Delaware LLC + offshore bank account

[gnud]

With the US corporate rate it defeats the purpose of setting up a company abroad. A better solution is to make it a subsidiary of a company in a corporate tax friendly country, or reside in a personal income tax friendly country and tax it as a personal income.

 

[tyrexoid]

With the US corporate rate it defeats the purpose of setting up a company abroad. A better solution is to make it a subsidiary of a company in a corporate tax friendly country, or reside in a personal income tax friendly country and tax it as a personal income.

Single member LLC does not pay corporate tax since it's a pass through directly to owner so owner tax situation applies to all earnings and finances of the LLC in that tax year unless he elects to be taxed as corporation, AFAIK. Well, if he's the only member.

OP, what if you do report the US LLC in your home country, will they even tax it? It's abroad, not all countries are like US who tax worldwide assets of their citizens, did you already check in the regulation and tax of your country that they will tax you when you live abroad even if you get tax residency in another country? (by spending 183+ days etc' whichever comes first). Since if you'll live abroad somewhere, you'll be tax resident of that place, and not of your home country where you're a citizen of. So they might just not tax you at all, and your US LLC, and everything will be completely legal.

As an example let's use my own situation: I use US LLC, live in Montenegro (will be tax resident only starting in 2022 but let's assume we talk about 2022 taxes, not 2021), the personal income tax is 9%, VAT is 21%, I'm a service provider (consultant) remote worker for a company in EU or Asia, doesn't matter, they are my 'client' and they pay to LLC on my invoices monthly/bi-weekly/etc'. Since I provide services to client outside Montenegro I officially don't owe VAT 21%, so I'm left with 9% income tax only. Which is a badass setup in my case, since it's all fully legal. US won't tax my LLC because it's a pass-through and my personal tax on their side is 0% because I am no longer a US tax resident. The moment I'll go and spend X days there, I become their tax resident again and will pay income rate bracket as usual, from all the LLC profits. It's a bit funny cos in my case it'll be 31+ days a year, and not 183+ days a year (since I spent last 3 full years in US, my next year will trigger tax residency after 31+ days and not 183+ as for newcomers, gotta be careful with that vacation time if I go for a visit )

 

[Eldorado]

If your location is fixed already and you wouldn't reveal it it's hard to suggest anything. But you cannot simply live on tourist visa and not "ground" the flow of money from the LLC somewhere. Eventually someone will start asking questions and some country will claim you with a possible fine for tax evasion. It's better if you decide it yourself so there's no doubt in the future.

Of course I can try like that. I know fellow countryman who are living there for years just extending long-term visas without "grounding" like getting permanent residence permit.
To flow the money I'm gonna use cryptos and withdraw cash from ATMs.

I'm not afraid of questions too - my partner is earning good salary there, so we can afford a decent life together without making us suspicious.

OP, what if you do report the US LLC in your home country, will they even tax it? It's abroad, not all countries are like US who tax worldwide assets of their citizens, did you already check in the regulation and tax of your country that they will tax you when you live abroad even if you get tax residency in another country? (by spending 183+ days etc' whichever comes first). Since if you'll live abroad somewhere, you'll be tax resident of that place, and not of your home country where you're a citizen of. So they might just not tax you at all, and your US LLC, and everything will be completely legal.

I think you got my idea.
I'm from country A, currently living and my COR is country B. I want to move to country C and set up Delaware LLC.
So country A - is not interested about me anymore - I have left, I don't report anything there. I'm just visiting friends and family 2-3 times per year.
Country B - I'm working here, paying taxes etc, but still no permanent residence. Of course is my COR now. Countries A and B are in EU, so it's legally fine.

Here we go to the country C - away from Europe, away from US - I'm not going to be a permanent resident there, just spend my years and leaving every 2 years to "reset" my time there and count days from 0 days.

As you have mentioned it's my LLC gonna be a pass-through company to withdraw cash locally. Of course I understand that the authorities may recognize country C as my new COR, which will be actually true, but as long as I'm recognized as a tourist, without a job contract etc, I believe nobody will be bothering me asking how I'm making money.

 

[gnud]

Of course I can try like that. I know fellow countryman who are living there for years just extending long-term visas without "grounding" like getting permanent residence permit.
To flow the money I'm gonna use cryptos and withdraw cash from ATMs.

I'm not afraid of questions too - my partner is earning good salary there, so we can afford a decent life together without making us suspicious.


