Is this TAX-FREE setup good?

[Marzio]

I still don´t see how it will be possible to do when the Danish company makes KYC on the foundation and the freelancer.

I still don't see why they should do a KYC on a client? The LLC is not receiving any money. But for some reason, even if they'll start requesting additional informations the only thing that they will discover is that the LLC's owner is the foundation and the foundation doesn't have any UBO.

Those are all the information that Codeable is requesting.

I'm registered with them since 2018 and nobody ever started any KYC on me.

 

[NicolasMaduro]

I still don't see why they should do a KYC on a client? The LLC is not receiving any money. But for some reason, even if they'll start requesting additional informations the only thing that they will discover is that the LLC's owner is the foundation and the foundation doesn't have any UBO.

Those are all the information that Codeable is requesting.

I'm registered with them since 2018 and nobody ever started any KYC on me.

I guess you’re right. Probaly only do kyc on the freelancer

 

[Gediminas]

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!

Hi, I would say that your plan has the following issues:

• First, US single-member LLC (I believe you are considering this form) is a pass-through entity in the US, it means that as soon as your tax residency country is aware that you are the ultimate beneficial owner of such company they will tax you under local CFC (controlled foreign corporation) rules. Even the US does not participate in CRS your local tax authority might find out this because your plan is that your EU company will issue invoices to US company, so they might ask more information about this US company which is the main client and source of income. Who will act as a director of this company..?
• Moreover, if a US company is effectively managed from your home country, it would have a permanent establishment for tax purposes in your home country (it is clearly stated in the Treaty for the avoidance of double taxation concluded between the US and your country). So there is more than one way to tax US income in your residency country. The only question is if local tax authorities have this information or not.
• Second, in the long run, it would be difficult to operate a US company without a local partner. When turnover reaches particular amounts payment gateways (whatever they are) will start asking questions and freezing accounts. But mainly it depends on turnover and goods/services.

There are plenty of possible modifications to this structure, which includes a change of personal residency, intermediate companies, local US partners.

Hope this helps

 

[JohnLocke]

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.

Well, the guy suggesting UpWork also said you may find other platforms, so if someone figure out what you have found then hopefully he switch to something more trustable.

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.

It may be well required to have a tax consultant to look into it in order to find a solution that will work, if it is possible at all. So far I can see a partial solution that would work for some projects I'm engaged into.

 

[Ryanab]

I still don't see why they should do a KYC on a client? The LLC is not receiving any money. But for some reason, even if they'll start requesting additional informations the only thing that they will discover is that the LLC's owner is the foundation and the foundation doesn't have any UBO.

Those are all the information that Codeable is requesting.

I'm registered with them since 2018 and nobody ever started any KYC on me.

thank you Marzio you provided a lot of in-deth value! Doing the transactions via a freelancing platform is interesting (only drawback is the 20% or more comission you have to pay to the platform)
I mean I don’t see huge danger in billing my llc directly, if there’s like a complete well-writen contract and proof of my work ( example: managing an e-commerce store: I am the actual owner of the ecom store via the llc, but here I play the role as the “technical manager: code customization and platform management” freelancer ). That’s true that “Wyoming” is a lil sketchy but it’s one of the only states that keeps the llc owner name anonymous (out of the registries etc) that’s why it’s interesting from that perspective for me. Yea maybe could choose another state and go with the “foundation” route as you said.
( can you setup the bank account under the llc which itself under the foundation? So the bank won’t ask any owner personal detail...? Well that would be interesting for complete anonymity )

 

[CaptK]

I'm sure you have to file a 5...... something form on your tax return stating who you paid abroad. An intermediate company is required.

This wont work.

 

[JustAnotherNomad]

That’s true that “Wyoming” is a lil sketchy but it’s one of the only states that keeps the llc owner name anonymous (out of the registries etc) that’s why it’s interesting from that perspective for me.

You think your local tax office doesn’t know that? Personally I think people who insult the taxman’s intelligence deserve to go to jail.

 

[Marzio]

can you setup the bank account under the llc which itself under the foundation? So the bank won’t ask any owner personal detail...?

Well i don't see why it shouldn't be possibile to do that.

I'm sure you have to file a 5...... something form on your tax return stating who you paid abroad

If you refer to form 5472 it's not a tax return, it's an information return with transactions occurred with a foreign or domestic related party. The LLC is not transferring money to anybody, the money are left in a US corporate bank account. The LLC is only paying a monthly fee for a freelancing service, like you pay for Zapier, or hosting.

I mean I don’t see huge danger in billing my llc directly

Don't play with fire or you'll get burned.

 

[JohnLocke]

Don't play with fire or you'll get burned.

What do you mean by that, I'm curious can you elaborate please?

 

[descente]

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...

Where have you seen that ?

 

[Dandyline]

I still don't see why they should do a KYC on a client? The LLC is not receiving any money. But for some reason, even if they'll start requesting additional informations the only thing that they will discover is that the LLC's owner is the foundation and the foundation doesn't have any UBO.

Those are all the information that Codeable is requesting.

I'm registered with them since 2018 and nobody ever started any KYC on me.

This is a really smart solution. The risk of gettin caught are zero to none.