Any experts on taxation of non resident UK LTD/LPP or US LLC?

[NwWork]

Hi I am a non resident of UK and US, currently what I need is to optimize my taxable income personally and via my present company in my country. So what I currently also need is for this new formed company to have access to services like PP/Stripe, Wise business acount as well. Starting in 2023 my present company will be taxed at 30% for all domestic income while foreign income coming into my country will not be tax liable.

Main questions;
So if I setup a UK LTD then if it earns income from my non UK customers it will not be tax liable right regardless of tax thresholds? If yes then if I payout dividends is that also tax free or need pay the 8.75% dividend tax of UK after remove 2000pound dividend allowance?
If earning is made from UK customers is that also tax free since setup as non resident UK LTD?
Is it possible for me to setup a non resident UK company using my current company incorporated outside UK which is a PVT LTD as the main shareholder?
Targeting to reduce the 30% CIT by diverting customer payments to UK LTD payments system and probably pay 0% tax in UK or 8.75% and payout dividends to my PVT LTD which will probably not be taxed again in my country since it is considered foreign income. So to achieve this what is best UK LTD or UK LLP?(Also take into account I don't want to personally be tax liable back at my resident country while that liability should be passed onto my already registered PVT LTD)

The clients I get are usually not from UK so if I setup a non resident company and local income there is tax liable I don't loose out much on that market side. While if I setup a US LLC where I get a considerable amount of US clients I would lose out more if US local income of non resident company is taxable, is it taxable as such?

Also have heard a news that UK PM making new rule to tax non-domicile as well so it that same as a non resident LTD/LLP?

Also if dividends is greater than 10K pounds only need to do self assessment for tax right? otherwise no need?

 

[Sols]

So if I setup a UK LTD then if it earns income from my non UK customers it will not be tax liable right regardless of tax thresholds?

Wrong. UK LTD companies are taxed on worldwide income. UK companies are resident in UK by being incorporated there. You can obtain non-residence only through a tax treaty, and then only if the other country where the company is tax resident has same or higher tax rate.

If yes then if I payout dividends is that also tax free or need pay the 8.75% dividend tax of UK after remove 2000pound dividend allowance?

Not yes.

If earning is made from UK customers is that also tax free since setup as non resident UK LTD?

Wrong.

Is it possible for me to setup a non resident UK company using my current company incorporated outside UK which is a PVT LTD as the main shareholder?

Yes, except there is no such thing as a non-resident UK company.

Targeting to reduce the 30% CIT by diverting customer payments to UK LTD payments system and probably pay 0% tax in UK or 8.75% and payout dividends to my PVT LTD which will probably not be taxed again in my country since it is considered foreign income. So to achieve this what is best UK LTD or UK LLP?(Also take into account I don't want to personally be tax liable back at my resident country while that liability should be passed onto my already registered PVT LTD)

LLP are tax transparent, which means they aren't subject to any tax at all under UK law. The members of LLP are taxed. This is automatic and cannot be deferred.

However, if you control an LLP from another country, it isn't guaranteed that the local legal system and tax authority agrees with the UK law. In many cases, tax transparent entities such as UK LLP or US LLC are considered corporate entities and subject to corporate income tax.

For example, if you live in Canada and form a US LLC, the LLC is considered as a taxable corporation in Canada and has to pay corporate tax, even if under US law it does not.

The clients I get are usually not from UK so if I setup a non resident company and local income there is tax liable I don't loose out much on that market side. While if I setup a US LLC where I get a considerable amount of US clients I would lose out more if US local income of non resident company is taxable, is it taxable as such?

In general, US LLCs with foreign members avoid US tax but it's not clear if that would always hold up in court or if questioned by the IRS.

Look into ETBUS and ECI.

Also if dividends is greater than 10K pounds only need to do self assessment for tax right? otherwise no need?

If I'm not mistaken, that's only for UK residents.

