Best management location for US LLC

[A1988]

Yes agreed, if your company is incorporated outside malta and the director is resident of Malta. Even if its managed from Malta, you can get away if there is no maltese sourced income and its not remitted to Malta.
Us LLC, GIBRALTAR company,, can work pretty well for someone who is not a resident of either US or gibralter to start with.

 

[JustAnotherNomad]

Since the company will be resident in Malta, it should also be possible to get a tax residency certificate for the company in Malta?

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.

But a US LLC would not be a red flag.

Say you want to set up an office in Spain. You set up a Spanish company, hire employees, you don't live in Spain yourself.
The Spanish company resells services provided by your US LLC for a commission, cost + 10%, making sure that transfer pricing restrictions are followed.
Now most of the profit goes to your US LLC, Spain does not see a Maltese company. Should probably be fine?

 

[A1988]

Since the company will be resident in Malta, it should also be possible to get a tax residency certificate for the company in Malta?



But a US LLC would not be a red flag.

Say you want to set up an office in Spain. You set up a Spanish company, hire employees, you don't live in Spain yourself.
The Spanish company resells services provided by your US LLC for a commission, cost + 10%, making sure that transfer pricing restrictions are followed.
Now most of the profit goes to your US LLC, Spain does not see a Maltese company. Should probably be fine?

Why a spanish company? Where do the shareholders live?

I would stay away from Spain, I know some people have been audited due to beckham law status and told that their Spanish company is not genuine even after declaring profits, this is the level of tax authorities you are dealing with.

 

[JustAnotherNomad]

Why a spanish company?

Just a random example.
Say someone wants to hire in Spain because you have Spanish customers. There will almost certainly be a PE, so you have to pay tax anyway.
Might as well just go in and set up a Spanish company to be more attractive for Spanish customers.

Where do the shareholders live?

Ideally they would be flexible as they have enough substance to only pay tax on what they pay out.

I would stay away from Spain

Should be fine if you don't live there.

 

[A1988]

Just a random example.
Say someone wants to hire in Spain because you have Spanish customers. There will almost certainly be a PE, so you have to pay tax anyway.
Might as well just go in and set up a Spanish company to be more attractive for Spanish customers.



Ideally they would be flexible as they have enough substance to only pay tax on what they pay out.



Should be fine if you don't live there.

Maybe holding company in gibralter or dubai with Spanish branch would work, but check with a good attorney in spain first.

Again, these structures are useless if shareholders live in a tax hell, it's important to know where the shareholders live.

 

[JustAnotherNomad]

Maybe holding company in gibralter or dubai with Spanish branch would work, but check with a good attorney in spain first.

You mean a holding company with a subsidiary. A branch is just the same company.

Again, these structures are useless if shareholders live in a tax hell, it's important to know where the shareholders live.

Yes, I don't intend to live in a tax-hell country.

But if you have proper substance, you could even live in a tax-hell country, unless the company is a CFC.
If you are a passive owner in a sugar-cane plant in Vanuatu or a restaurant in Bahrain, then moving to Spain won't suddenly make that company taxable in Spain.

 

[A1988]

You mean a holding company with a subsidiary. A branch is just the same company.



Yes, I don't intend to live in a tax-hell country.

But if you have proper substance, you could even live in a tax-hell country, unless the company is a CFC.
If you are a passive owner in a sugar-cane plant in Vanuatu or a restaurant in Bahrain, then moving to Spain won't suddenly make that company taxable in Spain.

Yes you are right, I think spain is my top country to live specially in marbella in andalusia, the socialist government removed the special status of no wealth tax in andalucia, if spain becomes a place with reasonable taxes then it can definitely give UAE, Singapore and most of the tax havens a run for their money.

 

[A1988]

Yes you are right, I think spain is my top country to live specially in marbella in andalusia, the socialist government removed the special status of no wealth tax in andalucia, if spain becomes a place with reasonable taxes then it can definitely give UAE, Singapore and most of the tax havens a run for their money.

