LLC for Greek Resident

[troupos13]

Maybe to have some better ways to write? Be more polite. Thank you.

 

[daniels27]

Maybe to have some better ways to write? Be more polite. Thank you.

Ansolutely. But why does it take me that many messages to get an answer from you:

From where?

But the main question for me is where his LLC is being managed from and whom. Otherwise the whole discussion makes little sense.

Where is the company managed from?

Unless you are not involved in the management and the company is managed from let's say Germany. In this case, it will be subject to taxation in Germany either as company (intransparent) or as person (transparent like KG: "Die im Ausland ansässigen Gesellschafter unterliegen mit ihren inländischen Betriebsstätteneinkünften der beschränkten Steuerpflicht in Deutschland (§ 1 Abs. 4 i.V.m.
§ 49 Abs. 1 Nr. 2 lit. a EStG).")

The main question I see here is where the LLC is managed from. As it may be deemed a company elsewhere should this be the case.

It depends. What is management? Are they doing any double-entry book keeping?

He said it will be "managed from outside" I suppose Greece. But still the question remains where it is managed from as his whole story would only work when the management uses double-entry book keeping.

He never answered this one. It is essential in the whole story as the company manages from Germany is essentially a German company in that regards. But without reply, we can only guess.

He said he won't manage from Greece.

Do you think it is polite to ignore me 9 times? I am trying to help you getting busted by IRS and you treat me like this?

You could have saved us and you a lot of bs by just answering it the first time I asked.

 

[troupos13]

Sure - thank you and sorry for this
Just not have the unlimited time .

As I said, we think either manager from US (CPA told us if its a part-time freelancer manager - e.g. works 1-2 hours per day then it doesn't create ECI. Other solution is a manager from EU or last solution a member-managed.

 

[daniels27]

As I said, we think either manager from US (CPA told us if its a part-time freelancer manager - e.g. works 1-2 hours per day then it doesn't create ECI. Other solution is a manager from EU or last solution a member-managed.

If he manages the company from the US, you will pay personal income tax in the US. See here from the IRS

Generally if a foreign corporation performs an activity that is conducted on a regular, continuous, and substantial basis in the U.S., it is considered to be engaged in a U.S. trade or business.

 

[troupos13]

Thank you for this

 

[daniels27]

You will need a director in Monaco in order to pull this off. Or in a place without any PE rules. But honestly, this is not a very good way to avoid taxes. You may set up a company in Malta or somewhere and pay 5% tax. And then another 5% on the dividends. This will give you less troubles in the long run.

 

[JustAnotherNomad]

You can get a director from a country like Panama, Paraguay, Seychelles, Bahrain, Qatar, ... basically some country that doesn't enforce PE rules (we have a thread about such countries somewhere).
But I don't see how Greece would accept that as proper substance.

The US manager is the worst idea because you risk that both the US and Greece would try to tax the company.

 

[daniels27]

The US manager is the worst idea because you risk that both the US and Greece would try to tax the company.

Yes, and in the worst combination:

• personal income in the US
• dividend income in Europe

That's exactly what you want to avoid. Depending on the country, you can end up paying twice the personal income (many European countries tax dividends like personal income).

 

[troupos13]

Ok, thanks for clarification for the manager.
About dividend, I WANT to taxed with dividend rate (in Greece its only 5%)

 

[daniels27]

Ok, thanks for clarification for the manager.
About dividend, I WANT to taxed with dividend rate (in Greece its only 5%)

Well, if you can get around paying the other part, yes.

But just for your understanding for the normal case with real companies:
But in the general case with a US manager, you would be taxed in the US personally. What you then want is to be taxed in Greece again personally. Because then the DTA takes effect and you only pay no tax in Greece as already paid in the US. If Greece would tax it like an opaque company, you end up paying more.

That is the general case. And now, you will also understand what the problem on the Greek side is. Greek taxes dividends for something that previously has been taxes as a company elsewhere. But if your company has not been taxed anywhere due to the lack of a PE anywhere, you will most likely face a tax audit sooner or later. And then, you will end up paying a whole Greek corporate tax.

The whole thing is quite risky in your case. You can apply for a tax ruling or take the risk. But as I mentioned above, you are better off with a Malta, Cyprus, Bulgaria company with low tax and then 5% in Greece.

 

[Marzio]

But if your company has not been taxed anywhere due to the lack of a PE anywhere, you will most likely face a tax audit sooner or later.

Why would he face a tax audit if:
1. the offshore company is not tax resident in GR
2. the management is outiside GR
3. he is a passive shareholder living off dividends (at least on paper)

 

[kilor]

How do you conclude that one only needs to pay dividend tax in Greece when a US LLC makes a profit? Are the Greeks less strict than the rest of the EU? With that in mind, I’d like to ask: how can anyone believe that the Greek tax authorities would accept having some random McDonald's employee as the management of your US LLC, thereby claiming substance and avoiding personal taxation?

Or what is the purpose of the US LLC? Is it perhaps not intended to conduct business but only to hold assets?

I don’t understand it.

