bypass 30 percent withholding tax for royalties

[FrustratedMan]

If you live in a country that has no tax treaty with the US, is it possible to form a company in the UK and receive tax free royalties there despite residing in a country that has no tax treaty with the US?

 

[Xshore]

If you live in a country that has no tax treaty with the US, is it possible to form a company in the UK and receive tax free royalties there despite residing in a country that has no tax treaty with the US?

Yes if a Ltd, and then you have to pay UK corporate tax on this amount (25/19%).

 

[daniels27]

There are some good reads here

D

Post in thread 'Best countries to incorporate for Google Adsense'

Oct 1, 2024

There are some schemes where you can pay literally no tax legally.

Yes, they always exist. You just need to look out for them. I think Cyprus or Georgia should work quite well. There was a couple that was living tax-free on the girl's $3M royalties in Georgia:
No any taxes paid, but they did not like the ploitical vibes. (They could just have gone to the country side or taken the expres bus to Armenia over the weekend.

• daniels27

Thread 'Critique My Lean US - Mauritius Structure (2.1% Effective Tax Rate)'

Sep 20, 2024

Good day Gentleman.

After wrestling with a UAE freezone/US LLC setup that turned into a compliance and AML audit nightmare (9% UAE tax, anyone?), and after spending some time in Georgia before realizing the political vibes weren’t for us (Hello Putin...), we’ve finally think we have found our sweet spot in Mauritius.

Why Mauritius?

Two words: tax perks and lifestyle.

It's by far the best run island I've ever been to - seems to have the chilled beach life when you want it, futuristic infrastructure in the built up areas as well as some high-end, modern villas with epic...

• Leo Vanguard
• Replies: 40
• Forum: Offshore Company

• 
• 

You can either setup a company in Georgia and then pay out the profits to you as active income (if your country does not tax them) or you move to Georgia.

 

[FrustratedMan]

Yes if a Ltd, and then you have to pay UK corporate tax on this amount (25/19%).

The reason why I asked this, I read somewhere on this forum that if you do a US LLC, they'd still withhold 30 percent as a non resident. Why would a UK LTD as a non resident bypass the withhold tax?

There are some good reads here

D

Post in thread 'Best countries to incorporate for Google Adsense'

Oct 1, 2024

There are some schemes where you can pay literally no tax legally.

Yes, they always exist. You just need to look out for them. I think Cyprus or Georgia should work quite well. There was a couple that was living tax-free on the girl's $3M royalties in Georgia:
No any taxes paid, but they did not like the ploitical vibes. (They could just have gone to the country side or taken the expres bus to Armenia over the weekend.

• daniels27

Thread 'Critique My Lean US - Mauritius Structure (2.1% Effective Tax Rate)'

Sep 20, 2024

Good day Gentleman.

After wrestling with a UAE freezone/US LLC setup that turned into a compliance and AML audit nightmare (9% UAE tax, anyone?), and after spending some time in Georgia before realizing the political vibes weren’t for us (Hello Putin...), we’ve finally think we have found our sweet spot in Mauritius.

Why Mauritius?

Two words: tax perks and lifestyle.

It's by far the best run island I've ever been to - seems to have the chilled beach life when you want it, futuristic infrastructure in the built up areas as well as some high-end, modern villas with epic...

• Leo Vanguard
• Replies: 40
• Forum: Offshore Company

• 
• 

You can either setup a company in Georgia and then pay out the profits to you as active income (if your country does not tax them) or you move to Georgia.

Thanks for the info, but it has to be the UK for a specific reason.

 

[Marzio]

is it possible to form a company in the UK and receive tax free royalties there despite residing in a country that has no tax treaty with the US?

Impossible bcecause of art23 in the UK-US double tax treaty.

it has to be the UK for a specific reason.

Which is?

 

[Xshore]

Impossible bcecause of art23 in the UK-US double tax treaty.

Thanks for the link, I wasn't aware of tax treaties have these kind of limitations. Good to learn!

 

[JustAnotherNomad]

Georgia.

Another option would be to set up a US corporation and then get the money out from the US corporation in some other way.

 

[FrustratedMan]

Impossible bcecause of art23 in the UK-US double tax treaty.

If I understood it correctly, withholding tax depends upon where the UBO is resident and not the company? "The provisions of paragraph 1 of this Article shall not apply if thebeneficial owner of the royalties, being a resident of a Contracting State, carries onbusiness in the other Contracting State, in which the royalties arise, through apermanent establishment situated therein, and the royalties are attributable to suchpermanent establishment. In such case, the provisions of Article 7 (Business Profits)of this Convention shall apply"

 

[FrustratedMan]

You can either setup a company in Georgia and then pay out the profits to you as active income

Will this depend upon where the UBO is resident?

