Is this TAX-FREE setup good?

[Ryanab]

Hi guys, I am new here. I am an EU citizen in a high taxing country. I do business online (trading. commerce and selling services) those businesses are starting to grow so I need to register somewhere with a business account before the tax authorities come knocking in my door lol.

After a lot of research, i thought about this setup:
1. Register a Wyoming US LLC
2. Register with a US business bank account (Mercury) linked to the LLC
3. Register a company in my tax-hell country

Let’s say I theoretically bring in 30k profits per month (all funds are deposited in US bank account)
I will basically bill my US company (with my EU company) for “management & consulting services” let’s say the bill is 8k.
So i would only have to pay taxes on the 8,000$ ( about 50% taxes so 4,000$ left as my personal salary) .
And then basically keep the rest of the money in the US account, if I need to make purchases locally I can also use the Mercury Bank Business MasterCard to make purchases.
What makes this setup possible is that the US is not part of the “CRS” Program where countries share data about non-resident account holders. So there’s basically 0 way for my EU country to know I am owning an LLC and a bank account offshore (US).
And my money and lifestyle in EU will be justified by the “management and consulting” company revenue. Where I’ll pay all the taxes like i should.

Do not hesitate to share your thoughts in the comments. Thank you!

 

[Sols]

The US LLC is tax resident where you live and is either taxed as a company (must pay corporate tax) or treated as a partnership (all profits become personal income for you). But it's a difficult structure to penetrate right now, given the high secrecy of US LLCs and the unreliable reciprocity of FATCA.

The risk of FATCA reciprocity is not zero, though, and you could find yourself reported to your local tax authority. While it's true the US hasn't signed up for CRS, it has FATCA which predates CRS but is functionally the same in many ways.

Additionally, every time you use your card in an ATM or at a store, you leave a trail with your name being on the card.

So no, it's not good. It's down to luck whether your structure holds or not. And what's your long-term plan? Leave 75% of your wealth forever in the US? The larger that amount becomes, the more difficult it's going to be to explain once you repatriate the funds.

If you're paying 50% tax on 8,000 USD, you're using a terrible accountant, even in the worst tax hells in Europe. Save yourself some headaches (and risks of fines/jail) and run your business locally, after consulting with a good tax adviser on how to get your tax burden down. Consider relocating to a lower tax jurisdiction like Cyprus or Malta, if your business and life situation permits.

 

[Ryanab]

The US LLC is tax resident where you live and is either taxed as a company (must pay corporate tax) or treated as a partnership (all profits become personal income for you). But it's a difficult structure to penetrate right now, given the high secrecy of US LLCs and the unreliable reciprocity of FATCA.

The risk of FATCA reciprocity is not zero, though, and you could find yourself reported to your local tax authority. While it's true the US hasn't signed up for CRS, it has FATCA which predates CRS but is functionally the same in many ways.

Additionally, every time you use your card in an ATM or at a store, you leave a trail with your name being on the card.

So no, it's not good. It's down to luck whether your structure holds or not. And what's your long-term plan? Leave 75% of your wealth forever in the US? The larger that amount becomes, the more difficult it's going to be to explain once you repatriate the funds.

If you're paying 50% tax on 8,000 USD, you're using a terrible accountant, even in the worst tax hells in Europe. Save yourself some headaches (and risks of fines/jail) and run your business locally, after consulting with a good tax adviser on how to get your tax burden down. Consider relocating to a lower tax jurisdiction like Cyprus or Malta, if your business and life situation permits.

Belgium is really taxing extremely high, it’s the second most taxing country in EU if I am not mistaken, probably in the world too...() whether it’s salary tax or company revenue and tax on profits , it goes nearly to 50% in total.
I know there’s some ways to optimize taxes here but it’s still stays relatively high, there’s no real way around it.

if I came to an offshore group forum it’s to look for more interesting tax-jurisdictions, not to register and fully pay my taxes here, I would have done it a while ago if that’s what I wanted.

And about the FATCA thing, you got it partially wrong: The IRS FATCA “reciprocity” (if they do it) they only share personal checking & savings accounts owned by non-residents ( not business accounts)
So there’s no data transfer to EU for LLC owners (as of now at least, and I think it’ll stay like this, because the US wants to be the biggest and most reliable tax haven for non-us citizen, which it already is in 2020)

i mean yea the major part of the money can stay there (US), having around 3500€ per month to live with + US mastercard should be enough. If I need to pay for something large I could maybe money transfer from the US bank account via Transferwise to the person/company I want to send the payment to (ex: car dealer)
And for the relocation I know that’s ideal but I wanna stay here for now.

I actually could just be considered as a “freelancer” here, managing and doing consultation for my own US company (obviously EU gov won’t know that part, “ *US LLC name* company is my main client”)

I know it’s not perfect but that’s the best setup I could think of while being able to stay and live here. Being considered “self-emloyed” here and paying my taxes.

 

[exprtadvisrdev]

I don't think is a good idea, I mean maybe is a good idea but I won't do it (actually I don't do it at this moment).

I have been using a US LLC which is a DE for a couple of years and I prefer to pay the taxes not because of the FATCA or CRS stuff but because of the banks... Why? because the country is not the problem, the banks are and they are the ones who report everything (they need to know who is behind the company). I mean you could try it since in the paper looks OK but as a DE all the profits goes to you so it means all that money the LLC made in past is actually your profit as a personal income and if your country tax that (I don't know anything about Belgium) then there is nothing legal to do with the US LLC.

BTW,

if I came to an offshore group forum it’s to look for more interesting tax-jurisdictions, not to register and fully pay my taxes here, I would have done it a while ago if that’s what I wanted.

