Biz solutions for digital nomads 2020

[zeytin]

I thought US based income is taxed in American LLC companies (delaware or wyoming llc) ?
My friend said, even as a non-resident or foreigner, if you receive money to an American bank from USA sources you are going to pay tax for it. Can anybody enlighten me if I'm wrong?

 

[JohnLocke]

almost everywhere because Cyprus does not have CFC rules

hmmm, not sure if I would relay on that https://www.ey.com/Publication/vwLU...s adopts legislation implementing EU ATAD.pdf

The Law introduces controlled foreign corporation (CFC) rules, a limitation to interest deductibility provision as well as a general anti-abuse rule

 

[Reboot]

If the income is from the US then a US LLC wouldn't be the best option I think. Maybe Cyprus or Bulgaria.

 

[GrumpyMess]

Then you can have a company almost everywhere because Cyprus does not have CFC rules and does not tax received dividends.

Fake. In accordance with the Cyprus income tax legislation, a company is considered to be tax resident in Cyprus if it is managed and controlled in Cyprus. Otherwise Cyprus would be a perfect tax heaven.

TL;DR just stay 2 months, it's not that long and Cyprus is decent.

But you have to maintain a rent contract for the whole year which costs quite a few

 

[Gediminas]

hmmm, not sure if I would relay on that https://www.ey.com/Publication/vwLUAssets/Cyprus_adopts_legislation_implementing_EU_Anti-Tax_Avoidance_Directive/$FILE/2019G_001559-19Gbl_Cyprus adopts legislation implementing EU ATAD.pdf

Cypriot CFC rules are not applied to individuals, only for corporate shareholders. So the above rules do not have a sense for the individual resident.

 

[andres33]

Thank you! i will check your guide. Thinking about it, this sounds a quite interesting idea. I wonder how the 60days are counted though. Does Cyprus complain if one such resident happens to stay there for only 30 days, for example? do they require yearly proofs of stays?

You can stay the 60 days in diferents stages. Is 60 days on the calendar year. So if you want to spend 1 month now and other month after summer it will be ok. Cyprus is not Shenguen territory. So your entry will be controled by your ticket fly and with control passport or ID. When you enter in Larnaca or Paphos airport your ID will be scanned. Once scanned your ID document your receive a printed ticket on the same machine scanner, giving you the welcome to Cyprus Mr. XX. And when you exit idem. Keep these tickets. It's other proove as your date stay. When you will request a tax resident certificate you will must to bring your copy ticket flys and tickets of welcoming and they will verificate it with the entry and exit police register. Very easy

Cypriot CFC rules are not applied to individuals, only for corporate shareholders. So the above rules do not have a sense for the individual resident.

exact. That's is so my accountant confirm me.

 

[JohnLocke]

So and how long do you think this will stay that way? - If this is for a short period of time I would say go for it. If someone is looking for a long term solution or at least something that will last longer than the next 12 months, you want to look into a different direction.

Cypriot CFC rules are not applied to individuals, only for corporate shareholders. So the above rules do not have a sense for the individual resident.

It is not a secret that I have been a huge fan of Cyprus business wise in the past, but today it's more and more similar to most other EU countries. This island / country is simply to small to stay against the presure of the major countries of this world.

 

[pierino]

You can stay the 60 days in diferents stages. Is 60 days on the calendar year. So if you want to spend 1 month now and other month after summer it will be ok. Cyprus is not Shenguen territory. So your entry will be controled by your ticket fly and with control passport or ID. When you enter in Larnaca or Paphos airport your ID will be scanned. Once scanned your ID document your receive a printed ticket on the same machine scanner, giving you the welcome to Cyprus Mr. XX. And when you exit idem. Keep these tickets. It's other proove as your date stay. When you will request a tax resident certificate you will must to bring your copy ticket flys and tickets of welcoming and they will verificate it with the entry and exit police register. Very easy


exact. That's is so my accountant confirm me.

Thanks, very helpful reply.
Given the proofs of tickets, i suppose i won't need to have a stable rental contract like GrumpyMess was suggesting?

 

[Gediminas]

Fake. In accordance with the Cyprus income tax legislation, a company is considered to be tax resident in Cyprus if it is managed and controlled in Cyprus. Otherwise Cyprus would be a perfect tax heaven.

What you just said is a general principle which is called permanent establishment (PE). This is applicable for decades in almost all countries in the world not only in Cyprus. If you are a tax resident in Cyprus it does not mean that you effectively control all your foreign companies from Cyprus.

 

[John Andrews]

When you are physically in a country and working in that country. If you are required to be in that country to perform the work then probably the income is taxable there, even if you stay less than 183 days. Sometimes tax treaties can be used to avoid having to pay taxes there.

It won't be taxed. He is just working temporarily as a contractor. Imagine some big company sends their workers abroad for a short period of time. He would stay in Cyprus for 2 months or so (to be tax resident) and less than 183 days in any other country.

OP, Cyprus non-dom is the best option here, paired with a Cypriot Ltd. US LLC is a hassle to manage anyway and you will need social security in Cyprus so it makes no sense.

 

[fshore]

It won't be taxed. He is just working temporarily as a contractor. Imagine some big company sends their workers abroad for a short period of time. He would stay in Cyprus for 2 months or so (to be tax resident) and less than 183 days in any other country.

OP, Cyprus non-dom is the best option here, paired with a Cypriot Ltd. US LLC is a hassle to manage anyway and you will need social security in Cyprus so it makes no sense.