The TL;DR is you have misunderstood UK corporate tax law. Consider another location instead. Look into exactly how your country defines foreign income. Simply forming an overseas company is often not enough. You often need local directors to satisfy the requirements for income to be foreign.

You might want to look into Cyprus, Malta, Isle of Man, Gibraltar, or Singapore instead.

 

[JackAlabama]

Hi I am a non resident of UK and US, currently what I need is to optimize my taxable income personally and via my present company in my country. So what I currently also need is for this new formed company to have access to services like PP/Stripe, Wise business acount as well. Starting in 2023 my present company will be taxed at 30% for all domestic income while foreign income coming into my country will not be tax liable.

Main questions;
So if I setup a UK LTD then if it earns income from my non UK customers it will not be tax liable right regardless of tax thresholds? If yes then if I payout dividends is that also tax free or need pay the 8.75% dividend tax of UK after remove 2000pound dividend allowance?
If earning is made from UK customers is that also tax free since setup as non resident UK LTD?
Is it possible for me to setup a non resident UK company using my current company incorporated outside UK which is a PVT LTD as the main shareholder?
Targeting to reduce the 30% CIT by diverting customer payments to UK LTD payments system and probably pay 0% tax in UK or 8.75% and payout dividends to my PVT LTD which will probably not be taxed again in my country since it is considered foreign income. So to achieve this what is best UK LTD or UK LLP?(Also take into account I don't want to personally be tax liable back at my resident country while that liability should be passed onto my already registered PVT LTD)

The clients I get are usually not from UK so if I setup a non resident company and local income there is tax liable I don't loose out much on that market side. While if I setup a US LLC where I get a considerable amount of US clients I would lose out more if US local income of non resident company is taxable, is it taxable as such?

Also have heard a news that UK PM making new rule to tax non-domicile as well so it that same as a non resident LTD/LLP?

Also if dividends is greater than 10K pounds only need to do self assessment for tax right? otherwise no need?

The question is what kind of US clients you have and what you provide to them as a service.

 

[NwWork]

The question is what kind of US clients you have and what you provide to them as a service.

IT(Web dev, graphic design, etc) & Marketing

Wrong. UK LTD companies are taxed on worldwide income. UK companies are resident in UK by being incorporated there. You can obtain non-residence only through a tax treaty, and then only if the other country where the company is tax resident has same or higher tax rate.


Not yes.


Wrong.


Yes, except there is no such thing as a non-resident UK company.


LLP are tax transparent, which means they aren't subject to any tax at all under UK law. The members of LLP are taxed. This is automatic and cannot be deferred.

However, if you control an LLP from another country, it isn't guaranteed that the local legal system and tax authority agrees with the UK law. In many cases, tax transparent entities such as UK LLP or US LLC are considered corporate entities and subject to corporate income tax.

For example, if you live in Canada and form a US LLC, the LLC is considered as a taxable corporation in Canada and has to pay corporate tax, even if under US law it does not.


In general, US LLCs with foreign members avoid US tax but it's not clear if that would always hold up in court or if questioned by the IRS.

Look into ETBUS and ECI.


If I'm not mistaken, that's only for UK residents.

The TL;DR is you have misunderstood UK corporate tax law. Consider another location instead. Look into exactly how your country defines foreign income. Simply forming an overseas company is often not enough. You often need local directors to satisfy the requirements for income to be foreign.

You might want to look into Cyprus, Malta, Isle of Man, Gibraltar, or Singapore instead.

Thank you for the comprehensive answer much appreciated was looking at this video's method but no explanation had been given on how the tax matters are handled;

Regarding tax treaty do you mean the double tax treaty? If so then my country does have one with UK.

And when you mentioned getting an offshore company in

Cyprus, Malta, Isle of Man, Gibraltar, or Singapore

I think as I saw most of these countries Stripe and PP not available except probably Singapore which would have all payment methods but I really don't have much knowledge on the method to open an offshore company in Singapore any thread I can research or video? As far as I know you need a resident director for SG companies and pay around 17% tax right??

