The treaty non-resident UK Ltd. - the best-kept offshore secret?

[discussionor]

+ access to UK payment gateways (Stripe, PayPal)
+ access to UK/EU EMI's
+ having invoices readily accepted in any country

Why does this improve access? if the shareholder of the UK company is in Dubai, don't UK/EU EMIs still treat you as high risk like a Dubai applicant?

 

[Marzio]

Why does this improve access?

Because you are presenting yourself through a UK LTD and not a FZE?

if the shareholder of the UK company is in Dubai, don't UK/EU EMIs still treat you as high risk like a Dubai applicant?

EMIs will refuse straight away to work with you if you ask to open an account for a FZE

Maybe some could refuse the opening if the LTD director isn't UK resident but at least you have choices.

 

[discussionor]

@Marzio thank you but doesn't the EMI ask for full ownership details all the way to UBO which would include the UAE entity if this is a UK company which has UAE domicile for tax purposes due to location of ownership/management control?

If so I would have assumed it isn't different from direct FZCO EMI application but if you or anyone has experience otherwise it would be very interesting to hear!

 

[Marzio]

if this is a UK company which has UAE domicile for tax purposes due to location of ownership/management control?

The fact that UK LTD has a UAE shareholder doesn't equate that LTD has requested a tax residency transfer.

Where UK LTD is tax resident is not EMI's matter but HMRC's

 

[discussionor]

Yes but the tax residence wasn't the question. EMIs do care about ultimate beneficial owners. If they deny applications from UAE, would they not also deny applications from UK company with UAE parent?

 

[Volti Fluxar]

It should work very easily, but it would probably pay the same taxes as a CY company (can't imagine they'd regard the income as foreign) and I'd also think that most banks would see through this. They typically ask where the director is resident, no? But who knows...

I wondering what kind certificate HMRC would like to see? is it would be enough to provide personal Cyprus tax residency certificate or should it be explicitly granted to the UK company?

It seems should be easy to get personal certificate for CY resident but Im not sure how hard it would be if it require for a company

 

[mytoofood]

thank you but doesn't the EMI ask for full ownership details all the way to UBO which would include the UAE entity if this is a UK company which has UAE domicile for tax purposes due to location of ownership/management control?

but you control that by full nominee service, so no one can see UBO.

 

[myhand]

Best would be to form a UK company with full nominee services where nominee are foreigners and resident in the country for where you want to apply it to be taxed.

Easy to do.

 

[wellington]

Best would be to form a UK company with full nominee services where nominee are foreigners and resident in the country for where you want to apply it to be taxed.

Easy to do.

Surely that makes it a shell corp and easily challenged?

 

[tickertrader]

Best would be to form a UK company with full nominee services where nominee are foreigners and resident in the country for where you want to apply it to be taxed.

Easy to do.

In this way, how one could ensure the control of the fund in the company. For example, to have a big chunk of fund sitting in the broker investing bond, stock etc. Wouldn't there be a chance that the nominees move the fund out of the company?

 

[EliasIT]

Surely that makes it a shell corp and easily challenged?

Why if you build some substance, get utility bill you are all good to go. Had zero troubles with my setups for the last 3 - 4 years. They are similar to what @myhand set up, one of the setups filed dormant for the 7th year even it is doing around 850K euro profits every year. You need to know what you are doing.

 

[BritishSecret]

Some time ago, someone on this forum posted about his "non-resident UK Ltd."
This sounded a bit strange - after all, the UK doesn't have non-resident companies in the same way e.g. Hong Kong does.

Of course this sparked my interest, so I've investigated a bit more - and I've been considering for a while whether I should share this at all, as it seems to be such a well-kept secret.
But given that the information was already on the forum anyway, albeit less accessible, I decided to share my findings:

By default, a company that is incorporated in the UK is tax resident in the UK, as is the case in most jurisdictions.
However, it is possible for a UK company to be considered tax resident in another country per that country's domestic rules. Many countries deem a foreign company to be tax resident there under rules for management control.
Excursion: In the 2000's, many European countries had rather high minimum share capital requirements for limited liability companies. To circumvent this, many people incorporated in the UK instead, where the minimum share capital is just 1 GBP. The company would then be considered tax resident in their country due to being managed and controlled from there.
In theory, this could lead to double taxation, but here's the kicker: The UK has signed a staggering number of tax treaties. And under such a treaty (Article 4), the UK would agree that the company should only be considered tax resident in the country where it is being managed and controlled.
In other words, the UK would agree that the company shouldn't be considered tax resident in the UK per a tax treaty - in short: It would be "treaty non-resident" per "section 249" of the UK tax code.
So many European residents would use UK Ltd. companies despite having no relation with the UK. These companies didn't enjoy a very high reputation as they were considered to be owned by people who were too poor to pay the minimum share capital, but for a lot of people, that didn't matter, so it was still a popular option.
Fast foward a few years, and most EU governments had lowered the minimum share capital requirements, or introduced new entity types with lower requirements, so UK companies became mostly irrelevant.