Temporary work is taxable in most countries. He should check with the tax office in the country he'll he working in.

 

[John Andrews]

Temporary work is taxable in most countries. He should check with the tax office in the country he'll he working in.

https://europa.eu/youreurope/citizens/work/work-abroad/posted-workers/index_en.htm

 

[fshore]

https://europa.eu/youreurope/citizens/work/work-abroad/posted-workers/index_en.htm

From your link:

"If you work in your host country for less than six months, you shouldn't be liable for income tax there. However, there are no EU-wide rules that set out which country can tax your income during a posting. This may be set out in national laws or tax agreements between EU countries."

So you probably have to use a tax treaty to avoid paying taxes there.

And

" you will need to register your residence with the authorities if your posting is longer than 3 months"

 

[pierino]

i can go back before 3 months expires, and in fact it's what i do. So i think i am OK wrt to B. In fact, if they would ever complain, my employer is OK with me working remotely.
As i wrote, i am doing it only for convenience of teamworking (and it costs me money, so i would also save by not doing it).

A question about Estonia, that i think might be related unless i misunderstand the mechanism: what happens if i sign up for e-residency, create a company in Estonia, that apparently for non residents can only work with EMIs such as TW, as local banks do not let foreigners open accounts, and then try to set the residence of the EMI account to the company address?
As far as i understand the estonian gov does not report to my country of residence that i have a business in there.
I could technically run the biz through that company (emit invoices, get paid, etc), and then the money in the company could be used to buy real estate on behalf of the company and not even need to be cashed out via dividends?

 

[Reboot]

i can go back before 3 months expires, and in fact it's what i do. So i think i am OK wrt to B. In fact, if they would ever complain, my employer is OK with me working remotely.
As i wrote, i am doing it only for convenience of teamworking (and it costs me money, so i would also save by not doing it).

A question about Estonia, that i think might be related unless i misunderstand the mechanism: what happens if i sign up for e-residency, create a company in Estonia, that apparently for non residents can only work with EMIs such as TW, as local banks do not let foreigners open accounts, and then try to set the residence of the EMI account to the company address?
As far as i understand the estonian gov does not report to my country of residence that i have a business in there.
I could technically run the biz through that company (emit invoices, get paid, etc), and then the money in the company could be used to buy real estate on behalf of the company and not even need to be cashed out via dividends?

How will you take out your salary without paying tax?

 

[John Andrews]

You should first figure out your goals. What would be the purpose of a company in Estonia in your case? Keep in mind you will need substance there otherwise it will be taxed as a local company in your country of residence. Also, in some EU countries you need a local company in order to buy real estate so Estonia wouldn't make any sense.

My suggestion is that you should stick to Cyprus.

local banks do not let foreigners open accounts

they do, you just have to show up in person

So you probably have to use a tax treaty to avoid paying taxes there.

which is probably not a problem.

i can go back before 3 months expires, and in fact it's what i do.

okay, but you don't have to do that.

 

[andres33]

Thanks, very helpful reply.
Given the proofs of tickets, i suppose i won't need to have a stable rental contract like GrumpyMess was suggesting?

you need a stable rental contract. At least for one year on the lease agreement. In theory is the minimum time solicited

 

[pierino]

How will you take out your salary without paying tax?

so in principle for a year or two i could avoid to get a salary out ( i mean i could, by paying 20% to estonian gov on dividends), and live off savings or by doing some extra job invoiced in my country of residence for which i would pay taxes there.

You should first figure out your goals. What would be the purpose of a company in Estonia in your case? Keep in mind you will need substance there otherwise it will be taxed as a local company in your country of residence.

What do you mean with "you need substance there"? If i got nothing there but i simply omit to report this company to A, what problems would i get into?

Also, in some EU countries you need a local company in order to buy real estate so Estonia wouldn't make any sense.

This would def. be something to check indeed. Like where it is allowed and where not.

My suggestion is that you should stick to Cyprus.

you need a stable rental contract. At least for one year on the lease agreement. In theory is the minimum time solicited

It is a good plan, but with a lease it starts to become quite expensive. I donno what's the minimum i could pay for a studio or a room there, but it sounds like no less than 5-6k/year.
I don't even know if it's deductible?
Although i suppose there might be plenty of subleasing options if many are doing this..

 

[andres33]

It is a good plan, but with a lease it starts to become quite expensive. I donno what's the minimum i could pay for a studio or a room there, but it sounds like no less than 5-6k/year.
I don't even know if it's deductible?
Although i suppose there might be plenty of subleasing options if many are doing this..

To have an idea about the prices you can check the web bazaraki. If you have a company, the rental payment is deductible. With a good accountant you can deduct almost 70% of your benefit over a turnover 80K.The rental address it can be your home but also your office. So you can deduct it + your salary. If you have your address office and a worker/employee, (for exemple yourself), you automaticly have a substance. Subleasing is very factible. But you need to find in this case somebody who can do sublease and subcontract also a utility bill. I mean to put an utility to your name. This is the part a little hard to find if you sublease, But it's important to get a utility bill because it will be a proof residence. To prove a residence in a bank you will need an address, an utility bill and a TIN

 

[John Andrews]

What do you mean with "you need substance there"? If i got nothing there but i simply omit to report this company to A, what problems would i get into?

google:
permanent establishment
place of effective management
controlled foreign corporation

I don't even know if it's deductible?

yes, it is, as andres33 said in the post above

This would def. be something to check indeed. Like where it is allowed and where not.

you can always open the local company as a subsidiary of the Cyprus Ltd.