Best holding company for US LLC?

[ppa]

I have an US LLC that is owned by a Seychelles IBC. The IBC acts as a holding company. Reason being so that profits from the US LLC end up in the Seychelles IBC and only when needed distributed as dividends to the UBO.

UBO pays dividend tax. UBO can not own the US LLC directly (tax treaties and uncertaincy over how local tax authorities will treat the pass-through US LLC - Corporation? Personal Income? etc.)

As long as the UBO owns the US LLC through a holding company and due to the lack of CFC rules in his country of residence everything is good.

However Seychelles has introduced tax on passive income. Income from the US LLC is considered passive income for the Seychelles IBC so that setup is no longer good.

What are the options to replace the Seychelles company in this setup? The requirement is to open company + bank account at the same time? I guess there are a couple:
- BVI
- Nevis
- Panama
- UAE/Dubai

Any recommendations here on what would be the best setup are appreciated. Stability of the setup, ability to open a bank account, no reporting/audit stupidy (the way Seychelles has introduced) are the most important factors here. Cost is not an issue.

 

[startfleetio]

ppa said:
I have an US LLC that is owned by a Seychelles IBC. The IBC acts as a holding company. Reason being so that profits from the US LLC end up in the Seychelles IBC and only when needed distributed as dividends to the UBO.

UBO pays dividend tax. UBO can not own the US LLC directly (tax treaties and uncertaincy over how local tax authorities will treat the pass-through US LLC - Corporation? Personal Income? etc.)

As long as the UBO owns the US LLC through a holding company and due to the lack of CFC rules in his country of residence everything is good.

However Seychelles has introduced tax on passive income. Income from the US LLC is considered passive income for the Seychelles IBC so that setup is no longer good.

What are the options to replace the Seychelles company in this setup? The requirement is to open company + bank account at the same time? I guess there are a couple:
- BVI
- Nevis
- Panama
- UAE/Dubai

Any recommendations here on what would be the best setup are appreciated. Stability of the setup, ability to open a bank account, no reporting/audit stupidy (the way Seychelles has introduced) are the most important factors here. Cost is not an issue.
Click to expand...

Check out UK LTD. HMRC regards US LLC profits as dividends most of the time. Foreign dividends are tax-exempt until a certain threshold

 

[ppa]

Can you recommend an UK CPA/Tax Advisor to discuss this with?

 

[fshore]

ppa said:
uncertaincy over how local tax authorities will treat the pass-through US LLC - Corporation? Personal Income? etc.)
Click to expand...

Is there any uncertainty over how the local tax authorities will treat a Seychelles/BVI etc company (that you own and manage from there)?

 

[ppa]

No as the Seychelles IBC is not a pass-through entity + no double tax treaty between country of residence and Seychelles + multiple official tax advices from Law/Tax companies regarding the setup and its tax implications in the country of residence.

 

[Jerry1911]

startfleetio said:
Check out UK LTD. HMRC regards US LLC profits as dividends most of the time. Foreign dividends are tax-exempt until a certain threshold
Click to expand...

I doubt HMRC views US LLC profits as dividends, UK has hybrid mismatch rules.

 

[Marzio]

LLC is treated like an opaque entity in UK

 

[fshore]

ppa said:
no double tax treaty between country of residence and Seychelle
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Generally a double tax treaty is always positive. It would almost never cause you to pay more tax somewhere, it will always reduce the taxes you'd have to pay.

 

[startfleetio]

Jerry1911 said:
I doubt HMRC views US LLC profits as dividends, UK has hybrid mismatch rules.
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It is, most of the time, except for Anson vs HMRC

 

[gnud]

So what do you put on the form 5472?

> 7a Name and address of ultimate indirect 25% foreign shareholder
> 7b(2) Reference ID number (see instructions)
> 7b(3) FTIN, if any (see instructions)

> 7c Principal country(ies) where business is conducted
> 7e Country(ies) under whose laws the ultimate indirect 25% foreign shareholder files an income tax return as a resident

In case of a BVI holding company, do you just lie and claim you run in from the BVI? What about the FTIN and address?
In case of an UK holding company, you obviously would not claim that you run it from the UK as that'd make it liable for the UK corp tax. The same with any other country.

Seems a bit pointless to have the LLC owned by any holding company when the UBO and the real place of business has to be revealed anyway.

Last edited: Feb 7, 2023

 

[SoNewToAllShit]

gnud said:
run it from the UK as that'd make it liable for the UK corp tax
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sorry to hijack thread. Does it mean that if you claim not to do business in the UK with your UK LTD it has not to pay tax in the UK ?

 

[gnud]

SoNewToAllShit said:
sorry to hijack thread. Does it mean that if you claim not to do business in the UK with your UK LTD it has not to pay tax in the UK ?
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If there's a double tax treaty, it does not pay in the UK. However it has to pay in the place where from the business is actually ran.