am the only director and shareholder. If visiting and staying in that country for few days....would that help.

 

[Mark Rucken]

jahmac said:
payment/bank/all business activities with suppliers /customers all with offshore bank/company. so no business activities in UK. So how it will be UK resident just because director lives in UK.
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US LLC is a pass through entity, which means that the profit passes through the entity to the Managining Member of the entity. In that sense, profit will pass through the company to you, given that you are a UK resident, that means you are supposed to report that income as your own to a local tax office in the UK and pay relevant tax.

The best solution IMO is to incorporate a LIMITED entity somewhere in the world. If you are looking for zero tax, Dubai LTD is a good option. Alternative would be Cyprus LTD that will have to pay 12.5% tax on corporate profit and you will have a tax residency certificate for that company and proof that you are paying taxes in Cyprus, so no one in the UK can go after you. Please note that Cyprus tax can be reduced by half if you have a good accountant.

 

[Sols]

jahmac said:
Thanks for your valuable info. But those mainly for those company who has physical business activities in UK with official premises/factory/Uk employee/shipping and all. Only service based like digital product has no physical residence activities. So how it will be determined as UK residence company. Just because company director lives in UK doesnt mean company is UK resident.
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OK, good luck then. You can point the HMRC to this thread when tax time comes, whether it's next year or many years from now.

Mark Rucken said:
US LLC is a pass through entity, which means that the profit passes through the entity to the Managining Member of the entity. In that sense, profit will pass through the company to you, given that you are a UK resident, that means you are supposed to report that income as your own to a local tax office in the UK and pay relevant tax.
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The UK treats LLCs are opaque entities, so the LLC becomes taxable just like a regular UK limited company.

https://www.gov.uk/hmrc-internal-manuals/international-manual/intm180030

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This is the probably the answer to your question.

 

[jahmac]

@Sols so what do you suggest if you have your own personal experience on any difficulty comes up later on. Are you saying I will have to pay company profit tax+dividend personal tax in UK and also UK VAT registered as well for a foreign offshore company just because company director in UK. is that what you saying.

 

[jahmac]

Mark Rucken said:
US LLC is a pass through entity, which means that the profit passes through the entity to the Managining Member of the entity. In that sense, profit will pass through the company to you, given that you are a UK resident, that means you are supposed to report that income as your own to a local tax office in the UK and pay relevant tax.

The best solution IMO is to incorporate a LIMITED entity somewhere in the world. If you are looking for zero tax, Dubai LTD is a good option. Alternative would be Cyprus LTD that will have to pay 12.5% tax on corporate profit and you will have a tax residency certificate for that company and proof that you are paying taxes in Cyprus, so no one in the UK can go after you. Please note that Cyprus tax can be reduced by half if you have a good accountant.
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I thought same for Dubai LTD company. Dont know much about Cyprus but that can be a good fit as well if just corporate profit tax only and no other tax like VAT and all.

 

[Sols]

jahmac said:
@Sols so what do you suggest if you have your own personal experience on any difficulty comes up later on. Are you saying I will have to pay company profit tax+dividend personal tax in UK and also UK VAT registered as well for a foreign offshore company just because company director in UK. is that what you saying.
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Yes, of course. If what you propose were possible, why wouldn't everyone be doing it? Why is there a single pence with the HMRC beyond what people/companies feel they need to remit to themselves? Why wouldn't everyone be operating under foreign companies and only pay themselves what they need and keep the rest untaxed offshore?

There is a constantly increasing likelihood that HMRC will find out about your company, through FATCA or CRS/AEOI (or data leaks, or private registers becoming public). So even if you don't comply voluntarily, when information about your company reaches the HMRC, and they see that there is a company controlled by a UK resident, there's a risk they will start looking into you and the company. From there, things can quickly go downhill.

Speak with a tax adviser, rather than drawing wild, wrongful conclusions on your own (and rather than trusting me).

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This is the probably the answer to your question.

 

[jahmac]

Sols said:
Yes, of course. If what you propose were possible, why wouldn't everyone be doing it? Why is there a single pence with the HMRC beyond what people/companies feel they need to remit to themselves? Why wouldn't everyone be operating under foreign companies and only pay themselves what they need and keep the rest untaxed offshore?

