The reputation really leaves a lot to desire. And the fees are note really for my cost appetite.How about UAE FZCO and LLC, with 95% of business in rest of the world and only 5% retained?
How about UAE FZCO and LLC, with 95% of business in rest of the world and only 5% retained?
Would tax in Swizerland not be more compared to Dubai ?For example, if the UAE company had an office in Switzerland, you may end up with a situation where Switzerland wants to tax the profits that can be attributed to that office, and then maybe you can get the UAE to accept that they shouldn't also tax those profits (as that would be double taxation, and there is a treaty).
It would. But I think the goal is to get close to 0% tax.Would tax in Swizerland not be more compared to Dubai ?
9% on profits, 0% on salary seems like a pretty good set up imo, with LLC + FZCO.
Would tax in Swizerland not be more compared to Dubai ?
I guess my question was more from a US tax perspective, if they would pursue tax on a federal level as 95% passes through tax free.
9% on profits, 0% on salary seems like a pretty good set up imo, with LLC + FZCO.
For the 0% and cost-dependent, would a holding company in vanatau make more sense? How about Bahrain where there's currently 0 corporation tax or limits on the amount one can take as well as no minimum stay conditions there.
Bahrain would be cheaper to set up in than Vanatau
To get this, do you need a US LLC and also live in Dubai? There is no income tax in Dubai, so why go through the hassle of having a US LLC?
What if it is sole owner, standalone LLC, an independent company?You mean to have a transparent US LLC and only have 5% of the profits taxed in the US?
Then you would have to convince the IRS that only 5% profits are ECI. No idea how hard that would be, but good CPA's and tax lawyers from the US don't come cheap. You could probably forget about paying less than at least $400 per hour for their time, likely more.
If the US LLC is owned by a foreign entity that is not transparent (like a FZCO), there would also be 30% branch profit tax.
Say you make $10M profit with your transparent US LLC and you could get the IRS to accept that only 5% are ECI (big if), you would then first pay CIT on those 500k in the US.
Say the federal CIT is 21% (I believe Trump may have plans to lower it) and that the company only does business in tax-free states (in California, you would have to add another ~9% according to Google). So then you have 395k left. On this amount you then pay 30% BPT, so you only get $276,500 out to the FZCO. I'm not sure if this would then be taxed in the UAE again.
The other $9.5M would be taxable in the UAE anyway, which would leave you with $8,645,000.
So in a best-case scenario you would be paying $960k on your 10M profits, or 9.6%.
That's not very competitive. In Malta, you could be paying 5% and you would also lower the BPT to 5% or 15% (not sure), definitely much lower than with Dubai.
You could also try to shift profits through invoices (reducing the profit in the US further), subject to transfer pricing restrictions, but then you would also pay 9% in Dubai (instead of 21%+ in the US), or 5% in Malta.
It's just not a good idea to have ECI without treaty benefits, as the 30% WHT/BPT stings.
Not sure what you mean here. If you have ECI, you'll want to use a treaty country. But watch out for LoB clauses in the treaty.
Did you get a quote for a Bahrain setup?
yeah there are much better suited countries for this little "experiment".There is no personal income tax (yet), but there is corporate income tax. Dubai would probably see the US LLC as opaque, so it would have to pay 9% CIT in the UAE. But enforcement is weak at the moment if you don't have an office or local customers in the UAE. If you just run the US LLC from your home in the UAE, they probably wouldn't know about this or try to tax the US LLC... yet. Good luck if they suddenly do, they will probably place you under a travel ban and hit you with huge fines or jail time. Lawyers are expensive in the UAE and there is no rule of law.
It's a really stupid idea to attempt such a setup in the UAE if you ask me.
You may be able to avoid this by having a manager for your US LLC outside the UAE though, which would bring us back to the original question of this thread.
What if it is sole owner, standalone LLC, an independent company?
I believe it's a c-corp which is 21% CT, on US income only all else remitted.
Will have a further look at Malta, assume there are no stay requirements?
Are you sure that CFC rules is about where shareholder is located? One of that C in CFC means contolled. By a legal definition, it means from where company is managed. Company does not be managed by a shareholders. Company is managed by a director in the most cases.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.
Yes.Are you sure that CFC rules is about where shareholder is located?
No.One of that C in CFC means contolled. By a legal definition, it means from where company is managed.
Are you sure that CFC rules is about where shareholder is located? One of that C in CFC means contolled. By a legal definition, it means from where company is managed. Company does not be managed by a shareholders. Company is managed by a director in the most cases.
I think he is talking about PE rules. CFC rules are irrelevant in 95% of the times we discuss anyting here. (It is similar to the tax certificate discussion we hold here where in 95% of all cases, the certificate is neither requested nor helpful.)Seriously, just look up the CFC rules of any country and you will see I am correct.
Not surprisingly, the assumptions were not true. For income to be considered foreign income, it has to be linked to an asset outside Malta.
It would be very interesting for me to see how your advisor justifies this @A1988, since you said you also declare some profits as remitted and taxable?
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