How I plan to restructure my US C-Corp $1M/Year *Digital Marketing Agency*

[reelay]

Hey guys,

Thank you for accepting to the community I recently joined and everyone has been really helpful on here. Super grateful for the opportunity to learn, grow, and share my off-shore journey with you.

I talked to a few CPAs and YouTube "stars" experts and wanted to share with you the plan and get your feedback on it.

Current situation:
Ukrainian citizen and Polish citizen, polish resident.

Past: US resident for 10 year, built a few 7-figure businesses and sold. Kept only this digital ad agency and moved to Poland. Traveled around Latin America.

Currently residing in Poland, with a US C-Corp digital marketing agency serving US clients all remote and doing online advertising for them, generating $1m/year in revenue.

My current banking for the company is
- Bank of America Business
- Bank of America Personal
- Polish local bank just for daily expenses here

The plan for 2024 is:

Option 1
Move to Panama. Dissolve my US C-Corp and form a new:
USA Single member LLC - I’m the CEO and will be operating the company from Panama
Set up a new:
- Business Bank Account in USA (Main Bank - Bank of America) (registred/owned by LLC)
- Business Bank Account in USA #2 Backup (Chase) (registred/owned by LLC)
- Personal Bank Account in USA (Pass-through/transactions Bank of America) (opened with TIN?)

Before moving to Panama, while still here in Europe resident planning on opening a solid personal Bank in Europe (Main Banking/Savings) and when move to Panama do not notify the bank about the address change to Panamian. Not sure if it's legal?

When moving to Panama, open a Personal Bank in Panama (day-to-day living) - rent, groceries etc etc.

All the personal banks (European & Panamian) funding will be through the USA personal bank "pass-through/transaction Bank of America"

Option 2 (Complex structure):
Dissolve my US C-Corp and form a new:
Holding company/HQ - Singapore or Dubai freezone or Panama?
Set up a new:
- Business Bank account in Europe (registered/owned by HQ)
US LLC Billing Subsidiary - USA LLC (can I switch my current C-Corp company to be this billing company? Probably not possible, needs to be a new non-resident LLC with new EIN?
- Business Bank Account in USA (registered/owned by USA LLC)
Move to Panama

Ah I also have assets in my brokerage account on Interactive Brokers if that plays somehow in the picture.

Any feedback for a padawan is appreciated from off-shore Jedi's on here. Particularly on:

PRO’s and CON’s of each structure? Which one should I go with?
Any pitfalls I should be aware of?
Is there a better setup structure you recommend? (only looking to live in Latin America, no Dubai etc..)

With Option 1 would I owe 0% or some tax? on my personal income tax in Panama, I know it has territorial taxation. So supposedly 0%

 

[Don]

I heard of a case where a Polish businessman got CRIMINAL charges because he kept a 50 USD worth printer that belonged to his business in his home.
That's just one example how aggressive Polish tax authorities can be.
If you consider how the enforcement of DAC6 varies in EU you would realize why it might be difficult to find good international tax advisors in certain countries.

DAC6 non-compliance carries serious penalties for intermediaries and also potentially for taxpayers. In Luxembourg, no, late, inaccurate or incorrect reporting can be fined up to 250,000 euros, in Germany, the penalty is 25,000 euros, while in Poland, the penalty could reach 5.8 million euros. In Estonia on the other hand the maximum penalty is 1.2k for first time and 3.2k for repetitive offenses.

Winding down the current setup is probably a good idea.
Its great you have majority of funds in US banks since US dont really exchange information under CRS I believe.

I don't recommend frauding banks by feeding them wrong information. Get a proper legit zero tax setup if thats the goal. Paraguay has a territorial tax system for example.

 

[reelay]

I heard of a case where a Polish businessman got CRIMINAL charges because he kept a 50 USD worth printer that belonged to his business in his home.
That's just one example how aggressive Polish tax authorities can be.
If you consider how the enforcement of DAC6 varies in EU you would realize why it might be difficult to find good international tax advisors in certain countries.

