Best management location for US LLC

[MarkusCostigan]

A1988 said:
No formal ruling, it's clearly written on the CFR website. That's the Bible in Malta for taxes. Google non dom company Malta CFR and you will see it.

And by the way, I have confirmed it with my lawyer and how to work around it. Malta has lots of tax benefits but it does not want to shout and sell itself like dubai. You need a good law firm to get yourself around it. Keep the locals happy and you are good.
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So since a US LLC is considered non-dom, there would be no need to open a branch (overseas company) since the money is not remitted to Malta? Is it enough to pay the famous 5k per year?

Are you sure that Malta treats US LLC as non-dom company and not as personal income?

 

[JustAnotherNomad]

MarkusCostigan said:
Are you sure that Malta treats US LLC as non-dom company and not as personal income?
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That would only be relevant if the member was tax resident in Malta.

 

[Anonymous1234]

MarkusCostigan said:
So since a US LLC is considered non-dom, there would be no need to open a branch (overseas company) since the money is not remitted to Malta? Is it enough to pay the famous 5k per year?

Are you sure that Malta treats US LLC as non-dom company and not as personal income?
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Yes correct, Malta does not treat any LLC or any company as tax transparent unless incorporated in malta, so a US LLC qualifies as a non dom company.

You pay flat 5k a year as minimum tax and you are good. You can also pay 5k a year jointly with your spouse so it allows an excellent opportunity to optimise.

Malta also works well with gibraltar, you can be a shareholder and director as maltese resident and pay nil. So it qualifies as non dom company in malta and non resident company in Gibraltar.

 

[Anonymous1234]

daniels27 said:
Are you currently using this? How much are you paying for the director?
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Yes I am using it, yes I am a resident of malta and director as well.

 

[JustAnotherNomad]

If it really works like this, why wouldn't all businesses in Malta, or at least those without local customers, be set up as US LLCs?
Does this only work if the director and/or member is a non-dom resident?

 

[Anonymous1234]

JustAnotherNomad said:
If it really works like this, why wouldn't all businesses in Malta, or at least those without local customers, be set up as US LLCs?
Does this only work if the director and/or member is a non-dom resident?
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Good question, 3 aspects which are very important here.

Non domicile company? Yes or no?

Non domicile individual? Yes or no?

Maltese Source income? Yes or no?

The answer to your question is YES. You have a lot of advantages if you are non dom individual in malta and if you dont have any Maltese Source income then you are very well placed. Probably nothing beats it in Europe.

 

[JustAnotherNomad]

My original question was where to have the director for a US LLC where the member of the company does not live in Malta.

So non-domiciled company: YES
Non-domiciled director: Not sure - does it matter?
Maltese source income: How is this defined? If there is only one employee (the director) and there are no Maltese customers?

 

[Anonymous1234]

Where is the beneficiary/ owner / shareholder resident?

 

[Anonymous1234]

The blanket answer would be any territorial tax country which does not apply CFC or PE rule. But, to get a more precise answer the shareholding pattern needs to be disclosed.

 

[JustAnotherNomad]

Why would it matter where the owner is resident? If it's not Malta, Malta would have even less reason to tax the company.
Let's assume the owner is a resident of Monaco or Qatar for the sake of the argument.
Certainly there can't be MORE tax in Malta than if both the owner and the director were living in Malta?

 

[JustAnotherNomad]

daniels27 said:
I think for CFC rules for active income, the setup would not work.
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As mentioned above, CFC rules are about the location of the shareholder.
The intention of CFC rules is to tax companies in low-tax jurisdictions that would otherwise escape taxation.
So you live in a high-tax country A like France or Spain, but you own a company in a country that is located in a territorial-tax country B where passive foreign income like royalties are not taxed.
That company has only passive royalty income and it has a local director in country B. The shareholder flies to country B once per quarter for a board meeting.
The substance criteria would be fulfilled, it is actually managed from country B. There is no PE in country A.
Such a company would not be taxable in country A under any other rule.
CFC rules were introduced to tax such companies, and that is why they only cover passive income in many cases.

Malta's CFC rules are completely irrelevant if the owner of the company does not reside in Malta.

Malta could already tax the company due to management and control being exercised in Malta, or a PE in Malta, so there is no need for CFC rules either.
If Malta does not apply such rules to US LLC's, then I wonder why not every business in Malta - at least if they don't have local customers or whatever the criteria for "Malta-sourced income" are - is set up as a US LLC.

 

[daniels27]

I think what he wanted to say is that if there are CFC rules for active income, you could get into troubles. But only if you live in countries like France etc. You probably hand more imminent problems if you are still there anyway. Also, your resident country can tax your US LLC profits ether as income it dividends.

But I think for the discussion here, it is about stupid l setups without those problems. Like travellers it people living in places that won't tax dividends nor extra territorial income.