You came here for thoughts, and what @Sols just said is 100% true: It's a matter of luck.

Also, making personal purchases with the US LLC account destroys the whole point of an LLC which is the limited liability (maybe is not important in this case, but I think it's important to know that too) and every transaction that you made from your LLC to you or in your behave you must notify it to the IRS with the form 5472 every year so they will know you are doing those kind of personal transactions and I'm not sure if that could cause issues (it's better to ask a US advisor in this case).

 

[NicolasMaduro]

Mercury will shut your bank account down within half a year when they see you dont have any US connections.

 

[exprtadvisrdev]

Mercury will shut your bank account down within half a year when they see you dont have any US connections.

more than a year with them, 0 connections to the US and still working OK. Are we sure is because of that?

 

[JustAnotherNomad]

When you get audited in your home country, you will be screwed. They will ask who that client is and Wyoming is a big red flag.

 

[Sadhu]

Have you considered Estonian e-residency ? - the system works well and support is great.

 

[Marzio]

If you really want to go that route the safer way for you will be to setup a US LLC owned by a foundation. Read more about the foundation here.

This foundation does not have a director. It has a council. 3 physical persons or 1 company. For a better privacy, having some offshore company to be a council member is a must.
You can set exact beneficiary, or you can set any legal way how to identify a beneficiary in a future: For example - Beneficiary is a person whose name and personal details are printed in a paper within sealed envelope in a safebox of a public notary custody in some other country...
This is a bullet proof structure how no one is ever able to identify who is a real person behind all operations.

Foundations are well known in US legal system. And banks understand fact, that foundation has no UBO.

You'll then register your LLC to upwork.com, post some jobs, hire yourself as a freelancer and receive your 3500€ a month from UpWork for fake "freelancing" work.

Pay attention to details, when posting jobs on UpWork for your US LLC use US VPN and when responding to your job posting use your real IP address

Yes, you'll have to pay additional commissions to UpWork but in this way you are more shielded because in case of an audit you'll show invoices from UpWork and not from US LLC.

Tu further lower the risk replicate the same on more freelancing platforms like fiverr.com

Note: this is only a mind construct. I don't know if this could work for you but it's way safer than your configuration.

 

[JustAnotherNomad]

What kind of foundation would you use for such a setup?

 

[Marzio]

What kind of foundation would you use for such a setup?

This one

 

[clemens]

Tu further lower the risk replicate the same on more freelancing platforms like fiverr.com

that's indeed not a bad idea and could possible work also in a legal case.

 

[tomboy]

What makes this setup possible is that the US is not part of the “CRS” Program where countries share data about non-resident account holders

How the hell, people think FATCA is not bilateral ? The U.S is going to report the s**t out of you. Especially if you are a resident of a high tax EU country (France, Spain, Belgium or Germany I guess) that's one.

Two. do you believe the taxman is that idiot ? you're going to invoice a shady Wyoming LLC freshly incorporated (probably when you started invoicing them), the amount will be the same every month, it will be your one and only client and that's it? LOL. Get ready for an audit, and I hope you will have better substance than just "consulting and management services".

 

[JustAnotherNomad]

Have you considered Estonian e-residency ? - the system works well and support is great.

What? Lol.

 

[NicolasMaduro]

You'll then register your LLC to upwork.com, post some jobs, hire yourself as a freelancer and receive your 3500€ a month from UpWork for fake "freelancing" work.

Pay attention to details, when posting jobs on UpWork for your US LLC use US VPN and when responding to your job posting use your real IP address

Yes, you'll have to pay additional commissions to UpWork but in this way you are more shielded because in case of an audit you'll show invoices from UpWork and not from US LLC.

that's indeed not a bad idea and could possible work also in a legal case.

UpWork is an escrow platform and the invoice is not from UpWork. The invoice will be from the shady Wyoming company trough the UpWork platform. The invoice is never from UpWork.

UpWork have a lot of problems with AML, and spent alot of resources on this. I know a person who is on his 5th UpWorks account with fake identity. They will do video for KYC etc.

 

[JustAnotherNomad]

How the hell, people think FATCA is not bilateral ? The U.S is going to report the s**t out of you. Especially if you are a resident of a high tax EU country (France, Spain, Belgium or Germany I guess) that's one.

It’s bilateral, but I also think business accounts owned by non-US persons aren’t reported. However, that could of course change - and then the reporting might be done retrospectively. Definitely very risky.

 

[tomboy]

It’s bilateral, but I also think business accounts owned by non-US persons aren’t reported. However, that could of course change - and then the reporting might be done retrospectively. Definitely very risky.

They are already reporting business accounts owned by aliens. Read the news, some people are facing charges in court. Moreover, your taxman will not let you get away so easily and with such a poor setup. If that was so easy, why would anyone pay tax ? Incorporating a U.S LLC cost only a few hundred dollars...

 

[JustAnotherNomad]

I completely agree it’s a bad idea. I was just wondering about the FATCA thing.

 

[Marzio]

The invoice is never from UpWork

Well, truth be told it was a lot of time since i lastly used UpWork. You are right. In that case you need to search for a freelancing platform that sends invoices on his behalf.

Codeable is one of those. Can you get more trusted invoice than a one from a company in Denmark? LOL

 

[NicolasMaduro]

Well, truth be told it was a lot of time since i lastly used UpWork. You are right. In that case you need to search for a freelancing platform that sends invoices on his behalf.

Codeable is one of those. Can you get more trusted invoice than a one from a company in Denmark? LOL

I see using a Danish company will be pretty trustworthy, however I still don´t see how it will be possible to do when the Danish company makes KYC on the foundation and the freelancer. They will see the freelancer is the same as the foundation.