I think you got my idea.
I'm from country A, currently living and my COR is country B. I want to move to country C and set up Delaware LLC.
So country A - is not interested about me anymore - I have left, I don't report anything there. I'm just visiting friends and family 2-3 times per year.
Country B - I'm working here, paying taxes etc, but still no permanent residence. Of course is my COR now. Countries A and B are in EU, so it's legally fine.

Here we go to the country C - away from Europe, away from US - I'm not going to be a permanent resident there, just spend my years and leaving every 2 years to "reset" my time there and count days from 0 days.

As you have mentioned it's my LLC gonna be a pass-through company to withdraw cash locally. Of course I understand that the authorities may recognize country C as my new COR, which will be actually true, but as long as I'm recognized as a tourist, without a job contract etc, I believe nobody will be bothering me asking how I'm making money.

So what will you put in the IRS forms 5472 and 1120 as a non-US LLC owner? Where are you located? Where is the work performed? What's your local tax ID?

The EU dropped the threat of considering the US a non-cooperating jurisdiction back in 2019, which is an indication all the information collected by the IRS is being reported to the country of residence of the owner.

 

[tyrexoid]

So what will you put in the IRS forms 5472 and 1120 as a non-US LLC owner? Where are you located? Where is the work performed? What's your local tax ID?

The EU dropped the threat of considering the US a non-cooperating jurisdiction back in 2019, which is an indication all the information collected by the IRS is being reported to the country of residence of the owner.

Very good questions indeed. I assume the plan is to report country C as the country of residence and tax residence, on the IRS report, which will be truth, and it's a good idea to always tell the truth to IRS . Remember the story of Tinkoff, who got arrested in London for "under reporting" (his Russian stock in his own company in Russia) to IRS many years ago .
The only concern in this setup which I see is the tax office of country C. If they're meticulous and also have enough resources to enforce every single bit of their laws on any tourist/visitor/resident, then it might cause trouble eventually, but again - the trouble could be different in each jurisdiction, some will ask to pay the tax retroactively and send a bill to pay, some will add a fine and ask to pay, others could sentence to jail or whatnot, go figure .

I'd look into the local country C authorities to determine what's their tax rate and whether declaring US LLC is a must, and how bad of an offence it is to not declare something. If it's barely found in their laws and is for example vague in a way that could not be clearly understood at all, whether to declare or not, taxable or not, in which residency status, and what is a legal residency terms (does it make you resident after 183+ days etc'?) then they're probably as clumsy as to not even notice those ATM withdrawals etc'. But if it's an advanced country like Singapore, Hong Kong, China, Japan, Australia, Malaysia, then probably it's not worth risking it, for the small amount of 'savings' on local tax rates, since if local tax rate is fair and relatively low - the good sleep is totally worth it, since worrying about being caught and billed for all past years retroactively, will still exist subconsciously, and it won't be worth it IMHO. Best option is to go fully legal setup, but I also understand the fun part of tricking the system a bit using crypto, it's just kind of fun, and proves some point (to the one who uses it) about crypto being an anarchist tool to gain personal freedom of any states and laws etc'etc'etc', a fun ride, but better be careful. If the total monthly amounts are not in the tens of thousands or hundreds of thousands $, then worst case scenario (if ever happens) is probably a 'fine and a slap in the face' but not jail time. But still, I would go fully legal for a clean setup confirmed by CPAs/tax advisor/accountant. That's a personal choice for anyone. But I agree it is not very dangerous, the described idea of OP, unless he will have very large sums of money and large scale business. In this case I would say to not play with relying on crypto ATM cards and tourist visas. But small sums are not worth the time of tax authorities, since they have limited resource and of course will first go after the big fish.

Sorry for the long read, I'm kinda sleepy.. possibly rephrased and wrote the same thing twice

 

[gnud]

Very good questions indeed. I assume the plan is to report country C as the country of residence and tax residence, on the IRS report, which will be truth, and it's a good idea to always tell the truth to IRS . Remember the story of Tinkoff, who got arrested in London for "under reporting" (his Russian stock in his own company in Russia) to IRS many years ago .
The only concern in this setup which I see is the tax office of country C. If they're meticulous and also have enough resources to enforce every single bit of their laws on any tourist/visitor/resident, then it might cause trouble eventually, but again - the trouble could be different in each jurisdiction, some will ask to pay the tax retroactively and send a bill to pay, some will add a fine and ask to pay, others could sentence to jail or whatnot, go figure .