DAC6 non-compliance carries serious penalties for intermediaries and also potentially for taxpayers. In Luxembourg, no, late, inaccurate or incorrect reporting can be fined up to 250,000 euros, in Germany, the penalty is 25,000 euros, while in Poland, the penalty could reach 5.8 million euros. In Estonia on the other hand the maximum penalty is 1.2k for first time and 3.2k for repetitive offenses.

Winding down the current setup is probably a good idea.
Its great you have majority of funds in US banks since US dont really exchange information under CRS I believe.

I don't recommend frauding banks by feeding them wrong information. Get a proper legit zero tax setup if thats the goal. Paraguay has a territorial tax system for example.

I'm not familiar with DAC6 So are you saying, if I get a bank account in Europe while still here, and then move to Panama and don't update the bank about my residency change I can get in trouble?

Now, what if I do update them that I have residency in Panama will they just shut down my account, because I heard EU banks hate Panama residencies..

Btw all my money in the US banks made legally and taxes paid off so CRS doesn't really matter so not sure what did you mean by that.

What do you mean "get a proper legist zero tax setup"? how is the setup I described illegal?

 

[Don]

I'm not familiar with DAC6 So are you saying, if I get a bank account in Europe while still here, and then move to Panama and don't update the bank about my residency change I can get in trouble?

Now, what if I do update them that I have residency in Panama will they just shut down my account, because I heard EU banks hate Panama residencies..

Btw all my money in the US banks made legally and taxes paid off so CRS doesn't really matter so not sure what did you mean by that.

What do you mean "get a proper legist zero tax setup"? how is the setup I described illegal?

It sounds like you were managing the business and working from Poland, which sounds a bit risky unless you paid all taxes in Poland. I was going a bit off topic with DAC6, etc., but my point was that Polish tax authorities can be aggressive and unpredictable, which is not the best combination.

"and when move to Panama do not notify the bank about the address change to Panamian. Not sure if it's legal?" - no

Yes most likely EU banks would prefer to not deal with you, unless you retain some kind of link with EU and structure it carefully

EU list of non-cooperative jurisdictions for tax purposes

The EU list of non-cooperative jurisdictions includes non-EU countries or territories that didn't make sufficient commitments to EU concerns on tax purposes.

www.consilium.europa.eu

 

[reelay]

It sounds like you were managing the business and working from Poland, which sounds a bit risky unless you paid all taxes in Poland. I was going a bit off topic with DAC6, etc., but my point was that Polish tax authorities can be aggressive and unpredictable, which is not the best combination.

"and when move to Panama do not notify the bank about the address change to Panamian. Not sure if it's legal?" - no

Yes most likely EU banks would prefer to not deal with you, unless you retain some kind of link with EU and structure it carefully

EU list of non-cooperative jurisdictions for tax purposes

The EU list of non-cooperative jurisdictions includes non-EU countries or territories that didn't make sufficient commitments to EU concerns on tax purposes.

www.consilium.europa.eu

Ah no, of course I've been paying all my taxes while living here in Poland. So that's why it's time for me to move out and restructure everything and move to Panama.

So would you say Option 1 sounds like the best structure for my case?

Yes most likely EU banks would prefer to not deal with you, unless you retain some kind of link with EU and structure it carefully

EU list of non-cooperative jurisdictions for tax purposes

The EU list of non-cooperative jurisdictions includes non-EU countries or territories that didn't make sufficient commitments to EU concerns on tax purposes.

www.consilium.europa.eu

I checked out the list you quoted, but it's not related to the entire EU, right? I'm sure there should be countries in Europe with decent banking system that If I build a good relationship with my banker in EU, and then move to Panama let him know about the tax residency change, I belive they should allow me to bank with them, obviously it will depend on the country and bank I decide to go with.

 

[Cloudbanck]

Option 1 seems easier and cheaper. I would say to avoid unnecessary complexity and go with that. The only case for Option 2 is if the US changes the interpretation of the rules for ETBUS/Effectively connected income and starts taxing the US LLC in the US because you have US clients. This is unlikely, but in this case you should go with Option 2 or some Option 2 modified to not pay tax in the US. Also if you intend to spend a lot of time in the US Option 1 isnt that great.

