Optimal Tax Setup for Fully Digital Professional Services Firm
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Has someone ever looked into a US LLC as a passthrough entity + Malta non-dom resident?
Let's assume that 1) the US LLC is effectively managed by someone else in another non-US and non-Maltese country, so it does not trigger US or Malta tax residency, and 2) the person can sustain their annual expenses with remitted foreign capital gains from capital they had before entering Malta.
If the US LCC profits are sent to a non-Maltese bank account, could the Malta taxation be only the annual 5k?
Could the above work if the US LLC also has income from US clients?
This would be much simpler and cheaper than having a Malta trading + Cyprus/Estonia holding that provides foreign non-remitted dividends to a UBO that is still a Maltese resident.
Let's assume that 1) the US LLC is effectively managed by someone else in another non-US and non-Maltese country, so it does not trigger US or Malta tax residency, and 2) the person can sustain their annual expenses with remitted foreign capital gains from capital they had before entering Malta.
If the US LCC profits are sent to a non-Maltese bank account, could the Malta taxation be only the annual 5k?
Could the above work if the US LLC also has income from US clients?
This would be much simpler and cheaper than having a Malta trading + Cyprus/Estonia holding that provides foreign non-remitted dividends to a UBO that is still a Maltese resident.
It is it managed from outside Malta and outside the US, you need to know where it is managed from and check if it would trigger any PE there. If they won't care or otherwise not an issue. You can get "dividends" in Malta from your US LLC. You would only pay what they charge you in Malta. I think @disagree is considering the same to enjoy flat taxes at 5k EUR per year.
it's the super-duper-widely popular solutions for Malta non-dom residents. Basically Malta doesn't enforce PE at all. Plus, they treat LLCs as opaque entities.
They don't really care about what you're doing outside of Malta. They charge this 5k one shot fee per year if you declare you had foreign income above 35.000 €. At the same time they never had any type of enforcement activity for this, so the truth is that a lot of people just file at 0 every year also while making multiple six figures a year. Not suggesting to do this. Just telling what's happening.
It's one of those setups where the "they don't really care" concept find it's perfect application.
Edit: I have to be more precise about the 5K one shot tax and the 35K threshold.
As far as I know, if you don't remit foreign income to Malta, you are not subject to the €5.000 minimum tax, even if your foreign income exceeds €35K
If you are a non-domiciled resident in Malta you are subject to a taxation system called remittance basis where you're only taxed on 1) income generated in malta and 2) foreign income remitted to Malta. Foreign income not remitted to Malta is completely exempt from taxes regardless of the amount.
The €5K one shot tax applies in some cases. For example: if your total taxable income (Malta-sourced income + foreign income remitted to Malta) exceeds €35K
If the total tax calculated on your taxable income is less than €5K, you will be required to pay the difference to meet the €5K minimum
That said... if you do not remit any foreign income to Malta, you are not subject to the €5K tax, even if your foreign income is above €35K. The issue (for someone) is that also paying for your rent or other services like internet, etc are theoretically "remitted"
Last edited: Jan 20, 2025
I got it, it makes sense. Such a setup could be sensible if someone lives with foreign capital gains, which are then remitted tax-free (except the annual 5k.)
To make this compliant the LLC would have to be managed by someone else and not in Malta, although Malta would probably not care too much.
Do you know how people in this setup deal with bank accounts, transferring money from USD to EUR, etc.?
To make this compliant the LLC would have to be managed by someone else and not in Malta, although Malta would probably not care too much.
Do you know how people in this setup deal with bank accounts, transferring money from USD to EUR, etc.?
Capital gains are never taxed in Malta, also if remitted. They're not considered the same way as revenue.
At the same time I can't see why you should remit that.
With a couple foreign bank accounts and fintech solutions, you're ok. Consider that thanks to the agility of this setup, let's say you have both Wise Business (LLC) and Wise personal (Malta), it's just matter of seconds and you can move money into your personal one and spend, or move somewhere else without remitting.
Because you'll have to pay for living expenses. If they are foreign capital gains, they'll be tax free. But as far as I know you still have to pay the 5k minimum tax.
Makes sense!
In that case you should pay the 5K, but based on money you use for big living expenses like rent, not for capital gains even if remitted.
As I said, the truth is nobody care.
