IT LLC to offshore

[Marzio]

Did you realize that paying royalties means that somebody else is‍ the owner of the IP for the royalties you are paying out?

To pull this⁠ off in a credible way you need to setup a holding company that will own⁤ the IP and license that IP to the Italian subsidiary.

That holding company will require⁣ a local director, an office and some staff to create substance.

The best place for⁢ your holding would be Georgia because it has 0% WHT on royalties with Italy and︀ it's a territorial taxation country so any income generated abroad (by your Italian company in︁ this case) will be tax exempt.

If instead you want something outside of CRS there's︂ North Macedonia with 0% WHT on royalties with Italy but it has 10% CIT so︃ you'll pay 10% on the royalties received from Italy.

In any case you have to︄ invest in creating substance for either company, creating the IP, license that IP and most︅ likely speak with somebody with knowledge abou transfer pricing.

Legal tax avoidance. Not stupid tax evasion.

 

[alain]

Marzio said:
Did you realize that paying royalties means that somebody else is the owner of the IP for the royalties you are paying out?

To pull this off in a credible way you need to setup a holding company that will own the IP and license that IP to the Italian subsidiary.

That holding company will require a local director, an office and some staff to create substance.

The best place for your holding would be Georgia because it has 0% WHT on royalties with Italy and it's a territorial taxation country so any income generated abroad (by your Italian company in this case) will be tax exempt.

If instead you want something outside of CRS there's North Macedonia with 0% WHT on royalties with Italy but it has 10% CIT so you'll pay 10% on the royalties received from Italy.

In any case you have to invest in creating substance for either company, creating the IP, license that IP and most likely speak with somebody with knowledge abou transfer pricing.
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Thank you for your advice. That sounds pretty good. Is it difficult to work in this countries and how high would be the running costs?

Marzio said:
Legal tax avoidance. Not stupid tax evasion.
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Thats what I want to do. I am not that expirienced like all of you, so i registered here to learn from you all. I know I am stupid but thats why i choosed my username. so big thanks for your help!

 

[noob3000]

Thank you for your advice.︅ That sounds pretty good. Is it difficult to work in this countries and how high︆ would be the running costs?

Thats what I want to do. I am not that expirienced like all︇ of you, so i registered here to learn from you all. I know I am︈ stupid but thats why i choosed my username. so big thanks for your help!

 

[JohnLocke]

I can only agree with this. Times have changed, where one could previously assume that the⁣ tax authorities were a bit foolish and unenlightened, they have become intelligent liars who will⁢ surely figure out your plan and actually make what you have done even worse by︀ just fabricating and assuming whatever they feel like. And you have no chance of convincing︁ them otherwise. That is, unless you're Bill Gates or Mark Zuckerberg, maybe.

 

[Marzio]

I revised my post because both recommendations were wrong.

Georgia is indeed⁢ a territorial taxation country but only for natural persons, not companies so you'll pay 15%︀ CIT on royalties from Italy.

North Macedonia has 10% CIT so by establishing a IP︁ holding there you'll fall into italian CFC rules because Norh Macedonia's CIT is less than︂ half of Italian CIT and more than 1/3 of income is passive income.

So the︃ advice about establishing a holding company that owns IP is correct but the reasons behind︄ the countries i initally highlited are incorrect.

By being tax resident in Italy you have︅ to establish a holding company in a country that:
1. has a DTT with Italy︆
2. would not fall into Italian CFC rules (this means that CIT has to be︇ minimum 14%)
3. not part of CRS (those are countries that are currently not︈ part of CRS, will you bank in those?)

Since you said that your LLC︉ is creating videos i guess you are a youtuber.

Is that correct?

Having said this︊ there are some countries that could work:
- Georgia > 0% IT WHT on royalties,︋ 15% CIT
- Estonia > 0% IT WHT on royalties, 0% CIT (deferred until distribution)︌

I think Estonia could be a great option in your case (it has to be︍ seen if the deferred payment of corporate income tax would fall into Italian CFC rules),︎ speak with @Don

 

[alain]

Marzio said:
Since you said that your LLC is creating videos i guess you are a youtuber.

Is that correct?
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Not really but similar. I have normal business too i make money with (basically consulting and stuff) so its a mix.

Marzio said:
- Georgia > 0% IT WHT on royalties, 15% CIT
- Estonia > 0% IT WHT on royalties, 0% CIT (deferred until distribution)

I think Estonia could be a great option in your case (it has to be seen if the deferred payment of corporate income tax would fall into Italian CFC rules), speak with @Don
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1. "deferred until distribution" does mean i can "stow" my money there until i can moove myself living in a low income taxation country and make the distribution there? like monaco etc.
2. i can't contact him because i have to upgrade my account i think
3. what's about Malta?

 

[noob3000]

Not really but similar. I have normal‍ business too i make money with (basically consulting and stuff) so its a mix.

