Any experts on taxation of non resident UK LTD/LPP or US LLC?

[Nw1]

Hi I am a non resident of UK and US, currently what I need is to optimize my taxable income personally and via my present company in my country. So what I currently also need is for this new formed company to have access to services like PP/Stripe, Wise business acount as well. Starting in 2023 my present company will be taxed at 30% for all domestic income while foreign income coming into my country will not be tax liable.

Main questions;
So if I setup a UK LTD then if it earns income from my non UK customers it will not be tax liable right regardless of tax thresholds? If yes then if I payout dividends is that also tax free or need pay the 8.75% dividend tax of UK after remove 2000pound dividend allowance?
If earning is made from UK customers is that also tax free since setup as non resident UK LTD?
Is it possible for me to setup a non resident UK company using my current company incorporated outside UK which is a PVT LTD as the main shareholder?
Targeting to reduce the 30% CIT by diverting customer payments to UK LTD payments system and probably pay 0% tax in UK or 8.75% and payout dividends to my PVT LTD which will probably not be taxed again in my country since it is considered foreign income. So to achieve this what is best UK LTD or UK LLP?(Also take into account I don't want to personally be tax liable back at my resident country while that liability should be passed onto my already registered PVT LTD)

The clients I get are usually not from UK so if I setup a non resident company and local income there is tax liable I don't loose out much on that market side. While if I setup a US LLC where I get a considerable amount of US clients I would lose out more if US local income of non resident company is taxable, is it taxable as such?

Also have heard a news that UK PM making new rule to tax non-domicile as well so it that same as a non resident LTD/LLP?

Also if dividends is greater than 10K pounds only need to do self assessment for tax right? otherwise no need?

 

[Sols]

Wrong. UK LTD companies are taxed on worldwide income. UK companies are⁠ resident in UK by being incorporated there. You can obtain non-residence only through a tax⁤ treaty, and then only if the other country where the company is tax resident has⁣ same or higher tax rate.

Not yes.

Wrong.

Yes, except there is no such thing as a︄ non-resident UK company.

LLP are tax transparent, which means they aren't subject to︋ any tax at all under UK law. The members of LLP are taxed. This is︌ automatic and cannot be deferred.

However, if you control an LLP from another country, it︍ isn't guaranteed that the local legal system and tax authority agrees with the UK law.︎ In many cases, tax transparent entities such as UK LLP or US LLC are considered️ corporate entities and subject to corporate income tax.

For example, if you live in Canada‌ and form a US LLC, the LLC is considered as a taxable corporation in Canada‍ and has to pay corporate tax, even if under US law it does not.

In general,︀ US LLCs with foreign members avoid US tax but it's not clear if that would︁ always hold up in court or if questioned by the IRS.

Look into ETBUS and︂ ECI.

If I'm not mistaken,︄ that's only for UK residents.

The TL;DR is you have misunderstood UK corporate tax law.︅ Consider another location instead. Look into exactly how your country defines foreign income. Simply forming︆ an overseas company is often not enough. You often need local directors to satisfy the︇ requirements for income to be foreign.

You might want to look into Cyprus, Malta, Isle︈ of Man, Gibraltar, or Singapore instead.

 

[JackAlabama]

The question is what kind of US clients you have and what you provide to them⁤ as a service.

 

[Nw1]

IT(Web dev, graphic design, etc) &‍ Marketing

Thank you for the comprehensive answer much appreciated was looking at this video's method but︎ no explanation had been given on how the tax matters are handled;





Regarding tax treaty️ do you mean the double tax treaty? If so then my country does have one‌ with UK.

And when you mentioned getting an offshore company in
I think as I saw most of these⁠ countries Stripe and PP not available except probably Singapore which would have all payment methods⁤ but I really don't have much knowledge on the method to open an offshore company⁣ in Singapore any thread I can research or video? As far as I know you⁢ need a resident director for SG companies and pay around 17% tax right??

Also you︀ said "Yes, except there is no such thing as a non-resident UK company." but I︁ have seen so many YT videos and blog posts saying open a non resident company︂ get better tax rates or 0 tax etc...

 

[Sols]

That means you might be‍ able to declare the company non-resident in UK and tax resident only where you live.⁠ If you live in Bangladesh (based on the video you mentioned), that could mean the⁤ company pays 0% tax in UK and full corporate tax in Bangladesh.

But it's best⁣ if you check this with a local tax adviser.

Stripe and PayPal are available in all the︁ ones I mentioned.

Singapore's tax system is a little complicated, yes. To achieve 0% tax, you can't remit︆ profits to or derive income from Singapore.

https://taxsummaries.pwc.com/singapore/corporate/taxes-on-corporate-income
They are all wrong if they are︊ talking about private limited companies.

https://taxsummaries.pwc.com/united-kingdom/corporate/corporate-residence

They are slightly less wrong if they️ are talking about LLP (Limited Liability Partnership), because LLP companies are not taxable companies at‌ all.