But here's the interesting part: The same mechanism can still be applied, and it seems like it's rather simple to receive the status.
In short, you simply have to declare to the HMRC that the company is being managed and controlled from a country with which there exists a tax treaty.
Here's some information from the UK governmen about this:
https://www.gov.uk/hmrc-internal-manuals/international-manual/intm120070
The accountant I spoke to told me that in the 1990's and 2000's, this used to be a popular option for Eastern Europeans, e.g. Ukrainians, to avoid tax:
They would create a branch of the company and appoint a nominee director and then apply for the treaty-nonresident status. The UK would then no longer tax the company if there was no UK-source income. But it gets better: Cyprus wouldn't tax the company either as it would consider the company's income to be "foreign-sourced".
They would then pay "dividends" to themselves in their Eastern European home country - where the tax authorities were led to believe tax had been paid in the UK. And such income wasn't taxed there either.
Those countries have since cottoned on to the practice and become better at enforcing their own laws for corporate tax residence and permanent establishment, so this trick no longer works today.

However, it's still entirely possible to apply the same method. For example, a UAE tax resident should be able to be the director of such a UK Ltd. company, and it would then be taxed like a UAE company.
The UAE requirements aren't quite clear here, especially with the new corporate income tax. It would probably be advisable to set up a branch in a free zone to reduce the risk of the company being subject to 9% corporate income tax.

Why is this so interesting?
UK Ltd. companies are very easy an cheap to form, even cheaper than US LLCs. The company would still be required to have a UK address, so it would look like any other UK company and benefit from the UK's excellent reputation.
Unlike a UK LLP, no additional partner is required. And unlike an LLP, the entity is opaque, so no one would expect that the company isn't subject to UK tax.
If there is no UK business, the company would have to file nil tax returns in the UK every year. Accounts would still have to be filed with Companies House, but for "small companies" (up to GBP 5M of revenue or so), profit and loss sheets wouldn't be published (though there have been discussions to change this). Only the balance sheet is public information. The company register is public as well, so it would be easy to verify who the shareholders of the company are, which again would help to build trust.

Banking should be simpler than with a US LLC as there obviously are no FATCA requirements. It would probably also look "nicer" to European clients than a US entity.
What I haven't yet figured out is whether it would be possible to obtain a VAT ID from the UK and/or a corporate tax residency certificate from the other country. I could imagine that it would be possible to apply for a UK VAT ID before applying for the treaty-nonresident status, but I haven't verified this yet.

It should also be possible to use this approach to move the tax residency of the company around as one moved from country to country. I guess this could be interesting for Brits who want to move from the UK to e.g. Malta. I'm not sure if this could trigger exit tax, though.
I'll share more information here as I find out more. Let me know if you have any question or if you've got more information yourself.

By the way, this should also work with other jurisdictions, but it seems extremely simple with the UK because there's an official process for this.
I remember the person posting about this mentioning that he doesn't use his UK company to invoice UK clients, just in case.
For that purpose, he has a separate Irish company, if I remember correctly. However, according to Google, if the Irish Ltd. doesn't have a director who is resident in an EEA country, a EUR 25k bond must be deposited with the Irish authorities as an "insurance", so this probably isn't as interesting if one wants to manage the company from e.g. the UAE. I also don't know which countries Ireland has signed a tax treaty with.

"Just in case" meaning to avoid any risk of HMRC considering the income from UK clients as "UK-sourced income", to which UK tax would still apply. This would be similar to tax-transparent US LLCs being managed by a non-resident. With US clients, even though the US LLC would be a pass-through entity, there always remains some risk that the IRS would consider it to be "engaged in a trade or business in the US" (ETBUS) and thus subject to US tax, if there are US clients.

So in a nutshell, the UK is a pretty useful place for LLCs when it comes to people's tax structures due to the tax treaties they have set up with different countries and territories. And if you want to move money to those places, using a UK LLC is a pretty useful tool, right?

 

[SmartestSmarty]

Would the non-resident UK LTD be able to have a UK VAT number?

 

[myhand]

yes that would be possible

 

[SmartestSmarty]

yes that would be possible

Is this a reply to my VAT question?

 

[Lord Palmerstone]

I have just seen this thread and although its many months past, I feel that I should add some expertise on this matter.
Having been a UAE resident for now approaching 29 years, I am also a director of a UK Ltd company.
Whilst I cannot comment on the benefits and 'ins and outs' of the tax status etc, I can however comment on the difficulties i.e. problems with UK banks whilst being resident in a country that 'they don't like'!
My Accountant (from UK) has often said 'They don't like you' and this has finally culminated this year with them closing our account ............ no reasons given as always, and now we are going through the long process (already 5 months) of returning our funds that these a-r-s-e-h-o-l-e-s seized/blocked, whatever description you care to use.
My company has been 'in limbo' now for many, many months without funds i.e. cashflow, or an operating account! and of course they continue to play with our money and earn interest on it at what is now a very good market rate.
So if there is any advice to give on this whole subject, do NOT under any circumstances whatsoever, trust UK Banks as they are all liars, thieves and completely and absolutely untrustworthy.

 

[Houdini]

You are going totally off topic @Lord Palmerstone - sorry to hear your story but you should open a new thread!