 

[daniels27]

Why would he face a tax audit if:
1. the offshore company is not tax resident in GR
2. the management is outiside GR
3. he is a passive shareholder living off dividends (at least on paper)

I think the main problem is that the management is effectively in Greece. There is just a freelancer somewhere claiming to be the director.

 

[daniels27]

How do you conclude that one only needs to pay dividend tax in Greece when a US LLC makes a profit? Are the Greeks less strict than the rest of the EU? With that in mind, I’d like to ask: how can anyone believe that the Greek tax authorities would accept having some random McDonald's employee as the management of your US LLC, thereby claiming substance and avoiding personal taxation?

Or what is the purpose of the US LLC? Is it perhaps not intended to conduct business but only to hold assets?

I don’t understand it.

Congrats to your Lifetime!

From reading all the discussion. My personal opinion is that OP had a smart idea. Which probably would have worked some time ago. But I doubt how solid the tax hiding is these days. I like the creativity of OP. But I have doubt that it will work.

While we are at it. The often quoted no CIT for Monaco here:
https://monentreprise.gouv.mc/en/th...x/other-taxes-and-duties/corporate-income-tax
It says that if over 25% of your revenue is foreign, you are subject to 25% of tax. Hence, I guess running a US LLC from Monaco would not work on paper.

 

[kilor]

Congrats to your Lifetime!

Thank you! Please to help OCT!

From reading all the discussion. My personal opinion is that OP had a smart idea. Which probably would have worked some time ago. But I doubt how solid the tax hiding is these days. I like the creativity of OP. But I have doubt that it will work.

The fact is that what you’re describing here applies if one hides their original activity and location and pretends to have a company that isn’t what it claims to be. That’s why I’m asking, as it’s incredibly confusing that someone with such an aggressive tone demands proof and documentation that personal taxation doesn’t apply in Greece or Germany when owning a US LLC that is openly operated from Greece or Germany, with the sole purpose of avoiding taxes. The rules are the same across the EU, there isn’t much to doubt.

Or what do you believe is different in this case?

 

[troupos13]

Congrats to your Lifetime!

From reading all the discussion. My personal opinion is that OP had a smart idea. Which probably would have worked some time ago. But I doubt how solid the tax hiding is these days. I like the creativity of OP. But I have doubt that it will work.

While we are at it. The often quoted no CIT for Monaco here:
https://monentreprise.gouv.mc/en/th...x/other-taxes-and-duties/corporate-income-tax
It says that if over 25% of your revenue is foreign, you are subject to 25% of tax. Hence, I guess running a US LLC from Monaco would not work on paper.

It's not to hide tax, its to legally (or at least the most) to reduce them.

And the only issue here, appears to be the management of the company - something that is still if you have a company in Bulgaria, Cyprus, Malta, etc.

 

[daniels27]

The fact is that what you’re describing here applies if one hides their original activity and location and pretends to have a company that isn’t what it claims to be. That’s why I’m asking, as it’s incredibly confusing that someone with such an aggressive tone demands proof and documentation that personal taxation doesn’t apply in Greece or Germany when owning a US LLC that is openly operated from Greece or Germany, with the sole purpose of avoiding taxes. The rules are the same across the EU, there isn’t much to doubt.

Or what do you believe is different in this case?

Sorry, I am now not 100% sure which side you are now standing on.

I personally think that if you operate a US LLC from Greece with a fake director anywhere, and do not pay any taxes anywhere but only 5% dividend tax in Greece, the Greek probably won't buy the story. At least they will ask for documentation of the "declared" dividends, which you won't be able to produce as the profits have never been taxed, let alone been entered into any book keeping system and reported anywhere.

And at least then, they will ask where the company has had its management and then tax it in Greece.

Such games work for @JustAnotherNomad and @peter taradash even the PT is a myth as they don't declare any tax anywhere. But if you want to declare it in Greece, I think there will sooner or later be questions that simply cannot be answered.

 

[kilor]

Sorry, I am now not 100% sure which side you are now standing on.

I personally think that if you operate a US LLC from Greece with a fake director anywhere, and do not pay any taxes anywhere but only 5% dividend tax in Greece, the Greek probably won't buy the story. At least they will ask for documentation of the "declared" dividends, which you won't be able to produce as the profits have never been taxed, let alone been entered into any book keeping system and reported anywhere.

And at least then, they will ask where the company has had its management and then tax it in Greece.

Such games work for @JustAnotherNomad and @peter taradash even the PT is a myth as they don't declare any tax anywhere. But if you want to declare it in Greece, I think there will sooner or later be questions that simply cannot be answered.

BINGO! Thanks for confirming my doubts.

 

[daniels27]

BINGO! Thanks for confirming my doubts.

Yes. @troupos13 with all due respect. I like your creativity. But I am pretty confident that your plan will not work in a proper way.. The main problem is that for the declaration of dividends, you will be lacking the profit tax bill from the other country. It may work for a while, but in my opinion is not worth the risk.

There are ways to reduce tax, but those would all involve either leaving Greece or hiring directors abroad in a place of low taxation. Malta would be worth looking into. Such setups mainly make sense for more than 200,000 USD per year as below you waste too much on legal and setup fees.

 

[Despina]

The problem here is the management part and obviously no tax agency will buy that the company is managed by some freelancer in Pakistan.