 

[Marzio]

If i remember‍ correctly you can remit some profits tax free, for example dividends that were already taxed⁠ in another jurisdiction with a statutory CIT of at least 15%

 

[Nw1]

As per the following;
"that could mean the company pays 0% tax in UK and‌ full corporate tax in your country"
On what aspect would it be 0% tax in‍ UK? Is it like this;

Company ABC PVT LTD non us/uk registered->Makes a new offshore⁠ company called XYZ and only shareholder is ABC PVT LTD (for this example let's say⁤ in UK)-> 2 scenarios of earning;

1. XYZ LTD earns income from IT/Marketing/Courses etc from⁣ non uk customers which means foreign income into UK
2. XYZ LTD earns income from⁢ IT/Marketing/Courses etc from uk customers which means local income as per UK

In the above︀ 2 scenarios I am certain in 1. it can be 0% tax for XYZ LTD︁ on income earned while 2. need clarifications

Also for both these scenarios does XYZ LTD︂ have to do annual audit (need hire external auditor right u can't do self audit︃ I assume?) & return submissions or not?
And what about self assessment is that same︄ thing as annual return?

The above summaries I believe the business activies in UK.

So now incase Company XYZ LTD pays dividends to it's shareholder ABC PVT LTD then probably︅ there is a dividend tax XYZ LTD has to withhold and pay to UK?

XYZ LTD pays dividends after any related dividend tax in Uk->ABC PVT LTD recieves dividends->ABC PVT︆ LTD declares it as foreign income in tax submission and annual return and in annual︇ audit->Tax department exempts it->ABC PVT LTD then pays only the tax for local income from︈ inside it's registered country and related dividend tax when payout to director of ABC PVT︉ LTD.

Hope I have layed out the ideas clearly enough🙂

 

[Marzio]

UK LTDs are taxed on worldwide income

 

[Sols]

You'd have to read the Double Tax Treaty in⁠ question, but it's generally only available if the company pays taxes similar to or greater⁤ than UK corporate tax on its worldwide income.

So if you earn a profit for⁣ your UK company that's treaty non-resident, you'd pay 35% tax in Bangladesh (because your company⁢ is tax resident there) but UK won't come and ask for its 19% or 25%.︀

There is no difference between foreign and local income in UK for companies. UK︆ companies are taxed on their worldwide income.

Audits are not︉ a statutory requirement in UK. Most small and medium businesses do not require audits.

Annual returns, VAT filings, and so on are required, though.

They are related but︋ not identical.

https://www.gov.uk/self-assessment-tax-returns
https://www.gov.uk/browse/tax/self-assessment
There is no withholding tax on︎ dividends in UK.

https://taxsummaries.pwc.com/united-kingdom/corporate/withholding-taxes
There is a lot⁤ more to consider than just this. Depending on how it's structured, you may have to⁣ take into account CFC, BEPS, and transfer pricing regulations. Company tax residence and Permanent Establishments⁢ are big headaches. If you're based in Bangladesh, both ABC and XYZ are probably going︀ to be Bangladeshi companies for tax purposes. The only meaningful advantage a foreign company has︁ in this case seems to be easier access to certain banks and PSPs.

The gist︂ of it is that UK is not a place you go to for 0% corporate︃ tax (unless you're a multinational mega corporation). A lot of small businesses get away with︄ tax evasion because the HMRC doesn't have infinite resources to go after everyone, though.

 

[Nw1]

Isn't this the‌ case if the shareholder/directors are UK citizens while in my case it is a non‍ resident company owning this company?

"Audits are not a statutory requirement in UK. Most small⁠ and medium businesses do not require audits.

Annual returns, VAT filings, and so on are⁤ required, though."

Hmmm no annual audits sounds good, I geuss this is why all these⁣ people going around saying no tax non resident companies possible on the Internet regarding UK⁢ since effectively if there is no external audit who is to double confirm all your︀ values u file for annual return and VAT fillings since the related Gov departments would︁ have very limited resources to go really in depth into the docs to find you︂ out unless you do a multi million pound business of course.

"You'd have to read︃ the Double Tax Treaty in question, but it's generally only available if the company pays︄ taxes similar to or greater than UK corporate tax on its worldwide income."
Essentially we︅ do pay more than the UK tax rate for local income but have a tax︆ exemption for foreign income which probably won't count since UK Gov probably has no idea︇ on it...

