Correct, only disregarded entities.
Other forms of LLC (C/S) wont be seen as transparent.
USA LLC owned by European resident = VAT or no ?
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Correct, only disregarded entities.
Other forms of LLC (C/S) wont be seen as transparent.
Not if he makes the Spanish S.L. the only member of the LLC as i was suggesting.
then obviously not G.
If you make a Spanish SL own the LLC, then even tho the LLC is still transparent because its disregarded, its transparent to the SL so 'impuesto de las sociedades' applies.
Disregarded US LLC's are tax transparent so far an individual holds them
And as a result 'autonomo', 'IRPF' and 'IVA' applies.
On a different note, theres a few ways to avoid 'impuesto sociedades' in Spain, the most common one being debt.
BBVA is somewhat easy to deal with for this if you show them cash flow.
That's obvious and my suggestion comes from the fact that if he manages the LLC while being an autonomo he is evading Spanish CIT on the permanent establishment he created in Spain.
He needs to close his autonomo position, form a S.L. and make the S.L. the single member of the LLC.
An option for continue to work as autonomo while owning the LLC without forming a S.L. does exist but it's not entirely by the book and is to interpose a company (not owned by him) between LLC an him so that the third company invoices the LLC and he as an autonomo invoices the third company.
I'm talking about companies like UpWork or similar that send invoices in their name so that he will invoice UpWork.com instead of his US LLC. (UpWork doesn't send invoices in their name, it was just an example)
It's risky because IRS knows he is the owner of the LLC but we don't know how they are using those informations, we know that at the moment they are not sharing those informations but we don't know if this will still be the case in the future and when they'll start to do that.
That can trigger branch profit tax in the US. It's best not to do anything without a good tax lawyer who knows the system in both countries.
If a disregarded LLC is controlled and an autonomo, no CIT applies. Theres no permanent establishment because theres no corporation, as Hacienda also sees the LLC as transparent.
Autonomo payments and IRPF on whatever the autonomo does is what has to be paid.
Hacienda doesnt care if you are using a disregarded LLC for 'cosmetic purposes' because you have US/international clients. All they care about is that you pay IRPF. I confirmed this multiple times with different Hacienda representatives.
No, unless he wants to go that route and then take dividends from the SL this is not needed.
In addition to this, at least one of the SL directors has to be autonomo. If hes the only one then he cannot cease to be autonomo.
You can tax plan this way yeah but theres no need if you aint making money as the set up costs some money.
Also a good idea, but you can own the LLC straight.
If that's the case then you are right.
However it remains to be seen if being an autonomo is the most advantageous setup tax wise.
Didn't thought about this eventuality so thanks for pointing that out.
the whole Spanish tax system is not the most advantageous setup tax wise lol
Spain is good if you just receive dividends imo, but income tax is very high for mid to high earners and tbh while yeah the place is developed, food is good and people are friendly... I can get that in Malaysia too and be left alone.
I guess the C-corp will be then seen as opaque entity so he will have to pay Spanish CIT and receive a tax credit for taxes paid in US.
I'm talking about the fact that after some income threshold it will be more advantageous to not be taxed on income but pay CIT at the company level.
Or yeah, use the UpWork trick and stay at the desired IRPF level.
There are other platforms out there which i will not point to but you can always pay Hacienda if you feel like it
If LLC is taxed as a C-Corp in USA, LLC is paying CIT on the profits.
If LLC is taxed as a disregarded entity then the profits and losses are pass through to the members (yours) tax return (eg. no CIT). If you are US tax resident there is additional self employment tax to be paid.
If you are not a tax resident in USA, you will still need to make your tax return to IRS and then add some additional information (don't remember the exact document ID's, but I believe there are 1 or 2 that need to be supplied) that you are not to be taxed in USA on your pass through income. Same goes for salary from a C-Corp.
If you have already chosen for the LLC to be taxed as a C-Corp it will be regarded as a US tax payer and LLC will pay CIT on the profit and then you can pay out any taxed profit to yourself and again tax on that personally.
What is the benefit of electing to be taxed as a C-Corp in your case/setup?
When you say "flushing" profit to yourself, what do you mean exactly?
Last edited: May 30, 2023
If LLC is taxed as a disregarded entity then the profits and losses are pass through to the members (yours) tax return (eg. no CIT). If you are US tax resident there is additional self employment tax to be paid.
If you are not a tax resident in USA, you will still need to make your tax return to IRS and then add some additional information (don't remember the exact document ID's, but I believe there are 1 or 2 that need to be supplied) that you are not to be taxed in USA on your pass through income. Same goes for salary from a C-Corp.
If you have already chosen for the LLC to be taxed as a C-Corp it will be regarded as a US tax payer and LLC will pay CIT on the profit and then you can pay out any taxed profit to yourself and again tax on that personally.
What is the benefit of electing to be taxed as a C-Corp in your case/setup?
When you say "flushing" profit to yourself, what do you mean exactly?
Last edited: May 30, 2023
Spain has some special anti-Gibraltar taxes that would be worth investigating first.
Depends on a factors.
1. Where your company in USA are registered?
2. Do you have Clients in USA?
3. In which countries you have clients and what is annual revenue you are receiving from each country?
Spain would like to have a word there. Spain won't care much about what the IRS thinks. They will tax the company in Spain as a Spanish company. Fine for them if he pays tax in the US as well. Spain won't give a cent back if he lives in Spain. Then he can argue with the IRS and ask them to give a refund for taxes paid in Spain.
If the LLC is setup as passthrough as a single foreign member and the actual (100%) work/service is not done within USA borders then US IRS will not care to tax the LLC member or the LLC entity.
But of course, as you say, Spain, and I believe most jurisdictions in EU whereever the LLC member is a tax payer will want to get the income taxed.
I'm not sure I understand why Spain would tax a US disregarded entity that has passthrough income?
Logically they would tax the Spanish members income from the US LLC, since the member is also a Spanish tax payer.
I understand if Spain has something similar setup as the US GILTI model and the LLC elects to tax as a C-corp.
But not as a disregarded entity due to the US tax return of the LLC would not give the Spanish tax authorities any profit or loss to calculate any tax on (since passthrough profit and loss is found on LLC members tax return, not the LLC's)?
So I see the taxation only on the tax members tax return where ever he/she is a tax payer and the LLC stays as disregarded as well, US or outside.
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