I would happily pay upto 15-20% on income and capital gains and live in marbella for the rest of my life. But it's not possible

 

[Houdini]

But if you have proper substance, you could even live in a tax-hell country, unless the company is a CFC.

how do you imagine this to work, curious ?

 

[Marzio]

I would happily pay upto 15-20% on income and capital gains and live in marbella for the rest of my life.

You are lucky, you don't have to pay as much

You only need to add a Gibraltar holding company to your actual setup, hire a Maltese director for you resident non domiciled company, move to Gibraltar and get dividends tax free.

If you want to do things by the book you would need to invoice the Maltese res non dom company for the work you do in Gibraltar.

Dividends in Gibraltar are taxable to the extent that the underlying income of the company comprises income that is taxable in Gibraltar and since dividends received from the Maltese non resident company will be tax exempt, the dividend distributed to yourself will be tax exempt too.

In 1 hour you could be in Marbella.

 

[A1988]

You are lucky, you don't have to pay as much

You only need to add a Gibraltar holding company to your actual setup, hire a Maltese director for you resident non domiciled company, move to Gibraltar and get dividends tax free.

If you want to do things by the book you would need to invoice the Maltese res non dom company for the work you do in Gibraltar.

Dividends in Gibraltar are taxable to the extent that the underlying income of the company comprises income that is taxable in Gibraltar and since dividends received from the Maltese non resident company will be tax exempt, the dividend distributed to yourself will be tax exempt too.

In 1 hour you could be in Marbella.

Wow thanks Marzio, this structure can allow me to live in Spain for more than 6 months or less than 6 months ? I believe less than 6 months?

 

[Marzio]

There's a super new agreement between Spain and UK regarding Gibraltar to solve tax residency issues of natural persons.

To answer your question the answer depends on your risk appetite.

You could be conservative, commute daily to Marbella, sleep in Gibraltar.

You could be reckless and buy a holiday home in Marbella, spend > 183 days and lend one of your credit cards to a trusted person in Gibraltar that everyday buys something at the grocery, eat out and stuff like that to simulate your presence in Gibraltar.

I would probably do something in between like renting a property in Spain through a US LLC so that they wouldn't be able to connect my name to the property.

 

[Marzio]

One thing to add is that there are CFC rules in Gibraltar but the provisions do not apply when the accounting profits of the CFC do not exceed 750K and CFC's non trading income does not exceed 75K so if you expect to generate more than 750K in profits then stay in Malta.

 

[daniels27]

One thing to add is that there are CFC rules in Gibraltar but the provisions do not apply when the accounting profits of the CFC do not exceed 750K and CFC's non trading income does not exceed 75K so if you expect to generate more than 750K in profits then stay in Malta.

If he makes more, he could apply for flat rate tax in Gibraltar and be under 5%?

 

[Marzio]

Which flat tax are you referring to?

 

[JustAnotherNomad]

how do you imagine this to work, curious ?

It's literally in the sentence after what you quoted.
If you are a passive owner in a business, so you are essentially retired and all operations are run by your staff, then you can move to any country and only pay tax on the money that is paid out by your companies.
For example, you own a hotel in Bahrain, and it's not your job to run it. There is a general manager who makes all decisions and you only fly their a few times per year for board meetings to discuss the general strategy of the business and set goals the manager has to reach (but how to reach them will be up to him) - then this hotel will not be taxed by Spain, even if you live in Spain.
But then you are retired and not actively involved in the business anymore, it's just an investment for you.

 

[JustAnotherNomad]

You only need to add a Gibraltar holding company to your actual setup, hire a Maltese director for you resident non domiciled company, move to Gibraltar and get dividends tax free.

There's a risk that Gibraltar would either see the US LLC as taxable in Gibraltar (management and control or PE) if there is not enough substance in Malta.
If they accept the Maltese substance, then there would still be a risk that it could be a CFC in Gibraltar.

Of course there is also a significant risk that Spain would consider him tax resident, especially if he spends 183+ days in Spain.
I'm not sure how strict the border checks are. I think remember having my passport checked at the border.
Even if they don't check passports, they probably record license plates...?

