[USA] Inc. vs LLC - Is my tax planner trying to fool me ?

[mardz]

Why don’t you just set up a company in a traditional tax haven without CRS?

Shopify Payments is crucial for my business (ecom, dropshipping). Here is the list of supported countries: Shopify Payments requirements
Some will say Stripe is the same (true, the engine is the same) but Stripe hates dropshippers, it's actually against their T&C. I process ~100k /month with shopify payments and never had any issue. I once tried to switch to Stripe on one of my stores and got banned within a few days. There are other payment processors like Mollie but their are by far not as good as stripe/shopify payment since they don't even integrate in Shopify's checkout process.

Why the two companies though? Sounds like expensive overhead.

It's explained here:

US LLC are pass entity meaning all Revenues generated by them will flow on personal incomes. you are taxed as unlimited in Germany meaning that worldwide income has to be declared.
The Finanzmatt will be informed by IRS that you have an entity there ( Not the amount of cash but the entity) the Finanzmatt will then decide to pursue this indication and they will. It take just a second to extract all Germany residents info from database then send it to the Finanzmatt

As far as I know the US didn't sign CRS, why would they rat me out ? I now understand it's a bad idea and I will not do it but I am curious

 

[JustAnotherNomad]

Why the second LLC then and not some offshore company?
I’m still not convinced that it’s such a great idea. There’s a risk that Germany would want to tax the corporation because of permanent establishment in Germany. And the Stripe fees are higher with a US company - unless you only have US customers anyway.

And isn’t FATCA data also exchanged with Germany?

 

[mardz]

Why the second LLC then and not some offshore company?
I’m still not convinced that it’s such a great idea. There’s a risk that Germany would want to tax the corporation because of permanent establishment in Germany. And the Stripe fees are higher with a US company - unless you only have US customers anyway.

And isn’t FATCA data also exchanged with Germany?

I think Strip fees depends on the location of the customer (US credit card have high fees than EU Credit Card)

Screenshot from their website:

Also I am almost sure FATCA only applies to US citizen.
Quote from Wikipedia:
"the Foreign Account Tax Compliance Act (FATCA) is a 2010 United States federal law requiring all non-U.S. foreign financial institutions (FFIs) to search their records for customers with indicia of a connection to the U.S., .... Like U.S. income tax law, FATCA applies to U.S. residents and also to U.S. citizens and green card holders residing in other countries. "

 

[JustAnotherNomad]

Yes, now look at Stripe USA. It will say 2.9% for all cards.

I think under FATCA, reporting also goes both ways, but I’ve heard some rumors that the data the US sends is quite useless. But I don’t know. I’m not sure I’d want to rely on that. They could also improve the data quality at a later point. I always assume they will find out everything eventually, so I do everything the legal way.

 

[cyprus123]

You will need to look at 3 points and structure your ideas: (I) payment options (II) jurisdiction for your managed company (substance and local director, which might be you if you can become local there) (III) jurisdiction for your personal tax (!) residence.

(I) e.g. a subsidiary in Austria will give you the chance to use Shopify Payment.
(II) Malta is an option (you will need a local director who is managing a maximum of 4 companies in order to get a VAT number for your entity; CIT repayment to the holding became slower in the last years). In my opinion Malta is not the best choice at the moment. You could go for Bulgaria or Cyprus: very low fees for structure, company setup etc. with a fair tax rate.
(III) In European Union there is only 1 flexible choice for your personal tax residence: Cyprus with it's 60 day rule. If you can leave EU and don't want to get too far you have following options: Monaco (183 days rule), Georgia (PTF or 183 days rule), UAE (183 days rule).

If you incorporate a legal entity abroad you will have to inform your local tax authority in Germany by law. It is not a criminal offense though (fee up to 5000 EUR). I would suggest to leave first and incorporate in a second step or use a nominee which is totally legal by German regulations.

If you think 5.000 to 10.000 EUR is a lot of money for a tax advise or even for a company setup I can assure you that for an ecommerce setup it is very reasonable amount, depending on jurisdictions involved of course.
If you need a cheaper setup below 10k look into Georgia, you can combine tax residency and freezone company with a PSP or subsidiary in the EU. Very simple setup.

 

[JustAnotherNomad]

Portugal has tax residency connected to personal residency like Germany. No minimum number of days required. Just rent an apartment in Portugal and you are tax resident immediately. Which could be better than 60 days in Cyprus.
But of course there is a risk of dual tax residency if you don’t actually live there, like with any other country.

 

[JustAnotherNomad]

@mardz :
https://www.offshorecorptalk.com/th...blic-romania-bulgaria-cyprus-and-malta.29471/

 

[mardz]

@mardz :
https://www.offshorecorptalk.com/th...blic-romania-bulgaria-cyprus-and-malta.29471/

Wow great news, thanks for the update

 

[MarkRakins]

You will need to look at 3 points and structure your ideas: (I) payment options (II) jurisdiction for your managed company (substance and local director, which might be you if you can become local there) (III) jurisdiction for your personal tax (!) residence.

(I) e.g. a subsidiary in Austria will give you the chance to use Shopify Payment.
(II) Malta is an option (you will need a local director who is managing a maximum of 4 companies in order to get a VAT number for your entity; CIT repayment to the holding became slower in the last years). In my opinion Malta is not the best choice at the moment. You could go for Bulgaria or Cyprus: very low fees for structure, company setup etc. with a fair tax rate.
(III) In European Union there is only 1 flexible choice for your personal tax residence: Cyprus with it's 60 day rule. If you can leave EU and don't want to get too far you have following options: Monaco (183 days rule), Georgia (PTF or 183 days rule), UAE (183 days rule).

If you incorporate a legal entity abroad you will have to inform your local tax authority in Germany by law. It is not a criminal offense though (fee up to 5000 EUR). I would suggest to leave first and incorporate in a second step or use a nominee which is totally legal by German regulations.

If you think 5.000 to 10.000 EUR is a lot of money for a tax advise or even for a company setup I can assure you that for an ecommerce setup it is very reasonable amount, depending on jurisdictions involved of course.
If you need a cheaper setup below 10k look into Georgia, you can combine tax residency and freezone company with a PSP or subsidiary in the EU. Very simple setup.

In Georgia it might be hard to open a bank account for him, after an avalanche of non-residents who opened companies there or accounts for foreign companies in 2018-2019, the banks started rejecting a lot of applications, even when you have a company there a bank account might be a problem. Just saying.

 

[Zaki]

@mardz any Updates mate ?what's the final setup you have done so far ?
@everyone no need to make a new thread guys
is the setup recommended by His (@mardz) tax adviser a bit risky ?
I sell services online(SaaS ,coding,scripts ...)to US,EU...clients/companies.
I am 'from+live' in Morocco wich doesn’t have a CFC rule and no CRS exchange infos (for now)
here we have 0% corp tax for 4 years + 0% Dividend! (Heaven)
I want to create an offshore company because :
Keep the USD/EUR in the offshore to pay maybe Facebook ads....
(hard to pay in EUR/USD from Morocco + they take 11% tax for each foreign payment)
If you're me what're gonna to do ?is @mardz's setup best option for me ?