 

[JustAnotherNomad]

daniels27 said:
I think what he wanted to say is that if there are CFC rules for active income, you could get into troubles. But only if you live in countries like France etc.
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That's a good point.
But CFC rules in EEA countries typically have exceptions for EU-based companies due to EEA rules.
From PwC:

The French parent company can avoid the application of the CFC rules if it demonstrates that the foreign entity carries an effective trading or manufacturing activity, conducted from its country of establishment or registered office. Furthermore, the CFC rules, in principle, are not applicable with respect of foreign branches or subsidiaries located in another EU country. However, this exception is not applicable if the French tax authorities can demonstrate that the foreign entity located in another EU country constitutes an artificial arrangement, set up to circumvent French tax legislation. This concept is similar to the ”˜abuse of law' concept, although it does not have all the same characteristics.
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So if you have enough substance in Malta, I would expect that this could be avoided. Maybe you would have to register a branch?

daniels27 said:
You probably hand more imminent problems if you are still there anyway.
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That as well.

daniels27 said:
Also, your resident country can tax your US LLC profits ether as income it dividends.
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Definitely.
I actually wonder what would happen if you were living in a country that views US LLCs as opaque (which many European countries do), but then you have substance in Malta, and Malta only taxes remitted income of the company.
They probably would have no other choice but try to apply CFC rules ("artificial arrangement").

daniels27 said:
But I think for the discussion here, it is about stupid l setups without those problems. Like travellers it people living in places that won't tax dividends nor extra territorial income.
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Exactly. It probably wouldn't be a good idea to be living in France with such a setup.
But if you live in Dubai, having a director in Malta might be enough substance for the UAE authorities to agree that the company doesn't have a PE in Dubai.

 

[marioIT]

Everyone I knew that moved to malta in the last decade was using US LLCs and declaring nothing or remitting just a little, enough to have a tax return in case their home country would question them...
never had any trouble. And some of them had 7-8 figures businesses.
I cannot write what I saw or heard from Maltese officials regarding taxes or the EU would nuke the island out of this planet rof/%
many couldn't live long term there so pretty much all of them moved elsewhere and upgraded their setups.

 

[Anonymous1234]

JustAnotherNomad said:
My original question was where to have the director for a US LLC where the member of the company does not live in Malta.

So non-domiciled company: YES
Non-domiciled director: Not sure - does it matter?
Maltese source income: How is this defined? If there is only one employee (the director) and there are no Maltese customers?
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If you are trying to find a golden structure for US LLC then the only answer is depending on the residency of the respective shareholder/s and not the director. Only then you can discuss further about having a director in xyz location, but if the shareholder is already residing in a tax hell country, nothing will save him even if he has multiple employees.

With my experience of dealing with lawyers from different jurisdictions, its important you are one step ahead of the tax authorities and give them no reason whatsoever to audit you. Once they start with audit, consider yourself done

 

[JustAnotherNomad]

marioIT said:
Everyone I knew that moved to malta in the last decade was using US LLCs and declaring nothing or remitting just a little, enough to have a tax return in case their home country would question them...
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Nice.

marioIT said:
never had any trouble. And some of them had 7-8 figures businesses.
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CFC risk then?

marioIT said:
I cannot write what I saw or heard from Maltese officials regarding taxes or the EU would nuke the island out of this planet rof/%
many couldn't live long term there so pretty much all of them moved elsewhere and upgraded their setups.
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Any idea what they upgraded to?

 

[Marzio]

A1988 said:
I am a resident of malta and director as well.
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That's interesting.

I assume you pay 0% CIT for the resident non domiciled company if income is not remitted to Malta.

BTW did you speak with somebody that explained what is considered Malta source income?

You then only pay 5K taxes yearly if your personal income kept outside Malta is > 35K

What about director salary?

Do you pay yourself one?

If yes are there any tricks to lower PIT on your salary?

 

[Anonymous1234]

Malta sourced income is considered when a service is performed inside Malta and the payment is received from either a maltese resident individual or company.

Malta offers generous deductions, the 5k minimum tax is anyways the minimum, you can adjust that with your salary and so it allows decent savings from a tax perspective. Another thing is, tax filing can be done jointly as well in case one has a spouse and then if you have kids then upto 50k euros would not have a large tax leakage considering you are already paying 5k minimum.

 

[JustAnotherNomad]

A1988 said:
If you are trying to find a golden structure for US LLC then the only answer is depending on the residency of the respective shareholder/s and not the director.
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Yes, of course. Or actually, it depends, like I wrote above.
If you have a lot of substance and you live in a country that views them as opaque, you may still be fine, if you can escape CFC rules.

A1988 said:
Only then you can discuss further about having a director in xyz location, but if the shareholder is already residing in a tax hell country, nothing will save him even if he has multiple employees.
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Depends. If you are a passive owner, your residency country views US LLCs as opaque and the company has an office and employees in Malta, with a proper director, you could probably get the same treatment for the company as if it was a Maltese company. But then it would likely also be taxed as a local company by Malta.

A1988 said:
With my experience of dealing with lawyers from different jurisdictions, its important you are one step ahead of the tax authorities and give them no reason whatsoever to audit you. Once they start with audit, consider yourself done
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My thoughts exactly. That's why I'm not a fan of any crazy setups that can be seen as red flags and that will only raise questions.
But Malta is already a huge red flag in itself. If a Maltese resident is the UBO of a company, this can already lead to questions and, possibly, an audit, if that company is related to companies in high-tax countries.

 

[Anonymous1234]

Any country will be a red flag if your company is established in a high tax country with draconian laws, Malta or any country will not be a saving grace in this scenario.