My biggest concern with such a setup is what will happen if your customers are audited and they demand a tax residency certificate for your “US” LLC.
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Low tax burden life plan suggestion for freelancer
- Thread starter dziter
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I'd say Gibraltar.
Gibraltar has a territorial basis of taxation. Under the Gibraltar Income Tax Act, income tax is only payable upon income which accrues in or is derived from Gibraltar. source: Ellul & Co | Gibraltar Tax | Gibraltar Lawyers | Notaries
@marzio
You didn’t read it completely:
“Persons who are ordinarily resident in Gibraltar are liable to taxation on their worldwide income.”
It also seems like you must spend significant time there to be considered tax resident.
You didn’t read it completely:
“Persons who are ordinarily resident in Gibraltar are liable to taxation on their worldwide income.”
It also seems like you must spend significant time there to be considered tax resident.
So if he is looking for tax friendly, sunny weather and still wants to go back to Poland/France every so often then UAE is the place for him.
CFC is only an issue if his set up is not done correctly.
For about 15K set up and 10K per year maintenance he can have all of the things he requires but without the stress.
An office with a professional staff member, a collaboration with a UAE entity ie subs out a lot of work or routes his work through another UAE entity (on paper).
Travels to the UAE at least 4 times a year. You only need to go once every 170 days but it needs to go more often to not raise questions.
Then if he wants to go down the NHR route he can.
Option 2 is still a UAE UAE company.
10K set up with 7K maintenance this option requires him to be diligent in how he operates. This is the same as above but without the substance.
If UAE is not for him then UK LLP not limited with the same structure as option 1. 5K set up and 4K running costs. If you use a Nominee then you are an employee and pay yourself a salary. The account is a bit of work but otherwise you are free to do what you want. You use the company card for expenses and keep receipts. All your socialising, vehicle, communication and work related costs are part of your expenses.
You write your contract of employment.
Substance is your issue not the jurisdiction, also Poland is not the country to base yourself in as they like the majority of EU countries are tax hungry.
As for France they can't touch you so long as you have no bills or memberships that you currently pay.
CFC is only an issue if his set up is not done correctly.
For about 15K set up and 10K per year maintenance he can have all of the things he requires but without the stress.
An office with a professional staff member, a collaboration with a UAE entity ie subs out a lot of work or routes his work through another UAE entity (on paper).
Travels to the UAE at least 4 times a year. You only need to go once every 170 days but it needs to go more often to not raise questions.
Then if he wants to go down the NHR route he can.
Option 2 is still a UAE UAE company.
10K set up with 7K maintenance this option requires him to be diligent in how he operates. This is the same as above but without the substance.
If UAE is not for him then UK LLP not limited with the same structure as option 1. 5K set up and 4K running costs. If you use a Nominee then you are an employee and pay yourself a salary. The account is a bit of work but otherwise you are free to do what you want. You use the company card for expenses and keep receipts. All your socialising, vehicle, communication and work related costs are part of your expenses.
You write your contract of employment.
Substance is your issue not the jurisdiction, also Poland is not the country to base yourself in as they like the majority of EU countries are tax hungry.
As for France they can't touch you so long as you have no bills or memberships that you currently pay.
Tax residence certificate is not something that's commonly used for business in the US, it wouldn't be easy to get any US supplier to supply one. Privacy is important in the US, and a disregarded LLC wouldn't get a tax residence certificate in any case, so the member would have to get one, and this is something that few Americans would want to share with a foreign partner.
Option 1 is a managed service there for everything to prove substance is included. So he can be wherever he wants.
Option 2 is just a normal company and you are on your own.
UK option again is like option 1 just a lot more accounting and receipt keeping. As UAE there is no need for accounts. He can live wherever he wants.
I didn't think about that.What if I don't care?
I mean they got audited not me (I have a lot of different customers so..).
With UK Brexit etc, still a good option?
Having a company in UAE, I am wondering if it will not be a problem for my customers especially to pay me or willing to do business with me. They are 100% french, businesses. No individuals.
And I think it's good for my activity but it's not really flexible to do other things.
Let's take easy example: I want to do Amazon FBA with Stripe and sell on Amazon EU and Amazon US: no way.
With all the territorial taxation countries, I was more thinking if it doesn't exist a small state/country in or near EU where a US LLC is taxed like self-employed and not local corporation.
Campione d'Italia, San Marino or I don't know, this kind of places (Italia example here) it can't work?
This way, I will have the advantage to be near EU (by car ..).
To sum up : where US LLC are taxed like US Tax Qualifications: through entity and not local company?
I guess what can happen is they can’t deduct the expense, so basically they would have to pay tax on it. The customer probably wouldn’t be very happy. The authorities could also ask who it is that is behind that company and if they know your name, the authorities may take a closer look at you. If neither is an issue for you, then I guess you don’t have much to worry about. I just think unhappy customers aren’t particularly good for business. But hey, it you have many, many happy customers, it might not be such a problem, especially since the risk of an audit isn’t that big. You should probably use a state like Texas or Florida then, and not Wyoming/Delaware/New Mexico. The latter three are known as tax haven states (because they provide anonymity) and the risk of a tax inspector taking a closer look increases.