I'd look into the local country C authorities to determine what's their tax rate and whether declaring US LLC is a must, and how bad of an offence it is to not declare something. If it's barely found in their laws and is for example vague in a way that could not be clearly understood at all, whether to declare or not, taxable or not, in which residency status, and what is a legal residency terms (does it make you resident after 183+ days etc'?) then they're probably as clumsy as to not even notice those ATM withdrawals etc'. But if it's an advanced country like Singapore, Hong Kong, China, Japan, Australia, Malaysia, then probably it's not worth risking it, for the small amount of 'savings' on local tax rates, since if local tax rate is fair and relatively low - the good sleep is totally worth it, since worrying about being caught and billed for all past years retroactively, will still exist subconsciously, and it won't be worth it IMHO. Best option is to go fully legal setup, but I also understand the fun part of tricking the system a bit using crypto, it's just kind of fun, and proves some point (to the one who uses it) about crypto being an anarchist tool to gain personal freedom of any states and laws etc'etc'etc', a fun ride, but better be careful. If the total monthly amounts are not in the tens of thousands or hundreds of thousands $, then worst case scenario (if ever happens) is probably a 'fine and a slap in the face' but not jail time. But still, I would go fully legal for a clean setup confirmed by CPAs/tax advisor/accountant. That's a personal choice for anyone. But I agree it is not very dangerous, the described idea of OP, unless he will have very large sums of money and large scale business. In this case I would say to not play with relying on crypto ATM cards and tourist visas. But small sums are not worth the time of tax authorities, since they have limited resource and of course will first go after the big fish.

Sorry for the long read, I'm kinda sleepy.. possibly rephrased and wrote the same thing twice

Yeah, and what tax ID will you / he provide on those IRS forms?

Also, if you buy crypto on a company account it's considered an asset, and needs to be kept on company books. An audit can happen.
If you pay in crypto to an entity outside the US you need to file a form W-8BEN, again with a local tax ID.

Do you get it now?

 

[tyrexoid]

Yeah, and what tax ID will you / he provide on those IRS forms?

Do you get it now?

The FTIN? it's an optional field. But since I also have a legal entity in Montenegro and will have a personal tax ID too (since I travel a lot and also plan at times to live long periods in other countries during winters/summers once in a while, and I don't want any other country claim me to accidentally owe them anything when I spend a lot of time in their territory) in my case I'll be using my FTIN.

But for OP, I guess his choice will be "None" or a blank line (see 2nd screenshot). But I might not be reading the instruction correctly, does it say "if this form is filed by foreign owned DE (LLC that chose a pass-through mode taxation) you *must* add a valid FTIN"?
If my reading comprehension is wrong and that's the meaning, you're right and it won't work for OP (but will work for me, since I'll have the FTIN and will use it, happily paying my low rate 9% tax to support the glorious nation of Kazakhstan Montenegro. I'm actually donating a lot to NGOs on a regular basis too... so taxation at a 10-20% range is fair IMHO since we all use the cities/countries infrastructures like airports/malls/roads/safe borders/etc so I believe most of us should keep doing that, imagine if everyone goes for a 0% setup, we'll have no roads to drive and no light on the streets ). I vote for lower tax, vs 0% scheme though Dubai also has taxes, they just collect from different revenue streams. The 21% VAT in Montenegro for example covers for the lower income tax, and it's actually smart because if you buy a lot of stuff and spend high sums locally, then you contribute more to local infrastructure, but if you barely make ends meet, like many families are, then the country doesn't try to squeeze you.

@Eldorado in any case a short consultation with country C local accountant/tax adviser is a must IMHO, both if you'll go for full clean setup or the 'catch me if you can' one, to find out about local laws and how strict they are. To be on a safe side.

 

[gnud]

The FTIN? it's an optional field. But since I also have a legal entity in Montenegro and will have a personal tax ID too (since I travel a lot and also plan at times to live long periods in other countries during winters/summers once in a while, and I don't want any other country claim me to accidentally owe them anything when I spend a lot of time in their territory) in my case I'll be using my FTIN.