"Company tax residence and Permanent Establishments are big headaches. If you're based in︈ Bangladesh, both ABC and XYZ are probably going to be Bangladeshi companies for tax purposes."︉

The tax residence and PE wise not going to have any physical presence(offices/property etc) besides︊ like the virtual address provided by QFC service for registering company and PSPs

"The gist︋ of it is that UK is not a place you go to for 0% corporate︌ tax (unless you're a multinational mega corporation). A lot of small businesses get away with︍ tax evasion because the HMRC doesn't have infinite resources to go after everyone, though."

Yes this is correct but in this scenario I described then either I would end up︎ paying 19% CIT to UK on income via XYZ LTD which is still not bad️ considering ABC PVT LTD would have had to pay 30% so at least a partial‌ saving is there and once that income comes out as dividends if no dividend tax‍ as you said in UK then the tax exemption for foreign income in ABC PVT⁠ LTD country would also exempt that income on dividend tax there possibly so effectively income⁤ comes out after minus 19%.

So UK offshore establishment pros;
No annual audit expense
Low formation cost around 20GBP or less
Access to Payment processors like PP/Stripe/Wise business etc
No witholding dividends tax
CIT of 19% threshold basis brackets

Cons;
Still need do annual returns⁣ and tax submissions
CIT of 19%
Punctual late fees collections for payments and submissions past⁢ due with no mercy

Considering above is there really any better options than UK with︀ lower CIT and low formation cost with same pros?

 

[Roamer]

In the UK, the Corporation Tax increases to 25% from 2023 (in three months).

 

[Nw1]

Are you sure? Meaning the minimum 19% 1st bracket raised to‍ 25?

 

[Nw1]

Considering above is there really any better options than UK with lower CIT︂ and low formation cost with same pros?

 

[JackAlabama]

Uk is a quite a‍ good spot. You will also have some crypto friendly banking options there. Or it was⁠ at least not so long ago. Also you will find competent lawyers.
(I did a⁤ venture there).

 

[Nw1]

What pros and⁠ cons did u experience?

 

[Sols]

Illegal tax evasion is indeed a way to achieve 0% tax.

But it's not just HMRC⁢ you need to worry about. If a bank or a tax authority at home asks︀ you to prove that the money in your bank is clean and taxed, things might︁ get difficult.

What do you do if tax man is local financial crime investigator asks︂ you to prove that the 50,000 GBP dividend you got was earned lawfully?

In that case, the company is probably Bangladeshi for tax purposes (has to pay︆ tax like a Bangladeshi company).

If incorporation cost is an important factor, then only US is comparable to UK. You︉ can get a US LLC for a few hundred USD.

All other jurisdictions (that have︊ access to PayPal, Stripe, and so on) cost closer to one thousand or several thousand︋ to incorporate and per year.

https://taxsummaries.pwc.com/united-kingdom/corporate/significant-developments

 

[Nw1]

Absolutely no point in trying to evade tax since it eventually leads to more headaches, only︃ thing we can do is to find and legally implement strategies that can lower the︄ tax exposure with related tax exemption laws permited by governments.

Right so my initial hunch︅ was right, it has to be a US or UK offshore company to get least︆ amount of ongoing troubles, so let us compare the CIT of both these options;
UK 2023= 19% CIT if profits do not exceed GBP 50,000 and if it does 25%︇
USA current 21% CIT and 2023 speculating 28% CIT it seems

Any pros vs cons︈ comparisons on the 2 done before which is looked into in a non resident corporate︉ entity owning them?

 

[Sols]

No corporate tax in US if you go for a US LLC (which︀ is what the vast majority do), since LLCs are tax transparent. Profits from an LLC︁ become personal income for the members, which is generally not in scope for US income︂ tax if you're a non-resident alien. There is a very small risk that US income︃ tax is owed but for people with similar setups, they pay nothing in the US︄ and IRS doesn't go after them.

As for what happens where you live, that's a︅ more difficult question to answer. Not all jurisdictions agree that LLCs are tax transparent, so︆ double check with a local tax adviser. If you're lucky, you can declare the income︇ from your US LLC as whatever type of income is subject to the lowest tax︈ (i.e. income, foreign salary, dividends, capital gains, or something else).

 

[Nw1]

Profits from︃ US LLC i don't think would become personal income in the scenario I described;

ABC PVT LTD makes new US LLC called XYZ LLC->ABC PVT LTD is only shareholder->XYZ LLC︄ earns foreign income(from outside USA) and if doesn't cross 109KUSD limit then it is fully︅ exempted->XYZ LLC distributes dividends to ABC PVT LTD

So in above case I think u︆ need pay CIT and/or dividend tax?

 

[Sols]

https://www.irs.gov/businesses/small-businesses-self-employed/limited-liability-company-llc

The US LLC is not itself taxable︂ in US.