Why would that help? With a business, you can always say “the business is in the other country”, if it’s you as a person, they can say you are tax resident there, so it’s local income.
Territorial taxation usually only applies to passive income.
Thanks for this good advice.
The big question is: where is is interesting to be tax resident with a US LLC?
In clear, what countries are taxing US LLC like a self-employed (with good rates)?
Ok yes, perfectly clear.
Any tax-free country like UAE. Probably also countries like Panama or Paraguay that likely just don’t care.
In all other countries, it’s probably more complicated because US LLC’s are a hybrid. You might be better off with a UK LLP or even a local partnership. Frankly I don’t see the advantage with a tax-transparent US LLC if you don’t live in a tax free country. I would go for a structure where the tax situation is perfectly clear and easy to understand for the authorities.
Hi everyone,
I have a basic question which could help me with my current thoughts.
IIs it legal or too grey area to do this setup to avoid paying high taxes:
1- Live in a normal/high taxed country like France or Poland
2 - Setup a local company in this country
3 - Setup an offshore company
4 - Invoice customers with the local company (where you are tax resident)
5 - Invoice this local company with the offshore company to move the expenses
Example :
Poland/France - Cyprus/UAE/Bulgaria/Montenegro ..(don’t know the best option still if possible)
II - Am I taking a big risk if I am staying more than 6 months in Poland (for example) and of course (and going 2 months/year in Cyprus for non dom ofc)? It’s Schengen area ..
The goal here is to be tax resident in Cyprus and under the radar in the other place (PL here).
I will be glad to hear your best advices: nothing at my name, using EMI on daily li like Revolut. What else?
Thanks for your help.
I have a basic question which could help me with my current thoughts.
IIs it legal or too grey area to do this setup to avoid paying high taxes:
1- Live in a normal/high taxed country like France or Poland
2 - Setup a local company in this country
3 - Setup an offshore company
4 - Invoice customers with the local company (where you are tax resident)
5 - Invoice this local company with the offshore company to move the expenses
Example :
Poland/France - Cyprus/UAE/Bulgaria/Montenegro ..(don’t know the best option still if possible)
II - Am I taking a big risk if I am staying more than 6 months in Poland (for example) and of course (and going 2 months/year in Cyprus for non dom ofc)? It’s Schengen area ..
The goal here is to be tax resident in Cyprus and under the radar in the other place (PL here).
I will be glad to hear your best advices: nothing at my name, using EMI on daily li like Revolut. What else?
Thanks for your help.
1) Yes, stupid because you’ll be caught with your pants down during an audit and either illegal or at least not possible to legally save taxes that way without proper substance due to permanent establishments/CFC rules.
2) Cyprus is not in the Schengen area.
That plan has a higher rate of success since than the other solution you’re not a Polish citizen, so you probably won’t be subject to as much scrutiny. Unless you drive around in a Lamborghini or someone flags you, it seems very unlikely that the Polish authorities will start asking for proof how much time you’ve spent there. But when you and your girl-friend get married or have kids, forget about it.
If that’s what you want to go for, just go with Bulgaria or some other Schengen country with low taxes and save yourself the hassle of spending 60 days in Cyprus. Those 60 days don’t matter anyway when you spend so much time in Poland. Cyprus wouldn’t protect you when Poland comes for you. So just go for a simpler solution with no minimum number of days to spend in the country.
2) Cyprus is not in the Schengen area.
That plan has a higher rate of success since than the other solution you’re not a Polish citizen, so you probably won’t be subject to as much scrutiny. Unless you drive around in a Lamborghini or someone flags you, it seems very unlikely that the Polish authorities will start asking for proof how much time you’ve spent there. But when you and your girl-friend get married or have kids, forget about it.
If that’s what you want to go for, just go with Bulgaria or some other Schengen country with low taxes and save yourself the hassle of spending 60 days in Cyprus. Those 60 days don’t matter anyway when you spend so much time in Poland. Cyprus wouldn’t protect you when Poland comes for you. So just go for a simpler solution with no minimum number of days to spend in the country.
Sorry, I was not clear. It was for Poland.
Stupid question but why Schengen country only. You are speaking about living there (tax resident) or for the corporation level?
It seems more and more than my gf wants to spend a lot of time in Poland because she will probably have a physical/not remote job there (and other personal matters). That’s my « problem » now. Personal issue, not moving business assets...
And as I don’t want to be tax resident there, I try to think about the « best grey area choice » I could have.
But it matters to have a tax residency certificate or proof to remove all my ties with France and that’s why Cyprus seemed easy for it.
No minimum number of days to spend in a country to become tax resident?
If it’s really possible I am not really searching well since beginning (even UAE it’s 6 months, I mean tax residency not only residency). Curious here.
I appreciate always your help, bigs thanks @JustAnotherNomad
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You mentioned Schengen yourself. 
Within the Schengen area, it’s much harder to track your movements. With Cyprus, they can in theory just pull up the Schengen border crossings and see you’ve been in the Schengen area (outside of Cyprus for 300 days). And then they can ask where you’ve been, and what will you tell them? That you cycled through all Schengen countries except France and Poland, always staying only one week in each?