As to business bank accounts for your US LLC, there are good neobanks/EMIs in the US like Mercury. The thing is, with the traditional Banks in the US, like Bank of America, they can be a PITA to deal with, asking you to come in to a branch office to sort out basic stuff, which isnt so great when that means a long flight, and making you wait for hours on the phone to speak to some clueless third-world country based support agent, that will not resolve your issue.

With EMIs, (or Neobanks with a banking license), they don't have branch offices, so they will never ask you to come in to one, everything can be sorted online. And they are very keen on making a good impression to customers to grow by word of mouth, so they generally have great responsive support available by chat/email. The newer and smaller, the better support basically. I recently opened an account with a really small US EMI, and it's like having a personal banker that contacts you pro-actively to check how things are going and if you need help with anything.

As to opening personal bank accounts in Europe, and keeping these while living in Panama/outside Europe. Yes, this is a very good idea, and generally not a problem, and you dont risk large fines if you dont live where you say you live - worst case they'll close your account.
I left Europe many years ago and still maintain accounts in multiple European countries, and I've even manage to open new accounts in Europe, but I make sure they are in countries where having a bank account isnt a tie that can make you a tax resident (I dont know about Poland here). For some accounts I have a non-European address (not Panama though), for others I have an address in the European country of the bank in question. Never had any issues, or any account closed, but I do expect address/residence verification to be tightened up sooner or later.
You could rent a cheap place just to get utility bills in some European country, and use that to get a bank account. And/or get an address via a mail forwarding service. Or own a property (possibly with a mortgage) in some European country where owning a property doesnt make you tax resident - then it's really easy to maintain personal banking in that country even if you dont live there.

The neobank Zen.com has a Polish team behind it by the way I think. Seems super easy to open a bank account with them if you have an EU passport. I dont think they even ask for a utility bill, you could put any address in Europe basically and get a multi-currency account straight away.

And finally with revenue (and I hope profits) in the 1M USD range, you could look into private banking. While more expensive, they will be more flexible with everything, including your place of residence.

 

[saintjohnny]

I have a similar setup, also a EU citizen (although I wasn’t born in that country) and work in the same industry. Option 1 is solid, however my EU citizenship country is aggressive (so is Poland), so I closed my bank account and have nothing in Europe to stay on the safe side.

 

[reelay]

Option 1 seems easier and cheaper. I would say to avoid unnecessary complexity and go with that. The only case for Option 2 is if the US changes the interpretation of the rules for ETBUS/Effectively connected income and starts taxing the US LLC in the US because you have US clients. This is unlikely, but in this case you should go with Option 2 or some Option 2 modified to not pay tax in the US. Also if you intend to spend a lot of time in the US Option 1 isnt that great.

As to business bank accounts for your US LLC, there are good neobanks/EMIs in the US like Mercury. The thing is, with the traditional Banks in the US, like Bank of America, they can be a PITA to deal with, asking you to come in to a branch office to sort out basic stuff, which isnt so great when that means a long flight, and making you wait for hours on the phone to speak to some clueless third-world country based support agent, that will not resolve your issue.

With EMIs, (or Neobanks with a banking license), they don't have branch offices, so they will never ask you to come in to one, everything can be sorted online. And they are very keen on making a good impression to customers to grow by word of mouth, so they generally have great responsive support available by chat/email. The newer and smaller, the better support basically. I recently opened an account with a really small US EMI, and it's like having a personal banker that contacts you pro-actively to check how things are going and if you need help with anything.

As to opening personal bank accounts in Europe, and keeping these while living in Panama/outside Europe. Yes, this is a very good idea, and generally not a problem, and you dont risk large fines if you dont live where you say you live - worst case they'll close your account.
I left Europe many years ago and still maintain accounts in multiple European countries, and I've even manage to open new accounts in Europe, but I make sure they are in countries where having a bank account isnt a tie that can make you a tax resident (I dont know about Poland here). For some accounts I have a non-European address (not Panama though), for others I have an address in the European country of the bank in question. Never had any issues, or any account closed, but I do expect address/residence verification to be tightened up sooner or later.
You could rent a cheap place just to get utility bills in some European country, and use that to get a bank account. And/or get an address via a mail forwarding service. Or own a property (possibly with a mortgage) in some European country where owning a property doesnt make you tax resident - then it's really easy to maintain personal banking in that country even if you dont live there.

