Setup with US LLC -> Dubai company

[AdvancedGene8320]

Somebody briefly described his setup:
* digital marketing business; quite decent revenue (miillions per year)
* newly UAE resident
* owns UAE company
* former UK resident; not a US citizen



He said that he owns a US LLC too, from which money flows straight into his UAE company, and thus he manages the money generated by his business - via his UAE company.

I don't know any more details.


What are the advantages of this type of structure vs a simpler "only US LLC" or "only UAE company"?

Last edited: Sep 21, 2021

 

[Fred]

"Only US LLC' doesn't grants you a tax free residence and you really don't get any decent banking beside of Mercury - 'Only UAE company" is simpler and usual enough however the US LLC could be setup for personal or individual reasons as he has a UAE tax free residence anyway.

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[gnud]

You need an UAE company to get the residency visa.
But would any US customers want to do business with an UAE company? Do UAE companies have a difficulty using payment processors like Stripe? Probably here's the reason.
Solution: form an US LLC and send the money yourself to your UAE company. If you perform work for a US LLC from outside the US, and have no employees in the US, it's a non-US sourced income, therefore tax free. UAE has no corporate tax and no income tax. Total tax = 0% and your customers think they're dealing with a US company.

 

[Fred]

gnud said:
You need an UAE company to get the residency visa.
But would any US customers want to do business with an UAE company? Do UAE companies have a difficulty using payment processors like Stripe? Probably here's the reason.
Solution: form an US LLC and send the money yourself to your UAE company. If you perform work for a US LLC from outside the US, and have no employees in the US, it's a non-US sourced income, therefore tax free. UAE has no corporate tax and no income tax. Total tax = 0% and your customers think they're dealing with a US company.
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That's it.

Stripe meanwhile fully available in the UAE:

https://stripe.com/newsroom/news/stripe-launches-uae
But of course another reason could be to just safe a few % in the processing compared to Stripe UAE.

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[gnud]

Also the reason why you can't just take out money from the US LLC is that the UAE LLC needs to have some revenue to be allowed to exist probably. Just a guess though, buy why would they otherwise require an UAE company to get the visa? It'd be too easy then, effectively it'd be just another fee, their goal is to attract business.

 

[Fred]

gnud said:
Also the reason why you can't just take out money from the US LLC is that the UAE LLC needs to have some revenue to be allowed to exist probably. Just a guess though, buy why would they otherwise require an UAE company to get the visa? It'd be too easy then, effectively it'd be just another fee, their goal is to attract business.
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That's not true - nobody cares if you use your Dubai Company or not as long as you pay for the renewal.

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[gnud]

Fred said:
That's not true - nobody cares if you use your Dubai Company or not as long as you pay for the renewal.
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ok. then I have no idea why wouldn't he just take it out of the US LLC.

 

[AdvancedGene8320]

gnud said:
Solution: form an US LLC and send the money yourself to your UAE company.
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I see. Is a US LLC a shell company for a Dubai company then? in this particular case.

 

[gnud]

AdvancedGene8320 said:
I see. Is a US LLC a shell company for a Dubai company then? in this particular case.
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No. Shell companies only hold assets, the US LLC performs an economic activity. Since it's a pass-through entity all profit is passed on to the owner who then pays income tax on it in case of natural persons, or corporate tax in case of corporations.

 

[Au999]

gnud said:
No. Shell companies only hold assets, the US LLC performs an economic activity. Since it's a pass-through entity all profit is passed on to the owner who then pays income tax on it in case of natural persons, or corporate tax in case of corporations.
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Is this actually the case for a US LLC pass-through to Dubai? I've recently read conflicting advice that says because Dubai has no tax treaty with the US, that a Dubai owned US LLC will be hit with 30% withholding tax on any payments from US companies...

Hope not as if that's the case my US to UAE setup will end up paying MORE tax than I currently am with UK corporate tax

 

[gnud]

Au999 said:
Is this actually the case for a US LLC pass-through to Dubai? I've recently read conflicting advice that says because Dubai has no tax treaty with the US, that a Dubai owned US LLC will be hit with 30% withholding tax on any payments from US companies...

Hope not as if that's the case my US to UAE setup will end up paying MORE tax than I currently am with UK corporate tax
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Normally if you're a non-US person owning the LLC and all its activity happens outside the US and you have no dependent agent in the US then it's classified by the IRS as non-ETBUS and is not liable for any tax in the US.

But you can check with a tax advisor, not some dude on the internet.

 

[Marzio]

Au999 said:
because Dubai has no tax treaty with the US
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If you need to rely on tax treaty because you receive payments from US companies (Google, Apple for example) then yes, your setup will end up paying more than your UK setup.

 

[startfleetio]

Au999 said:
Is this actually the case for a US LLC pass-through to Dubai? I've recently read conflicting advice that says because Dubai has no tax treaty with the US, that a Dubai owned US LLC will be hit with 30% withholding tax on any payments from US companies...

Hope not as if that's the case my US to UAE setup will end up paying MORE tax than I currently am with UK corporate tax
Click to expand...

30% withholding taxes are only applicable to FDAP income, e.g interests, royalties, dividends. Active income from business activities are not withheld.

 

[aage]

startfleetio said:
30% withholding taxes are only applicable to FDAP income, e.g interests, royalties, dividends. Active income from business activities are not withheld.
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what exactly does it mean. That I have to pay 100% tax in the mother company from all income in the US entity?

 

[Au999]

aage said:
what exactly does it mean. That I have to pay 100% tax in the mother company from all income in the US entity?
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It depends where you or your on-shore company are tax resident but yeah my understanding is a US LLC being pass-through is treated as being based where you're tax resident. So if you're tax resident somewhere with 25% tax, then you pay 25% tax locally and nothing in the US.

If you're resident in a 0% tax location for corporate or income tax then you pay zero. But you do genuinely need to be tax resident, not a paper exercise else it's getting towards being evasion.

 

[aage]

If that is how it works it may indeed be one of the easiest entities to manage for someone living abroad and who is willing to pay taxes of course 🙂

 

[Nicholas Van Orton]

gnud said:
Also the reason why you can't just take out money from the US LLC is that the UAE LLC needs to have some revenue to be allowed to exist probably. Just a guess though, buy why would they otherwise require an UAE company to get the visa? It'd be too easy then, effectively it'd be just another fee, their goal is to attract business.
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As @Fred pointed out, they couldn't care less, they 'tax' you via the bureaucratic fees they impose every step of the way (set-up, renewal, new add-ons, etc), so as long as you fill their pockets with your fees, none is the wiser...

NVO

 

[aage]

it depends, I doubt these fees are very high... to maintain my delaware and new mexico corp cost me less than a thousand dollars a year