I guess it could work though.

But maybe it would be easier to just drop the Maltese director, manage everything from Gibraltar and pay 12.5% tax in a worst-case scenario.
I don't know how strict Gibraltar is about this stuff - maybe they don't really enforce corporate residency/PE rules?
Honestly this might be a better option - no need to worry about substance in Malta.

 

[Marzio]

There's a risk that Gibraltar would either see the US LLC as taxable in Gibraltar

The fact that the resident non domiciled company in Malta can access the full imputation system and the treaty network means that is considered a tax resident company so i assume it could get a tax residency certificate from Maltese tax agency. (@A1988 please correct me if i'm wrong).

If the company could get the tax certificate then I don't see how Gibraltar could claim the company to be taxable there.

I also assume that the since UK sees US LLC as an opaque entity, Gibraltar treats US LLC the same way (but i'm not sure).

If they accept the Maltese substance, then there would still be a risk that it could be a CFC in Gibraltar.

CFC rules are exempt if profits are < 750K

Of course there is also a significant risk that Spain would consider him tax resident, especially if he spends 183+ days in Spain.

Agreed, especially if he rents/buys permanent home in his name.

I'm not sure how strict the border checks are. I think remember having my passport checked at the border.

They are changing borders control right now, they are still working on a Brexit deal but even if they check passport at the border and stamp him leaving GIB they can't claim he is staying in Spain.

They key imho is not have anything in his name in Spain.

But maybe it would be easier to just drop the Maltese director, manage everything from Gibraltar and pay 12.5% tax in a worst-case scenario.

Now it's 15%

I guess it could work though.

Yes, i'm fairly confident too that this could work.

 

[daniels27]

Which flat tax are you referring to?

I mean thre Gibraltar’s Category 2 Tax Residence.

There are many on this in Gibraltar but actually live in Spain as "okupas" almost the whole time. Border control used to be very weak as we know.

 

[JustAnotherNomad]

The fact that the resident non domiciled company in Malta can access the full imputation system and the treaty network means that is considered a tax resident company so i assume it could get a tax residency certificate from Maltese tax agency. (@A1988 please correct me if i'm wrong).

If the company could get the tax certificate then I don't see how Gibraltar could claim the company to be taxable there.

As discussed many times before, it's not a magical piece of paper. You can have many such papers, which then will not be so magical anymore.
Gibralter could simply declare the company tax resident as well.
Then if there is a treaty between Gibraltar and Malta, they will have to figure out who wins. If there is none, then the company may end up being double taxed and you can only reclaim tax paid twice as foreign tax credits under domestic law (if such a law exists).
But I don't know how aggressive the tax authority in Gibraltar is.

I also assume that the since UK sees US LLC as an opaque entity, Gibraltar treats US LLC the same way (but i'm not sure).

ATAD 2 contains rules against hybrid mismatches:

https://taxsummaries.pwc.com/gibraltar/corporate/group-taxation

I would also guess that they can thwart any ideas people have about receiving "dividends" from a US LLC tax free under NHR in Portugal.

CFC rules are exempt if profits are < 750K

I don't see such a limit in Gibraltar.
CFC rules are about where the owner is located, which would be Gibraltar in your example.

They are changing borders control right now, they are still working on a Brexit deal but even if they check passport at the border and stamp him leaving GIB they can't claim he is staying in Spain.

I would love to be a fly on the wall when you tell the Hacienda what they can and can't do.
Of course they can claim that, then it will be up to him to prove otherwise.

They key imho is not have anything in his name in Spain.

If they really investigate him, they can even access records from phone towers.
But they won't even have to, they will just claim something and then he can try to fight it in court.

But Malta is a Schengen country - he could do what you are suggesting even living in Malta. Claim to be living in Malta, but just travel to Spain without flying and stay there.

Now it's 15%

The Pwc website says 12.5%, but even if it's 15%, he said he would be fine paying that if he could live in Marbella.

Yes, i'm fairly confident too that this could work.

Sure, but unless you go back to sleep in Gibraltar every day... probably not legally.