The neobank Zen.com has a Polish team behind it by the way I think. Seems super easy to open a bank account with them if you have an EU passport. I dont think they even ask for a utility bill, you could put any address in Europe basically and get a multi-currency account straight away.

And finally with revenue (and I hope profits) in the 1M USD range, you could look into private banking. While more expensive, they will be more flexible with everything, including your place of residence.

Thanks, yes Option 1 seems like the way to go. The only thing I'm not 100% sure yet, is while living in Panama if all I would need to pay tax on is the money I would transfer from my US bank account to a Panamanian bank account for rent and food. And the rest of profits I'd keep in the US personal bank account and it won't be taxable since the money never went to Panama.

Option 2 how would you modify it if you would? and no, not planning to spend any time in the USA.

Yes, heard about EMI's and was looking into that.

What traditional banks do you recommend (that you tested yourself or not) in Europe that are safe and easy to open using the techniques you recommended? Not interested much in fintech banks in Europe tbh don't wanna hold 6-7figures in Neo banks in Europe.

I have a similar setup, also a EU citizen (although I wasn’t born in that country) and work in the same industry. Option 1 is solid, however my EU citizenship country is aggressive (so is Poland), so I closed my bank account and have nothing in Europe to stay on the safe side.

Nice, where are you currently residing?

 

[myhand]

you could setup a UK LTD anonymous with nominees and setup an EMI for this company. So you won't need to worry about anyone to government your profits.

 

[saintjohnny]

I would need to pay tax on is the money I would transfer from my US bank account to a Panamanian bank account for rent and food. And the rest of profits I'd keep in the US personal bank account and it won't be taxable since the money never went to Panama.

In my country of residence (territorial tax, LATAM), it works exactly like you’re describing. I don’t know about Panama, but I guess it’s similar. Let me explain my case:

Since the LLC is considered an opaque entity in my country, it’s essentially a ’foreign company’ (US) dealing with ‘foreign clients’ (also US), hence the income is considered ’foreign income’ and not subject to local tax. There are no CFC rules either.

However, as a resident of my country, if I personally receive money from this LLC to any of my personal bank accounts (outside and inside my country), it ceases to be foreign income, as I have ‘generated’ these proceeds some way or another (i.e. dividends, consultancy fees, etc.) from WHITIN my country, so I do have to pay tax on it.

This is something not many people get about territorial tax systems. It’s not about where the client is located, but from where you do the work… and this would only work if your LLC and yourself are legally separated (opaque entity).

So… in theory, you could never remit anything to your personal account in Panama (or wherever) and leave everything in the US, inside the LLC’ s account, and pay only when you distribute profits to your name. I wouldn’t recommend this to you though, as Poland will probably want proof that you’re paying tax somewhere before letting you off the hook.

Then there’s another “risk”… the IRS – which in theory couldn’t do anything since your income is not effectively connected to the US, but still something to consider…

 

[Marzio]

if I personally receive money from this LLC to any of my personal bank accounts (outside and inside my country)

First time I hear about problems related to receiving income in a offshore personal bank account.

 

[saintjohnny]

First time I hear about problems related to receiving income in a offshore personal bank account.

It's not an offshore account if you're a citizen and live in the country – which is my case.

 

[Cloudbanck]

In my country of residence (territorial tax, LATAM), it works exactly like you’re describing. I don’t know about Panama, but I guess it’s similar. Let me explain my case:

Since the LLC is considered an opaque entity in my country, it’s essentially a ’foreign company’ (US) dealing with ‘foreign clients’ (also US), hence the income is considered ’foreign income’ and not subject to local tax. There are no CFC rules either.

However, as a resident of my country, if I personally receive money from this LLC to any of my personal bank accounts (outside and inside my country), it ceases to be foreign income, as I have ‘generated’ these proceeds some way or another (i.e. dividends, consultancy fees, etc.) from WHITIN my country, so I do have to pay tax on it.

