Portugal tax resident under NHR + US LLC

[disagree23]

It will be tax evasion.

Tax planning will be reached if following will be reached:
1. Portugal Tax Haven Blacklist.
2. Foreign Companies from where dividend comes have effective tax on dividends.
3. Central management and control will not be in Portugal.

After considering all this, tax can be planned.

When you get your LLC treated as a C-corp you basically satisfy points 2 and 3, right?
What do you mean with the point 1?

That’s overkill. As @Marzio and @Sols said Portugal is not enforcing its tax laws for NHR residents. Use a US LLC and don’t send $$$ to Portuguese bank account, instead pay or withdraw cash with your US LLC debit card.

Here you're basically suggesting to evade taxes in the most illegal way. Moreover, this way you're suggesting doesn't allow you to get that money on a personal level.

Important: what about your yearly personal tax return you should file in Portugal? This way, you would be a NHR individual that does not file a tax return because you don't have any personal income, right? Isn't this a little bit suspicious, given that you are NHR but you don't have any kind of personal income to declare?

 

[Legal]

When you get your LLC treated as a C-corp you basically satisfy points 2 and 3, right?
What do you mean with the point 1?

Here you're basically suggesting to evade taxes in the most illegal way. Moreover, this way you're suggesting doesn't allow you to get that money on a personal level.

Important: what about your yearly personal tax return you should file in Portugal? This way, you would be a NHR individual that does not file a tax return because you don't have any personal income, right? Isn't this a little bit suspicious, given that you are NHR but you don't have any kind of personal income to declare?

Portugal has a tax haven blacklist (Tax Guide 2023 – Favourable Tax Regimes). Income from this country can not be considered as tax-free foreign received dividends.

LLC is structure which has members and if time comes for you to prove that it was dividend received from LLC and not member remuneration can be complex, accordingly way batter to keep it straight forward and have C-Corp.

 

[disagree23]

Portugal has a tax haven blacklist (Tax Guide 2023 – Favourable Tax Regimes). Income from this country can not be considered as tax-free foreign received dividends.

LLC is structure which has members and if time comes for you to prove that it was dividend received from LLC and not member remuneration can be complex, accordingly way batter to keep it straight forward and have C-Corp.

Sorry, but how this should answer to my last comment?

 

[Legal]

Sorry, but how this should answer to my last comment?

Can you specify your exact questions? (Then I will answer again).

 

[disagree23]

How much will I pay in taxes if I use a C-corp? Let's say I create one in North Carolina which have a 2.5% corporate tax.

I cannot understand these points:
- is there a tax on dividends I can take from the c-corp?
- is there a tax on administrator salary I can take from that c-corp?
- how much in % and which taxes this c-corp will have to pay?

Then, we should also talk about the Portugal annual tax return (as a person).
If you have a US LLC (disregared entity) and you don't take money in your personal bank account (because you're paying everything with LLC cards) I will not file a tax return - as I don't have any personal income to declare, right?

But in this case: don't you think it would be weird for the Portugal IRS to see a NHR status person that doesn't have any type of income?

 

[Marzio]

That’s overkill

While i don't fully agree with the rest of your plan, forming a C-Corp as a non resident is not something that i would do personally.

How much will I pay in taxes if I use a C-corp?

The corporation itself is taxed on their corporate income at the federal corporate tax rate of 21%.

Plus, sice we are talking about US dividends there's 15% US WHT for dividends distributed to non-us shareholders.

I agree with pay some taxes but isn't 35% a little bit too much?

 

[Legal]

How much will I pay in taxes if I use a C-corp? Let's say I create one in North Carolina which have a 2.5% corporate tax.

I cannot understand these points:
- is there a tax on dividends I can take from the c-corp?
- is there a tax on administrator salary I can take from that c-corp?
- how much in % and which taxes this c-corp will have to pay?

Then, we should also talk about the Portugal annual tax return (as a person).
If you have a US LLC (disregared entity) and you don't take money in your personal bank account (because you're paying everything with LLC cards) I will not file a tax return - as I don't have any personal income to declare, right?

But in this case: don't you think it would be weird for the Portugal IRS to see a NHR status person that doesn't have any type of income?

You will pay 2.5% and get a dividend, then declare it in Portugal.

While i don't fully agree with the rest of your plan, forming a C-Corp as a non resident is not something that i would do personally.



The corporation itself is taxed on their corporate income at the federal corporate tax rate of 21%.

Plus, sice we are talking about US dividends there's 15% US WHT for dividends distributed to non-us shareholders.

I agree with pay some taxes but isn't 35% a little bit too much?

If a company is foreign-owned and is not effectively connected to the U.S. Only 2.5% applies.

 

[Marzio]

is not effectively connected to the U.S.

A C-Corp isn't effectively connected to the US?

 

[disagree23]

You will pay 2.5% and get a dividend, then declare it in Portugal.


If a company is foreign-owned and is not effectively connected to the U.S. Only 2.5% applies.

