International Structure for tax planning

[skoffs]

Hi,

We have a company which does own intellectual property. we sell this intellectual property to our customers. Company is located in EU.

We would like to pay as little taxes as possible in EU. We are thinking of creating LLC in Delaware/Wyoming and transferring our intellectual property there - we will never have any direct US income, so as far as I understand it we will be taxed at 0% on our income. ( US LLC will invoice intellectual property use to EU company and EU company will pay it without any issues )

We are able to create US company account here in EU without any problem and have all funds here.

Question is, what is next step ? How can we get these money to ourselves without paying too much tax. Currently we are thinking of 2 things. Gift ( they are not taxed in our country and can be received from foreign country ) or Loans from US LLC with 1cent per year payment for upcomming 1000 years. It helps a bit that in Wyoming we dont have to do accounting so i guess they dont care much about what their LLC is doing.

What do you think of this ? is there better way to get money out of company ? or is this setup not going to work ?

Our goal is to get cash to our private accounts here in EU. Not keen on having some BVI and using their credit card to finance life here.

Our initial plan was Cyprus company and 7.5% dividend tax on top of 2.5% intellectual property tax in cyprus which would bring us somewhere close to 10% but I have read just bad things about how cypriot companies and accountants take advantage of companies + there are high maintenance and initial costs so this is now worst case scenario for us.

any advice or comment is appreciated!

 

[Vince]

Check out Malta, they are the best in EU for online entrepreneurs at the moment. Please check this link:

Living in Malta - No More Tax

" individuals qualifying for the ordinary residence scheme aren't subject to income tax in Malta on foreign sourced income not remitted to a Maltese bank account. They're also not subject to income tax on any foreign sourced capital gains whether remitted to Malta or not."

you will have to rent a place there and spend a couple of months there per year (not 6 months in reality more like 1-2 from what I'm told), but worth it. I'm doing it soon.

 

[skoffs]

Vince said:
Check out Malta, they are the best in EU for online entrepreneurs at the moment. Please check this link:

Living in Malta - No More Tax

" individuals qualifying for the ordinary residence scheme aren't subject to income tax in Malta on foreign sourced income not remitted to a Maltese bank account. They're also not subject to income tax on any foreign sourced capital gains whether remitted to Malta or not."

you will have to rent a place there and spend a couple of months there per year (not 6 months in reality more like 1-2 from what I'm told), but worth it. I'm doing it soon.
Click to expand...

Thank you for your answer but I am afraid relocation is not possible for me. Interesting thing here is "no gift tax" - is this something which can be leveraged ? my country of residence does have same gift policy - i was hoping to use that.

 

[Vince]

without changing your fiscal address, I'm afraid your only safe option will be to keep the money on business accounts and spend the funds from there with a debit card (having a business in a country without accounting like Belize, you can basically buy anything with your card and no one will care).

with AOEI reporting, in my opinion, it's not safe anymore to hide money in personal offshore accounts. There may be some countries not reporting back to your home country yet (the US are actually not yet reporting foreign account holders there to their home countries), but I'm sure it won't last long.

with your gifts/loans plan if you get audited in your home country, you will struggle to justify it, but all depends on local laws, and how hard they enforce them.

 

[skoffs]

Again thank you for answer @Vince

Even if i would have BVI or belize company i would be the UBO of the company and sooner or later i could be reported. I am not sure I would be OK with going darks way and having some darks credit card in my wallet. However even if i did it this way - i am afraid of exchange fees on this card and withdrawal fees. If the fees are lets say 3% in total and yearly upkeep is 3k - i can just do wyoming and pay myself dividend which i would tax at 7% and its about the same without any stress or bad sleep.

I would definitely not want to go with my account in offshore country - that would definitely not end well.

gift plan might be little problematic - but many people from my country live in US and send money home to their families so that might be able to pass with some anonymity in wyoming company. Loan plan is safer - as you can claim you loaned money . if you have correct documentation i dont see any problem with it. People in my country do it often - loan money from their own company so they dont have to pay some taxes but then they end up with company to which they own 500k and are fucked. In case of wyoming company without accounting this probs cannot happen ( althought in case of that company end, i might be liable declare remaining part of loan as my profit as there would be nobody to pay it back)

another option is to create wyoming LLC which would be taxing income on 0%. then sending back all the money to the EU Non-Profit org. non profits here doesnt have to have accounting and can do donations/gifts taxed at 0%. I am often doing public speakings or helping with education etc so i could easily pass non profit donations to me as donations for this education programs.

 

[Vince]

regarding your first line about being UBO of IBC, my opinion on this is that in most countries there is nothing stopping you from being a non-paid manager or owner of a foreign business. As long as you're not taking a salary, dividends or moving money in any way to a personal account, I don't see why it would be illegal to keep money in this business account. For Belize companies, the upkeep is less than $1000 per year. Bank fees depend ofc on the bank.

 

[skoffs]

that is true, but currently country where I reside does have 35% withholding tax for belize and similar countries. USA is however not included in this list. I would need at least 2 companies to move funds before reaching final destination in Belize.

Technically, I can just own Wyoming company, be its non-paid manager and owner, tax everything there at effective rate of 0% - without keeping the accounting and have Wyoming bank account and credit card and just withdraw money as needed without any issues ?

 

[Vince]

If you don't have to keep receipts and report your purchases as business purchases, then you can do it. But are you sure the Wyoming LLC provides that? Do you have a link explaining how you are tax and accounting exempt?

 

[Vince]

regarding USA, I know they have a lot of illegal immigrants, so a lot of banks operate on a no questions asked policy. I recommend Bank of America. I've been working with them for a long time with no issues. Wells Fargo on the other hand, they closed one of my accounts and did not even send me a notice.

 

[Vince]

just checked and I'm positive with a Wyoming LLC you are still liable for US federal income tax of 21%. Best to contact some accountant that has experience with online businesses and foreign owned businesses and see what he says.

 

[skoffs]

i was thinking of using some EMI instead of US bank - it takes too much effort to go there in person and open bank account ( however if it would be possible i am definitely not against )

You are actually right - corporations do have 21% federal tax. LLC however do not have them as they are passing taxes to their owners. But upon lot of reading, i think LLC is not a way to go for me as I would still have to keep accounting for the IRS ( Sole Proprietorships | Internal Revenue Service ), file it, and possibly pay some taxes in EU. I think I owe you a beer now.

From bit of googling i found out that usual modus operandi is that Wyoming/Nevada/Delaware LLC is owner by BVI or other offshore. This way, they pay no state tax in US and taxes just in their own jurisdiction - 0% for BVI.

From what I can tell only 2 0% jurisdictions where I can officially pay invoices to are Isle of Man and RAK ( i have read lot about RAK on this forum )

So it looks like I can create BVI and then US LLC - from EU pay to US LLC, and from there to BVI. Or I can create RAK company and pay straight there - not have accounting and have just credit card.

Or i can create company in Hungary and pay 5% tax on royalties or cyprus.

looks like my naive ideas are almost out of window now.

 

[Vince]

if you do that make sure to only change the ownership of the llc after you open a bunch of bank accounts, EMI, etc, otherwise you will not find it easy for them to accept opening for LLC owned by an offshore corp.