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UAE clarification of Freezone Qualifying Income

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I have already registered my freezone company︆ and traveling in the next few weeks for visa. I hope I can update the︇ freezone to be a branch of the US LLC and not have to set this︈ up from scratch. That would be crazy.
The other thing is , will the US︉ be sending reports or my 5472 to the UAE? Like how would this all play︊ out in the UAE ( I know it's a mess there right now ) .︋

If I register for corp tax in UAE , pay my 9% with my freezone︌ company. Does it matter that it's a branch of us LLC or registered in my︍ name ?
 
This form is only for services, not purchase of goods. So it wouldn't affect all industries.‍
 
When the file⁠ the 1099 they will use your foreign details, as you can't give them a W9⁤ as a foreigner with a disregarded LLC, you must give them a W8BEN(E). So the⁣ IRS will not actually be informed of the LLC, only the single member. That's why⁢ it's called a disregarded entity, it's disregarded for taxes.
 
Hey, so with this form filled properly they won't withhold 30% tax when⁤ selecting the disregarded LLC on the form? Any references for how to fill?
 
Yeah, I already asked about that as well:

A W-8BENE is not applicable to a‌ U.S. domestic entity (unless solely owned by a foreign person and is a disregarded entity‍ – then a Form W-8BEN would be the correct form). A domestic entity, LLC, issues⁠ a Form W-9 to establish that it is not foreign.

However.

The problem is, and⁤ we encounter this frequently, is that the customer dictates which form they will send to⁣ your LLC or foreign corporation, and it is almost fruitless to change their minds. And⁢ you will have the benefit of no Treaty as you are in Dubai.

As I︀ said, many (most? almost all?) people are fine. I cannot tell you how risky this︁ is in practice. I still think it's good to be aware of this, however.
The tax lawyer has nothing to gain from scaring people away either - it's just his︂ honest opinion (and he works in a high position in an extremely reputable law firm).︃
 
The tax lawyer if they're also a cpa can gain︅ from having you hiring them to file a US tax return even if you wouldn't︆ have to.

I don't see how you can file a w9 if you're a foreigner.︇ I understand that the customer might not want to accept a w8ben, but that doesn't︈ mean that you can or should file a w9.
 
They also made it clear I wouldn't have to file a US tax‍ return (only form 5472 if I remember correctly). They were quoting ridiculous rates for that,⁠ but they didn't try to sell anything I didn't need.

Yeah, that sentence wasn't worded well. Not sure︀ why there were even mentioning the W9, probably I incorrectly asked about W8-BENE. Maybe I︁ should have omitted the first sentence.
I think what they meant is just what you︂ wrote, that the W9 is for domestic entities, but in my case, W-8BEN would be︃ the form to file. But as you said, the client may not accept a W8-BEN︄ and send a 1099 anyway. So some risk would remain.
To be honest, I'm not︅ super worried about this. I just thought it might be relevant for others.
 
I once had a US client asking me first for a︃ W-8BENE. I told them no, no that's for a foreign business, this is a US︄ business. Then they said, oh that's great, that's much simpler, then you just need to︅ send us a W-9.
So, I had to tell them, look on the W-9 form︆ it says:

"If the owner of the disregarded entity is a foreign person, the owner︇ must complete an appropriate Form W-8 instead of a Form W-9."

And the appropriate W-8︈ for a disregarded US LLC owned by a foreign person is W-8BEN. (Without the -E)︉

They answered that they had checked with their tax advisor and I was indeed correct.︊ But then they started querying about whether they should deduct withholding tax, so I had︋ to explain why that wasn't the case. All good at the end.
 
What would be the role of the︆ nominee manager, do they have to sign contracts and be signatory of banks etc? Are︇ most of them on paper? Or actually doing the work?
 
What do you think of this..⁤ my client needs me to have professional and workers comp insurance. Any issues with having⁣ Insurance being considered ECI?
 
I have been filing my own 5472s and 1120s. There's tons of info on YouTube.‌ Here is a good guide:
 
Are you in services B2B‍ by chance 🙂?
Have you followed the past few posts? Any IRS issues that you⁠ encountered?
 
I provide services to‍ US clients. My understanding is that if you don't have physical locations, employees, and don't⁠ need to regularly visit the US to perform business duties, you will be fine. I⁤ would even avoid US freelancers or regular US visits for pleasure just to be safe.⁣ I have not had any issues with the IRS, so far.

I have been advised⁢ to keep my servers/domain registrations outside of the US too, but I haven't yet done︀ so. I have a business and personal account in the US (CitiBank). In theory this︁ setup works. Depending on the scale of your business, you would want to be super︂ careful with keeping anything in the US.

I am a mix of B2B and B2C.
 
You're bang on about the UAE mainland risk of US LLC if⁣ owned by UAE resident - as opposed to FZCO.

In the grand scheme of things⁢ I'd far rather risk having to show IRS there is no US activity (in my︀ case super easy to show given digital services are taxed where the service is performed︁ rather than where customers based) than have to argue anything in a Dubai court

And provided you explicitly have no US activity and have never been there the IRS has︂ no leg to stand on given these rules at least are crystal clear.
 
Yeah, I think the question is what happens once you spend at least a few‌ days per year in the US and you get a 1099 because the client doesn't‍ understand the reporting rules.
What are your thoughts on having a UAE freezone branch of⁠ the US LLC instead of having the FZCO own the US LLC?
 
They file the 1099 based on the information you give them in a W9 or⁠ W8BEN(E). They can't file a 1099 without a W9/W8BEN.
 
I've surely lost part of the discussion here but why should‍ a foreign owned US LLC file a W9 form if the beneficial owner is a⁠ foreign company?

Isn't form W9 for U.S. entities?
 
So then you think it's fine if you just send them a W8BEN? I have no‍ idea how big the risk of the IRS claiming there is ECI really is.

Yes, W8BEN is what's relevant,⁠ we've established that. 😉
 
So, what is the deal here, do I change ownership of My US LLC to︁ my FZE instead of my personal name ? I am registered in Wyoming so I︂ think I can just send a form and change ownership. This then puts me at︃ a low risk of branch tax as per previous conversations . What is the UAE︄ risk , does the FTA audit this stuff ?

Hey , is the owner of your US LLC your UAE FZE︎ or did you register your personal name against it. Also, do you have US business️ insurance? My customers require it along with workers comp , even tho I'm never on‌ site for their customers.

Hey, can I bug you with one more thing.⁢ I also have a Canadian operation (my citizenship) with people and Canadian customers etc. I︀ know my tax obligations here. I will also be running zero net profit when I︁ leave . (Have discussed this with my Canadian accountants).
For the UAE, they will consider︂ this in anyway or do I need to disclose this ? 0 net profit and︃ zero revenue share since no profit. Owner here is def in my name and not︄ FZE.
Now, for transfer pricing , technically management and control is not in Canada.
And there is a Canada UAE treaty.
 
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