There is a constantly increasing likelihood that HMRC will find out about your company, through FATCA or CRS/AEOI (or data leaks, or private registers becoming public). So even if you don't comply voluntarily, when information about your company reaches the HMRC, and they see that there is a company controlled by a UK resident, there's a risk they will start looking into you and the company. From there, things can quickly go downhill.

Speak with a tax adviser, rather than drawing wild, wrongful conclusions on your own (and rather than trusting me).
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can you show me a single person pay all uk corporate tax+UK VAT for offshore company digital product selling who has no business activities in uk. The way you said then everyone would do that....same question to then no one would do that and no one would have foreign offshore company at all.

 

[Sols]

You don't need my approval for any of this. I'm just passing on what I've learned from having these discussions with legal practitioners and tax advisers.

Speak with a tax adviser.

Or steam ahead and see what happens in a couple of years.

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This is the probably the answer to your question.

 

[legrant]

jahmac said:
Hello, any good advise for online based digital service selling only....Like server/vpn/remote IT support and all. For US offshore and US bank account is that IRS 5472 form straightforward simple or complicated. I am UK TAX resident. Looking for best low tax with No accounting/book keeping jurisdiction. Also Dubai looks good option as well. Just need you guys thought from your personal experience on Offshore.
I am aware I will have to pay income tax in uk on any dividends/income I will bring to UK as my income.
Click to expand...

I'm not informed about you having to pay UK corporate tax as others say above, it is probably true. However, even if it wasn't, you would need to pay income taxes for all the profit the company generates, even if you keep it in the company. It's not just the money you withdraw from the company to your bank account, it's all the money the company has generated.

 

[jahmac]

legrant said:
I'm not informed about you having to pay UK corporate tax as others say above, it is probably true. However, even if it wasn't, you would need to pay income taxes for all the profit the company generates, even if you keep it in the company. It's not just the money you withdraw from the company to your bank account, it's all the money the company has generated.
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I discussed about that with a qualified accountant. You wont have to pay any personal income tax for that company profit until you transfer that to your any personal account in the world. you pay your corporate tax according to that country's jurisdiction rules (if its 0% its 0 or whatever that country's rules for offshore company tax). The concept is as long as money stays in your company account the company owns.....thats not your personal income until you withdraw it to your personal account. Its same rules in UK. If you dont take money out from your UK company account there is no extra personal tax on that....only corporate tax. As soon as you take money out as dividend or salary that becomes taxable. More importantly in those no accounting/Book keeping required jurisdiction you may not even have any accounting/auditing. So how you will pay tax to your local authority on company profit.

 

[legrant]

jahmac said:
I discussed about that with a qualified accountant. You wont have to pay any personal income tax for that company profit until you transfer that to your any personal account in the world. you pay your corporate tax according to that country's jurisdiction rules (if its 0% its 0 or whatever that country's rules for offshore company tax). The concept is as long as money stays in your company account the company owns.....thats not your personal income until you withdraw it to your personal account. Its same rules in UK. If you dont take money out from your UK company account there is no extra personal tax on that....only corporate tax. As soon as you take money out as dividend or salary that becomes taxable. More importantly in those no accounting/Book keeping required jurisdiction you may not even have any accounting/auditing. So how you will pay tax to your local authority on company profit.
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I take what I said back, just read some information and you seem to be right. UK has a weird way of handling US LLC's. If you don't conduct any business in the US or UK, you won't have to pay any corporate taxes in the US or UK, and you will only be taxed on the salary you pay yourself or the dividends that are distributed by the company.

 

[Novice]

jahmac said:
More importantly in those no accounting/Book keeping required jurisdiction you may not even have any accounting/auditing.
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Which countries have no accounting/bookkeeping required jurisdiction? The US? (As far as I know, you do and you need to save your files/invoices/bookkeeping for up to 3 years)

 

[Cetme308win]

as someone that had a Wyoming LLC in the past.....is a pain in the a*s to get a bank account