 

[Boxer]

Georgia.

Another option would be to set up a US corporation and then get the money out from the US corporation in some other way.

What is the withholding tax for it in Georgia? And HNWI tax residency works for that option?

 

[FrustratedMan]

What is the withholding tax for it in Georgia? And HNWI tax residency works for that option?

It's 0 for all cis countries

 

[JustAnotherNomad]

The UK-US tax treaty (like most modern tax treaties) have LoB clauses, so it matters where the UBO is resident.

Will this depend upon where the UBO is resident?

Not with Georgia, because these are old Soviet Union tax treaties that didn't have LoB clauses yet.

 

[daniels27]

Will this depend upon where the UBO is resident?

No. You just need a company there and then pay out the profits to you. Beware that there are profit taxes. If you move there as per the linked articles, you can get the royalties personally tax-free.

 

[nurredon]

Georgia is the way to go. I wrote up this for the other linked post: https://www.offshorecorptalk.com/th...ture-2-1-effective-tax-rate.46119/post-341054

1. Set up an entity in Georgia or Kyrgyzstan – Both benefit from the old CIS double tax treaty, which has no LOB clause. Georgia is the better choice. There’s a solid CSP in this forum I’ve worked with. You’ll need minimal substance—1-2 local employees. Given your revenue, you or your wife will likely want an assistant and an accountant anyway, so just hire them there. Georgian companies are called LLCs, so you can be creative with how you present the entity in your invoices, if you know what I mean.

2A. Georgia’s Free-Zone Tech Exemption – You can apply for a reduced 5% CIT, but this requires hiring software developers, which may not be ideal if you're not in that industry. If that works, a single Georgian entity is enough.

2B. IP Structuring Alternative – If you don’t want to hire developers, hold the IP in an offshore TopCo in a jurisdiction with a DTT with Georgia --but not a GBC Mauritius company with the tax holiday exemption as some people said here, as there's no DTT, so withholding applies. Instead, structure the Georgian entity as an agent with sublicensing rights, allowing you to pass through any profits as IP income to the TopCo—minus a small amount taxed in Georgia. Good TopCo locations with strong DTTs with Georgia include: UAE (DIFC PresCo recommended, as royalties are tax-exempt), Cyprus (your IP may not qualify for the IP box, in which case it’s subject to 12.5% CIT), Malta (10% effective tax due to refunds, plus a nice place to visit). All these options require local directors and board meetings... to ensure economic substance is met, adding a minimum of €20-25K/year in costs if done properly. But if your revenue is as high as you mentioned, that’s a rounding error.

 

[Marzio]

If I understood it correctly, withholding tax depends upon where the UBO is resident and not the company?

US tax treaties are structured in a way that to access the benefits of the treaty UBO has the be tax resident of the country used to claim the treaty. If a UK entity (either a company or natural person) claims the benefits of the treaty it has to pay UK taxes.

There's no way to avoid that and i assure you i've read every word of those treaties, i've read technical analysis looking for a loophole, there is none that can be exploited.

Georgia is the way to go.

Georgia is surely an option but banking will be problematic, especially when you receive USD.

 

[nurredon]

Georgia is surely an option but banking will be problematic, especially when you receive USD.

I wouldn’t keep the banks in Georgia; instead, I’d use a private bank—definitely not Wise either

 

[Marzio]

I’d use a private bank

Where would you bank?

 

[Xshore]

US tax treaties are structured in a way that to access the benefits of the treaty UBO has the be tax resident of the country used to claim the treaty. If a UK entity (either a company or natural person) claims the benefits of the treaty it has to pay UK taxes.

Do you mean that if the UK company doesn't claim treaty benefits then it doesn't have to pay UK corporate tax on the income? Or would have to pay both 30% royalties and 25% UK tax?

 

[Marzio]

If UK company wouldn't be able to access the benefits of the treaty would have to pay 30% US WHT on royalties and obtain a credit for the taxes paid overseas but obiously up to the UK CIT so max 25% or 19% depending in which tax bracket would fall the UK company.

Or would have to pay both 30% royalties and 25% UK tax?

This happens with countries without a US tax treaty. For example UAE where you will pay 30% US WHT on royalties plus 9% UAE CIT, not funny.

 

[JustAnotherNomad]

If you don't have access to treaty benefits, you have the same situation as if there was no treaty. So there can be double taxation.
Most countries give some relief (tax credit) for tax paid overseas, even if there is no treaty.