It's not possible to setup a UK LTD nonresident, what you can do is to use some of the shady setups used today (which also are discussed inside mentor group gold) and which you can setup for about a year or two and trash it after this period. Rinse and Repeat every year.

 

[anotherone]

You are going totally off topic @Lord Palmerstone - sorry to hear your story but you should open a new thread!

It's not possible to setup a UK LTD nonresident, what you can do is to use some of the shady setups used today (which also are discussed inside mentor group gold) and which you can setup for about a year or two and trash it after this period. Rinse and Repeat every year.

He is not off topic, let me explain you why.

In order to be non resident, you could choose a UAE or HK director (Article 5 (permanent establisjment) & 7 of Double tax treaty with UAE and HK) so that your UK company should pay Corporate income tax in UAE (9%) or HK (up to 15%) rather than UK. I prefer HK to UAE because HK law is based on UK law because of common history.
But then, you must open a business bank account for your UK company. You could open a Wise business bank account but then, don't forget your director isn't a resident of UK or EU. It is a resident of UAE or HK. We may wonder, what could happen in this case?

If you can have a non resident UK company but can't open a bank account it is nearly useless.


About VAT:
I don't know if you can apply for VAT in the UK without a UTR. The Unique Tax Reference is provided by HMRC when you register for Corporation tax.
According to UK for, the UTR is optional when you register for VAT:
https://www.gov.uk/register-for-vat/how-register-for-vatIdea behind: UK company - enrolled for corporation tax in HK - VAT in UK

About non resident UK company:
When you incorporate a company in the UK, you don't need to enroll for corporation tax in the UK right away.

Open a wise business bank account online:
Some pakistani guys did tutorial on youtube you show to open a wise business account for a UK company. I guess this implied that the director was pakistani.

So, in this case, these pakistani guys should pay corporation tax in Pakistan not in the UK because they have no permanent establishment in the UK (Article 5 of any Double tax treaty).

Gents, don't focus on local laws, The laws/rules of double taxation agreements take precedence over the local laws of both countries.​

 

[daniels27]

Why if you build some substance, get utility bill you are all good to go. Had zero troubles with my setups for the last 3 - 4 years. They are similar to what @myhand set up, one of the setups filed dormant for the 7th year even it is doing around 850K euro profits every year. You need to know what you are doing.

But which country is it being taxed at low rate?

 

[anotherone]

Here is the article 5 of the Double tax agreement between UK and Hong Kong:
https://assets.publishing.service.g...0b62302692963/hong-kong-uk-dta_-_in_force.pdf
ARTICLE 5 Permanent Establishment
1. For the purposes of this Agreement, the term “permanent establishment” means a fixed place of business through which the business of an enterprise is wholly or partly carried on.

2. The term “permanent establishment” includes especially:
(a) a place of management; => Director's fiscal residency.
(b) a branch; ==> see an office
(c) an office; ==> Dependent employees of the company. Not independent contracting secretary company
(d) a factory;
(e) a workshop; and
(f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources.

3. A building site, a construction, assembly or installation project or supervisory activities in connection therewith, constitute a permanent establishment only if such site, project or activities last more than six months.

4. The term “permanent establishment” also encompasses the furnishing of services (including consultancy services) by an enterprise, directly or through employees or other personnel engaged by the enterprise for such purpose, in connection with a site, a project or supervisory activities referred to in paragraph 3, if those services continue within a Contracting Party in connection with such site, project or activities for a period or periods aggregating more than 183 days within any twelve-month period.

5. Notwithstanding the preceding provisions of this Article, the term “permanent establishment” shall be deemed not to include: (a) the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise; (b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery; (c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise; (d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information, for the enterprise; (e) the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character; (f) the maintenance of a fixed place of business solely for any combination of activities mentioned in sub-paragraphs (a) to (e), provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character.

==> Example: Web servers, cloud servers.
Then article 7:
. The profits of an enterprise of a Contracting Party shall be taxable only inthat Party unless the enterprise carries on business in the other Contracting Partythrough a permanent establishment situated therein. If the enterprise carries onbusiness as aforesaid, the profits of the enterprise may be taxed in the other Party,but only so much of them as is attributable to that permanent establishment.

So, let's say, you incorporate your company in the UK, your director is from Hong Kong, your web server are located in Germany or Netherlands. So, i guess the company would pay Corporate income tax in Hong Kong because in the company house registry in the director's list there would be the name of someone living in HK. Then, the correspondance address can be the one of a virtual office. Anyways, if there aren't any employees in the UK, HMRC will not come after you.

The real problems related to this setup is for me:

1. Nominee directors in UAE and Hong Kong are much more expensive than UK nominee directors. Also, they are more intrusive.
2. Outside of the UK, outside of Cyprus, and other jurisdictions like these ones it is difficult to find good, reliable nominee directors.
3. If the HMRC comes after you, they will ask you to prove that your company pays Company income tax in the country of the director
4. You must report your CIT in the currency of the country where you pay the CIT. In our example: Hong Kong Dollar (=£0,10) or UAE dirhams (=0,079).