A C-Corp isn't effectively connected to the US?

This was confusing me too as the answers is obv yes. If you switch to c-corp is 100% connected to US and that’s why c-corp will be a normal company paying normal US taxes.

While i don't fully agree with the rest of your plan, forming a C-Corp as a non resident is not something that i would do personally.



The corporation itself is taxed on their corporate income at the federal corporate tax rate of 21%.

Plus, sice we are talking about US dividends there's 15% US WHT for dividends distributed to non-us shareholders.

I agree with pay some taxes but isn't 35% a little bit too much?

I think that withholding tax can be lowered to almost zero if your personal residency country have some tax treaties with US? Just asking.

If this is doable and you can lower it to zero, and then have your c-corp pay 2.5% corporate tax (North Carolina) I could think about it.

About the 21% you said: is this the same for every state or what?

 

[Marzio]

This was confusing me too as the answers is obv yes. If you switch to c-corp is 100% connected to US and that’s why c-corp will be a normal company paying normal US taxes.

AFAIK a C-Corp pays 21% federal taxes by default.

I think that withholding tax can be lowered to almost zero if your personal residency country have some tax treaties with US?

It's already lower than the regular rate which is 30%.

There are no countries with 0% WHT on dividends.

United States - Corporate - Withholding taxes

Detailed description of corporate withholding taxes in United States

taxsummaries.pwc.com

 

[disagree23]

Agree with Marzio. I don't know any case or anyone that have been exposed by tax authorities. It doesn't mean that the setup is right because is not. And the ruling that is in freshportugal webpage talks about a multi member LLC not a c-corp or a single membership.
In my case I think that the smartest thing to do is to have a low profile. Self employee with low invoicing and the rest in dividends from cyprus (ideal setup with NHR)

But Cyprus LTD dividends do not have any taxes I think... so how this would be compliant with NHR?

 

[tradeall]

AFAIK a C-Corp pays 21% federal taxes by default.



It's already lower than the regular rate which is 30%.

There are no countries with 0% WHT on dividends.

United States - Corporate - Withholding taxes

Detailed description of corporate withholding taxes in United States

taxsummaries.pwc.com

Cyprus has 0% tax of WHT on dividends

 

[disagree23]

Cyprus has 0% tax of WHT on dividends

Yes exactly. And NHR “wants” someone else to tax that money right, so how can this be the solution?

 

[Marzio]

Yes exactly. And NHR “wants” someone else to tax that money right, so how can this be the solution?

This is taken from Cyprus - Portugal double tax treaty.

Point 2 states that dividends may also be taxed in the contracting state.

In reality the contracting state (which is Cyprus in this case) will not tax dividends because of its domestic laws.

That's all you need to know.

 

[disagree23]

This is taken from Cyprus - Portugal double tax treaty.

Point 2 states that dividends may also be taxed in the contracting state.

In reality the contracting state (which is Cyprus in this case) will not tax dividends because of its domestic laws.

That's all you need to know.

Ok got it. Now what about the place of effective management problem?

For example this can be a problem with the LLC disregarded entity. As if the Portugal IRS ask you to prove that this is a real company and you can’t, the actual work and management of the LLC is in Portugal because you’re working from there, where you have your residency.

What about this with the Cyprus LTD?

 

[Marzio]

The solution to the pleace of effective management problem is simple.

Either you accept the risk of running a non compliant setup (managing US LLC from PT relying on the fact that to this date Portugal's tax agency doesn't go after non residents, especially if you stay under the radar and don't move millions) or hire somebody to manage the company (at least on paper) with added bureaucracy and costs.

Cyprus LTD will make you appear more compliant because you'll have to rent an office and the company will have its own Cyprus resident director.

 

[disagree23]

The solution to the pleace of effective management problem is simple.

Either you accept the risk of running a non compliant setup (managing US LLC from PT relying on the fact that to this date Portugal's tax agency doesn't go after non residents, especially if you stay under the radar and don't move millions) or hire somebody to manage the company (at least on paper) with added bureaucracy and costs.

Cyprus LTD will make you appear more compliant because you'll have to rent an office and the company will have its own Cyprus resident director.

With the US LLC, you would have to hire a manager that is not working from USA, right? Otherwise you could trigger a taxable event, right?

 

[Marzio]

With the US LLC, you would have to hire a manager that is not working from USA, right? Otherwise you could trigger a taxable event, right?

Not working from US is first requirement.

Second is that he has to be based in tax friendly jurisdictions like Panama, Paraguay, Monaco, Holy See LOL and so on.

 

[disagree23]

Not working from US is first requirement.

Second is that he has to be based in tax friendly jurisdictions like Panama, Paraguay, Monaco, Holy See LOL and so on.

Why? He cannot be in Europe?

 

[Marzio]

Why? He cannot be in Europe?

For the same reason you are looking for a manager outside PT.

What do you think will happen if you somebody will manage a US LLC from Germany? Or France? Or Spain? Or UK? or [put any EU country here]