But for OP, I guess his choice will be "None" or a blank line (see 2nd screenshot). But I might not be reading the instruction correctly, does it say "if this form is filed by foreign owned DE (LLC that chose a pass-through mode taxation) you *must* add a valid FTIN"?
If my reading comprehension is wrong and that's the meaning, you're right and it won't work for OP (but will work for me, since I'll have the FTIN and will use it, happily paying my low rate 9% tax to support the glorious nation of Kazakhstan Montenegro. I'm actually donating a lot to NGOs on a regular basis too... so taxation at a 10-20% range is fair IMHO since we all use the cities/countries infrastructures like airports/malls/roads/safe borders/etc so I believe most of us should keep doing that, imagine if everyone goes for a 0% setup, we'll have no roads to drive and no light on the streets ). I vote for lower tax, vs 0% scheme though Dubai also has taxes, they just collect from different revenue streams. The 21% VAT in Montenegro for example covers for the lower income tax, and it's actually smart because if you buy a lot of stuff and spend high sums locally, then you contribute more to local infrastructure, but if you barely make ends meet, like many families are, then the country doesn't try to squeeze you.
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@Eldorado in any case a short consultation with country C local accountant/tax adviser is a must IMHO, both if you'll go for full clean setup or the 'catch me if you can' one, to find out about local laws and how strict they are. To be on a safe side.

I think you don't really understand what the instructions say You MUST enter an FTIN if you have any, only in case you don't have any you're allowed to leave it blank. Lying to the IRS will get you in deep s**t. And it's easily verifiable if your country of residency issues TINs, the IRS has millions of forms from owners from the same place.

A country that invented FATCA will not let you get away with tax evasion lol

 

[tyrexoid]

@gnud you seem like a knowledgable one , what would you suggest to OP in this case, should he first setup himself and permanent proper tax residency somewhere, and make sure to be in compliance at that location, plus properly manage the US LLC using the FTIN of that new location, and only then travel around and play with crypto cards? (since in this case it'll be fully legal and nothing omitted from any authorities in either of A,B,C countries, right?). Would that be a good step for him to first establish a base in a low tax country and only then move on to country C ? (approximately what I'm doing with establishing real base in MNE, but in my case I do plan to live there most time of the year, it's a chill and beautiful country with warm climate).

 

[tyrexoid]

I think you don't really understand what the instructions say You MUST enter an FTIN if you have any, only in case you don't have any you're allowed to leave it blank. Lying to the IRS will get you in deep s**t. And it's easily verifiable if your country of residency issues TINs, the IRS has millions of forms from owners from the same place.

A country that invented FATCA will not let you get away with tax evasion lol

Do you refer to a FTIN that OP has from country A or B? since country C might not have such thing for tourists especially , or most countries do? That might be some EU thing, that tax number. But at least it looks like I am on the right path myself so far lol. Sorry for OP, it does seem like I did not understand the instructions then, so US LLC is not a good option for him unless he has no FTINs issued in both country A and B (but it's EU so he probably has one already, so his US LLC will be reported based on this ID into EU?).

 

[gnud]

@gnud you seem like a knowledgable one , what would you suggest to OP in this case, should he first setup himself and permanent proper tax residency somewhere, and make sure to be in compliance at that location, plus properly manage the US LLC using the FTIN of that new location, and only then travel around and play with crypto cards? (since in this case it'll be fully legal and nothing omitted from any authorities in either of A,B,C countries, right?). Would that be a good step for him to first establish a base in a low tax country and only then move on to country C ? (approximately what I'm doing with establishing real base in MNE, but in my case I do plan to live there most time of the year, it's a chill and beautiful country with warm climate).

I'd suggest him what I wrote earlier. Either make it a subsidiary of a company in a country with a low corporate and dividend taxes, or own it personally and reside officially in a country with a low personal income tax.

For example a Romanian micro enterprise would be a great parent company. Extremely low taxation, low costs overall in the country, part of the EU. You can fake living there and doing the work there easily, thus creating a "permanent establishment", and you can live anywhere as a tourist and nobody would care.

 

[gnud]

Do you refer to a FTIN that OP has from country A or B? since country C might not have such thing for tourists especially , or most countries do? That might be some EU thing, that tax number. But at least it looks like I am on the right path myself so far lol. Sorry for OP, it does seem like I did not understand the instructions then, so US LLC is not a good option for him unless he has no FTINs issued in both country A and B (but it's EU so he probably has one already, so his US LLC will be reported based on this ID into EU?).

Well obviously Country C would not provide him an TIN when he's there as a tourist. In fact as a tourist he's not allowed to perform any work there officially. So he'll have to provide a TIN from a country where he officially resides, i.e. country B. The IRS would report his LLC's profit there and country B would ask him to pay tax.