How territorial tax works exactly and what counts as foreign income has been discussed many times on this forum. Basically it depends from country to country, but the typical case is that the law is not very clear on having a (small) foreign company and managing it from a territorial country, but that it is usually de facto not taxed in the territorial country.
It is often a case that enforcement is more important than the law, and if you ask multiple lawyers you will get different answers. Sometime in the future some territorial countries might start to actually enforce taxation on foreign companies managed in the territorial country. In that case one can look into setting up PE/substance/nominee directors somewhere else - or do this as a preventative measure.

So… in theory, you could never remit anything to your personal account in Panama (or wherever) and leave everything in the US, inside the LLC’ s account, and pay only when you distribute profits to your name. I wouldn’t recommend this to you though, as Poland will probably want proof that you’re paying tax somewhere before letting you off the hook.

This idea that you need to prove that you pay tax somewhere, and that otherwise you are per default taxpayer in your country of citizenship is a very common semi-misconception. For the majority of high tax countries, that's just not how it works.

The high tax country is just going to check (or take your word for it) that you are not a tax resident, i.e. that you dont have your center of vital interest / significant ties / that you dont spend too much time in the high tax country. The high tax country will typically ask you for an address abroad but they are not going to check that you pay tax there.

It is a semi- and not a full on misconception, because there are countries like Norway that asks you to pay tax to Norway for three years after you leave unless offset by DTA. And of course they only have DTAs with other high/medium tax countries. So the net effect is that Norway at least for 3 years kind of forces you to pay tax somewhere, but they still dont ask for proof that you are paying tax.

Then you have Australia that will tax you in Australia if you just travel around and dont live anywhere. So there you have to show that you have a residence somewhere (but I dont think you need to prove that you pay tax). Also Spain, Italy and France are very difficult if you move to a tax haven, asking you for a lot of proof that you live there, and can also still tax you.

 

[reelay]

It's not an offshore account if you're a citizen and live in the country – which is my case.

You literally said (outside and inside) of the country

 

[saintjohnny]

You literally said (outside and inside) of the country

What I meant with that was: If you pay yourself, it doesn't matter where you paid yourself, to a bank account inside Panama or outside Panama. If you're a resident of Panama, you're supposed to pay tax on your Panama-sourced income.

In any case, tax evasion might be alluring to some. I personally sleep well at night paying my taxes.

 

[reelay]

How territorial tax works exactly and what counts as foreign income has been discussed many times on this forum. Basically it depends from country to country, but the typical case is that the law is not very clear on having a (small) foreign company and managing it from a territorial country, but that it is usually de facto not taxed in the territorial country.
It is often a case that enforcement is more important than the law, and if you ask multiple lawyers you will get different answers. Sometime in the future some territorial countries might start to actually enforce taxation on foreign companies managed in the territorial country. In that case one can look into setting up PE/substance/nominee directors somewhere else - or do this as a preventative measure.



This idea that you need to prove that you pay tax somewhere, and that otherwise you are per default taxpayer in your country of citizenship is a very common semi-misconception. For the majority of high tax countries, that's just not how it works.

The high tax country is just going to check (or take your word for it) that you are not a tax resident, i.e. that you dont have your center of vital interest / significant ties / that you dont spend too much time in the high tax country. The high tax country will typically ask you for an address abroad but they are not going to check that you pay tax there.

It is a semi- and not a full on misconception, because there are countries like Norway that asks you to pay tax to Norway for three years after you leave unless offset by DTA. And of course they only have DTAs with other high/medium tax countries. So the net effect is that Norway at least for 3 years kind of forces you to pay tax somewhere, but they still dont ask for proof that you are paying tax.

Then you have Australia that will tax you in Australia if you just travel around and dont live anywhere. So there you have to show that you have a residence somewhere (but I dont think you need to prove that you pay tax). Also Spain, Italy and France are very difficult if you move to a tax haven, asking you for a lot of proof that you live there, and can also still tax you.

That's what I thought, that if you have a pass-through SM LLC, and live in a territorial taxed country, you don't owe any taxes. And what do you mean by "small" foreign company? Is there a clear tax code saying if your company generates <$100k/year you do not owe tax and if >$100K/year you do?

Where do you guys generate these opinions from? As you can see everyone has their own interpretation of tax law..

What I meant with that was: If you pay yourself, it doesn't matter where you paid yourself, to a bank account inside Panama or outside Panama. If you're a resident of Panama, you're supposed to pay tax on your Panama-sourced income.