I don’t think anyone will care about your Cyprus tax residency certificate, but I could be wrong. All it proves is that you’ve spent 60 days in Cyprus. So what? You can still easily spend 305 days in France or Poland.
I don’t know anything about the French rules. I’m sure France could ask for a tax residency certificate, but I doubt that they just blindly have to accept it. They would probably ask for more information anyway. Especially in the case of France, which has extremely vague tax residency rules. Move to Bulgaria or some other country that doesn’t require you to spend X days there. Many countries don’t require a certain number of days (France doesn’t), they just require that you have your home there. So just rent an apartment in Bulgaria, register your residency there and tell that to the authorities in France/Poland and they should leave you alone, unless you’re a celebrity. I’m not recommending you to do that of course, I’m just pointing out that it’s probably a simpler solution than Cyprus. I don’t think it will make much of a difference in practice if you choose a Schengen or non-Schengen country because they won’t care about you anyway. But if they do care, Cyprus won’t protect you, so why even bother. Ok, it’s a nice documentation that you spent 60 days. But nothing more. And France should probably also let you go if you show that your company and your apartment and everything is in Bulgaria. You can of course replace Bulgaria in this example with any other country.
Within the Schengen area, it’s much harder to track your movements. With Cyprus, they can in theory just pull up the Schengen border crossings and see you’ve been in the Schengen area (outside of Cyprus for 300 days). And then they can ask where you’ve been, and what will you tell them? That you cycled through all Schengen countries except France and Poland, always staying only one week in each?I don’t think anyone will care about your Cyprus tax residency certificate, but I could be wrong. All it proves is that you’ve spent 60 days in Cyprus. So what? You can still easily spend 305 days in France or Poland.
I don’t know anything about the French rules. I’m sure France could ask for a tax residency certificate, but I doubt that they just blindly have to accept it. They would probably ask for more information anyway. Especially in the case of France, which has extremely vague tax residency rules. Move to Bulgaria or some other country that doesn’t require you to spend X days there. Many countries don’t require a certain number of days (France doesn’t), they just require that you have your home there. So just rent an apartment in Bulgaria, register your residency there and tell that to the authorities in France/Poland and they should leave you alone, unless you’re a celebrity. I’m not recommending you to do that of course, I’m just pointing out that it’s probably a simpler solution than Cyprus. I don’t think it will make much of a difference in practice if you choose a Schengen or non-Schengen country because they won’t care about you anyway. But if they do care, Cyprus won’t protect you, so why even bother. Ok, it’s a nice documentation that you spent 60 days. But nothing more. And France should probably also let you go if you show that your company and your apartment and everything is in Bulgaria. You can of course replace Bulgaria in this example with any other country.
Sure but I don't see the problem. Under the non-dom 60 days, it's completely legal to spend only 60 days in Cyprus (and maintain home there of course).
Does it mean than residency and tax residency will be consider same for your home residence at this level?
I am really interested about countries which they don't require to spend a lot of time there.
What do you have in mind? Or where I can find more alternatives please?
I check and read a lot about it and the only one I found were: Bulgaria / Czechia / Georgia (but I don't have 3 years background for their small wealthy rule)
Quickcomparison between Cyprus and Bulgaria:
Cyprus has the advantage to not have tax on dividends compared to Bulgaria. I should do some calculations to see who is the winner.
Cyprus is using euros.
Bulgaria doesn't require any stay but to buy home for example (more buying than renting these days).
Of course it’s legal. But if you spend 305 days in Poland and 60 days in Cyprus, where do you think you will be considered tax resident?
If Polish authorities suspects that you’re really living in Poland, do you think that when you tell them “I spent 60 days in Cyprus this year!”, there going to say “Oh, never mind then”? What is likely going to happen is that they will demand proof where you spent every single day of the year.
Of course if you can convince them that you fulfill the tie-breaker rules specified by article 4 in the DTA (which basically means that you have closer ties to Cyprus than to Poland), you’re good. But that’s not very likely if you spend 300 days in Poland.
If you spend 60 days in Cyprus, less than 180 days in Poland etc., it could be a different story.
So what I am saying is, when push comes to shove, your 60 days in Cyprus won’t matter. And if they won’t matter anyway, why even bother with such a complicated setup. Any country would do because if they find out, you’re screwed anyway. Ok, obviously, the more time you spend there, the better. So if you like Cyprus, sure, spend 60 or 100 days there. It’ll be better than having Bulgarian residency and never living there. I’m just saying that Bulgaria is probably easier and it might also be easier to claim you were in Bulgaria and you drove across the border (though not really because they’ll ask for receipts).
Most countries don’t have such a rule. Why would they? And even if they do, if you tell them you spend more than 183 days there, why would they challenge that? After all, it means that they are allowed to tax you.
Not even the UAE requires a minimum number of days in the country to consider you tax resident (provided you are resident) - only if you want a tax residency certificate. But in theory it’s enough to have residency even in the UAE.
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