1. "deferred until distribution" does mean i can "stow" my money there until i can︀ moove myself living in a low income taxation country and make the distribution there? like︁ monaco etc.
2. i can't contact him because i have to upgrade my account i︂ think
3. what's about Malta?

 

[Don]

For Royalty setups, we have recommended a combination of the︈ following:
1) Tax residency in Georgia (foreign-sourced income is exempt from tax)
2) Personal income︉ comes in as royalties from a US SMLLC (structured purely as an IP holding, so︊ the source of income is entirely passive). Partly you can also pay salaries from the︋ Estonia entity since foreign employment income is not taxed in Georgia and Estonia doesn't tax︌ the employment of non-residents for work performed abroad.
3) Estonian operating entity - developing the︍ IP for the US SMLLC (active income). Profit is not distributed, so it remains at︎ an effective 0% tax.
To avoid CFC rules, you can operate as a non-profit association.️ Its exempted from CFC since it's not a corporation. Establishing an Estonian entity could be‌ step one.

 

[Marzio]

He can't move

He uses‍ an Italian LLC

I thought about⁠ Malta too and even if on the surface CIT is 35% you'll end up paying⁤ 5% and that would fall into Italian CFC rules.

 

[Don]

Some unconventional setups, like using⁠ a non-profit abroad, could potentially run under the radar from CFC and CRS.
With an⁤ NGO, there are no shares, and members are not disclosed publicly. UBO is potentially not⁣ reported anywhere or is someone else who is not real beneficiary.

I can agree that⁢ in general, such endeavours can be risky, as was commented before.

 

[Marzio]

How would‌ you extract profits from the non-profit?

 

[alain]

Marzio said:
How would you extract profits from the non-profit?
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i thank you simply use it as your personal bank account then haha

jokes aside, that would be interesting. a lot of big players do so.

Don said:
Some unconventional setups, like using a non-profit abroad, could potentially run under the radar from CFC and CRS.
With an NGO, there are no shares, and members are not disclosed publicly. UBO is potentially not reported anywhere or is someone else who is not real beneficiary.

I can agree that in general, such endeavours can be risky, as was commented before.
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so is there a scheme you think about and how many layers are needed, estimated cost etc for it?

 

[noob3000]

i thank‌ you simply use it as your personal bank account then haha

jokes aside, that would‍ be interesting. a lot of big players do so.

so is there a scheme you think about and how many layers are needed, estimated︀ cost etc for it?

 

[Don]

You can‌ take money out as a salary, loan or liquidate it, and liquidation can be structured‍ tax-free as well.

In certain cases, you can even structure it as a charitable entity⁠ so even donations to a certain extent are deductible as per EU law.

The arrangement should have some economical substance, and people's refined tastes often︁ differ in this matter.

 

[JohnnyDoe]

The harder you try, the harder they will hit you. Unless you are talking of €10k per year, they can and will go as far as sending a GdF marshal abroad to check your setup, offices and background of the business. They will write a long (hundreds of pages) report with a fancy title and even an illustrated front cover, that will end on the table of the Procuratore della Repubblica. At that point, a 5-6 years long and expensive nightmare will start.

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[Don]

Concerning GdF⁢ marshals, I've even heard of some regular guys paid by the tax authorities to snitch︀ after such service providers who they believe help to facilitate so-called schemes. So, in that︁ regard, having sufficient economic substance is highly advised.

 

[alain]

JohnnyDoe said:
The harder you try, the harder they will hit you. Unless you are talking of €10k per year, they can and will go as far as sending a GdF marshal abroad to check your setup, offices and background of the business. They will write a long (hundreds of pages) report with a fancy title and even an illustrated front cover, that will end on the table of the Procuratore della Repubblica. At that point, a 5-6 years long and expensive nightmare will start.
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sounds like expirienced and well known expiriences... better not to have the same!

Don said:
Concerning GdF marshals, I've even heard of some regular guys paid by the tax authorities to snitch after such service providers who they believe help to facilitate so-called schemes. So, in that regard, having sufficient economic substance is highly advised.
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yes they exist, but i think everywhere in the world....

but what you mean with "sufficient economic substance" ?

and talking in numbers... if we say lower 6 numbers is it worth then?

 

[noob3000]

sounds like⁢ expirienced and well known expiriences... better not to have the same!

yes they exist, but︃ i think everywhere in the world....

but what you mean with "sufficient economic substance" ?︄

and talking in numbers... if we say lower 6 numbers is it worth then?

 

[Marzio]

It means people working for your holding, a director that you pay 50K a year, office‌ space that you rent, salaried employee.

And even in this case your structure could fall‍ into GAAR meaning that if there are no other reasons beside tax reduction that justify⁠ your holding it will be disregarded and you'll end up like @JohnnyDoe said.

 

[alain]

Marzio said:
It means people working for your holding, a director that you pay 50K a year, office space that you rent, salaried employee.

And even in this case your structure could fall into GAAR meaning that if there are no other reasons beside tax reduction that justify your holding it will be disregarded and you'll end up like @JohnnyDoe said.
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that sounds pretty disillusioning.