In any case, tax evasion might be alluring to some. I personally sleep well at night paying my taxes.

Got it, that makes more sense. I just talked to a tax advisor he said the same that you do need to pay tax whether you transfer the money to your personal bank account in the US or Panama, doesn't matter

 

[saintjohnny]

That's what I thought, that if you have a pass-through SM LLC, and live in a territorial taxed country, you don't owe any taxes. And what do you mean by "small" foreign company? Is there a clear tax code saying if your company generates <$100k/year you do not owe tax and if >$100K/year you do?

There's not lol. At least not in Panama, or where I live. Answer is pure bogus. See below.

Where do you guys generate these opinions from? As you can see everyone has their own interpretation of tax law..

Welcome to the forum lol.

I personally get my opinions from a licensed international tax advisor in my own country... which I recommend you do.

 

[Cloudbanck]

That's what I thought, that if you have a pass-through SM LLC, and live in a territorial taxed country, you don't owe any taxes. And what do you mean by "small" foreign company? Is there a clear tax code saying if your company generates <$100k/year you do not owe tax and if >$100K/year you do?

No of course not. I mean a one person foreign registered company with the owner living in a territorial tax country is in a different situation with regards to foreign sourced income, vs a 1000 person foreign registered company where say one out of many directors or a significant owner lives in a territorial tax country.

I personally get my opinions from a licensed international tax advisor in my own country... which I recommend you do.

I've talked to many tax advisors. Most are useless, and the bigger firm they work for and the fancier degree they have, the worse they are generally. Most just know one country, have zero creativity, and are completely lost when developing/frontier countries come into play, or any international situation really.
I think there is something about getting a law degree that makes students so focused on all the downsides, that they lose some creativity. There have been studies showing that people with advanced degrees are generally good entrepreneurs, with one notable exception - yes, you guessed it - lawyers are terrible entrepreneurs.

I've found that you get the best tax advice from independent, a bit free-wheeling tax advisors that lead an international lifestyle themselves, and have a nerdy interest in tax law. Also old foxes that have run businesses and lived in multiple countries and tried many set ups are really good, like Johnny Doe on this forum. Cant beat actual practical experience!

Also crowdsourcing experiences from members of this forum isnt so bad. The collective knowledge of 100s (1000s?) of people who do business and tax planning internationally is quite powerful. Any professional tax advisor should tap into such knowledge (even if some contributions are of course bulls**t, but still the wisdom of crowds is hard to beat).

 

[reelay]

There's not lol. At least not in Panama, or where I live. Answer is pure bogus. See below.


Welcome to the forum lol.

Hahaha Yeah I realized that now, that it's more about generating ideas on here and then consult with tax lawyers in your own country to get the best result

 

[saintjohnny]

No of course not. I mean a one person foreign registered company with the owner living in a territorial tax country is in a different situation with regards to foreign sourced income, vs a 1000 person foreign registered company where say one out of many directors or a significant owner lives in a territorial tax country.


I've talked to many tax advisors. Most are useless, and the bigger firm they work for and the fancier degree they have, the worse they are generally. Most just know one country, have zero creativity, and are completely lost when developing/frontier countries come into play, or any international situation really.
I think there is something about getting a law degree that makes students so focused on all the downsides, that they lose some creativity. There have been studies showing that people with advanced degrees are generally good entrepreneurs, with one notable exception - yes, you guessed it - lawyers are terrible entrepreneurs.

I've found that you get the best tax advice from independent, a bit free-wheeling tax advisors that lead an international lifestyle themselves, and have a nerdy interest in tax law. Also old foxes that have run businesses and lived in multiple countries and tried many set ups are really good, like Johnny Doe on this forum. Cant beat actual practical experience!

Also crowdsourcing experiences from members of this forum isnt so bad. The collective knowledge of 100s (1000s?) of people who do business and tax planning internationally is quite powerful. Any professional tax advisor should tap into such knowledge (even if some contributions are of course bulls**t, but still the wisdom of crowds is hard to beat).

Agreed. And can vouch for Johnny. He did more for me than the law firm I hired (Which he also approves of).