I have been speaking with a few providers for the following setup:
One of these providers has mentioned two things:
Additionally:
- Malta Trading Co + Foreign Holding Co set up as a fiscal unit to achieve the 5% corporate tax
- The idea is that I won't remit into Malta the foreign dividend because I can cover the cost of living with remitted foreign capital gains
- I am also thinking to pay a small salary as the Maltese MD up to the 5k tax I'd have to pay anyway (plus the associated social contributions)
One of these providers has mentioned two things:
- Estonia is better than Cyprus because:
- Bank account opening in Malta with a Cyprus Holding and a Maltese non-dom resident as UBO is hard. Did anyone experience the same?
- Estonia is cheaper and more efficient (this I know to be true)
- It's not recommended to form a fiscal unit in the first year. That's because this would require consolidated statements, which will make it clear to the Maltese authorities that the UBO is a Maltese non-dom resident who is also the MD of the Maltese trading company. Are they right?
Additionally:
- Is it a good idea to receive a small salary as the Maltese MD? I don't need it for cash flows, I could just bring in more foreign capital gains. But I thought it could be good to show substance in Malta and that I pay social contributions somewhere?
- What is a fair price for Year 1 and ongoing for both entities? The trading has about 5-10 incoming invoices and 5-10 outgoing invoices every month, whereas the holding would only deal with the annual dividends and in the future maybe some other investments
Yes, why not, and get public health insurance this way.
Business transactions are based on mutually agreed terms, not moral fairness.
That being said buying professional services is not equal to filling up your cars gas tank.
The price you get is most likely influenced by the risk level of your business and yourself as a person.
Thank you all for your help here. I decided to move to Malta.
Now it's about figuring out the best tax structure:
Also, any insights on cost ranges? I would say my business and myself are pretty low risk, I offer simple B2B consulting services, 5-10 incoming invoices and 5-10 outgoing invoices every month.
Now it's about figuring out the best tax structure:
- I don't want to do the US LCC thing because I want to sleep well at night 😀
- I am most likely going to go for the Malta Trading + Foreign Holding
- The Malta Trading part is easy since I will be the MD and ensure substance, control & management
- For the Holding, I'm not clear whether having it in Estonia/Cyprus with a nominee director is enough to comply with Estonia/Cyprus and Malta regulations. Does anyone have any insights here? Does this work only assuming Estonia/Cyprus and Malta don't care, but if they do an audit I am screwed?
Also, any insights on cost ranges? I would say my business and myself are pretty low risk, I offer simple B2B consulting services, 5-10 incoming invoices and 5-10 outgoing invoices every month.
I would work with a lawyer/service provider, apparently you have to get your application right to get the 5%.
Seems like different service providers prefer different countries for the holding company.
I would NOT go with Estonia, they will tax you if you sell your company. But there are more than enough other options. I would go with whatever the service provider/lawyer you choose recommends.
Seems like different service providers prefer different countries for the holding company.
I would NOT go with Estonia, they will tax you if you sell your company. But there are more than enough other options. I would go with whatever the service provider/lawyer you choose recommends.
There's no specific request for the 5% (also it's a 5% only If you plan to earn 100k, otherwise it's just a 5k one shot fee).
You just have to request your TIN after you've got your self-sufficient non-dom residency approved. Then file a tax return every year.
I think we're talking about different things? I am referring to the 5% corporate tax, which the company has to pay if there is a fiscal unit.
Separately, I'll have to pay the 5k fixed income tax as a natural person. This I plan to maximise by earning a salary that results in the 5k income tax (should be about 37.5k) + social contributions.
Thanks for the advice. I am thinking about whether it makes sense to have the holding in Italy, where my brother could be MD and ensure substance. I can put other investments in companies under it, so perhaps it would make a stronger case.
However, I'll have to see if the dividend from Malta, which then goes to me in a foreign bank account, can be configured as a pass-through dividend. Otherwise, at least a 15% withholding tax will apply.
Ideally 0 😀 But I am willing to pay a bit if this is going to make the structure safer.
I am hoping that as a pass-through dividend (parent-subsidiary EU directive), this will not be taxed in Italy and flow directly from the Malta trading to me in a foreign account.
The worst case I think is that the Italian holding will pay 1.2% corporate tax (thanks to a 95% exemption) and then a 15% WTH tax on dividends.
Yes, so was I. I think you have to apply for the fiscal unit thing. Seems like Gibraltar is quite popular for this. Some also use UK Ltd.'s, but who knows if things will really stay the same in the UK...
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