Also you said "Yes, except there is no such thing as a non-resident UK company." but I have seen so many YT videos and blog posts saying open a non resident company get better tax rates or 0 tax etc...

 

[Sols]

Regarding tax treaty do you mean the double tax treaty? If so then my country does have one with UK.

That means you might be able to declare the company non-resident in UK and tax resident only where you live. If you live in Bangladesh (based on the video you mentioned), that could mean the company pays 0% tax in UK and full corporate tax in Bangladesh.

But it's best if you check this with a local tax adviser.

And when you mentioned getting an offshore company in

I think as I saw most of these countries Stripe and PP not available

Stripe and PayPal are available in all the ones I mentioned.

except probably Singapore which would have all payment methods but I really don't have much knowledge on the method to open an offshore company in Singapore any thread I can research or video? As far as I know you need a resident director for SG companies and pay around 17% tax right??

Singapore's tax system is a little complicated, yes. To achieve 0% tax, you can't remit profits to or derive income from Singapore.

https://taxsummaries.pwc.com/singapore/corporate/taxes-on-corporate-income

Also you said "Yes, except there is no such thing as a non-resident UK company." but I have seen so many YT videos and blog posts saying open a non resident company get better tax rates or 0 tax etc...

They are all wrong if they are talking about private limited companies.

https://taxsummaries.pwc.com/united-kingdom/corporate/corporate-residence

UK incorporated companies are generally treated as UK tax resident. The exception to that general rule is that companies resident in the United Kingdom under domestic law but treated as solely resident in a different country under that country's DTT with the United Kingdom are not treated as UK tax resident for the purposes of UK domestic tax law.

They are slightly less wrong if they are talking about LLP (Limited Liability Partnership), because LLP companies are not taxable companies at all.

 

[Marzio]

Singapore's tax system is a little complicated, yes. To achieve 0% tax, you can't remit profits to or derive income from Singapore.

If i remember correctly you can remit some profits tax free, for example dividends that were already taxed in another jurisdiction with a statutory CIT of at least 15%

 

[NwWork]

As per the following;
"that could mean the company pays 0% tax in UK and full corporate tax in your country"
On what aspect would it be 0% tax in UK? Is it like this;

Company ABC PVT LTD non us/uk registered->Makes a new offshore company called XYZ and only shareholder is ABC PVT LTD (for this example let's say in UK)-> 2 scenarios of earning;

1. XYZ LTD earns income from IT/Marketing/Courses etc from non uk customers which means foreign income into UK
2. XYZ LTD earns income from IT/Marketing/Courses etc from uk customers which means local income as per UK

In the above 2 scenarios I am certain in 1. it can be 0% tax for XYZ LTD on income earned while 2. need clarifications

Also for both these scenarios does XYZ LTD have to do annual audit (need hire external auditor right u can't do self audit I assume?) & return submissions or not?
And what about self assessment is that same thing as annual return?

The above summaries I believe the business activies in UK.

So now incase Company XYZ LTD pays dividends to it's shareholder ABC PVT LTD then probably there is a dividend tax XYZ LTD has to withhold and pay to UK?

XYZ LTD pays dividends after any related dividend tax in Uk->ABC PVT LTD recieves dividends->ABC PVT LTD declares it as foreign income in tax submission and annual return and in annual audit->Tax department exempts it->ABC PVT LTD then pays only the tax for local income from inside it's registered country and related dividend tax when payout to director of ABC PVT LTD.

Hope I have layed out the ideas clearly enough

 

[Marzio]

I am certain in 1. it can be 0% tax for XYZ LTD on income earned

UK LTDs are taxed on worldwide income

 

[Sols]

As per the following;
"that could mean the company pays 0% tax in UK and full corporate tax in your country"
On what aspect would it be 0% tax in UK?

You'd have to read the Double Tax Treaty in question, but it's generally only available if the company pays taxes similar to or greater than UK corporate tax on its worldwide income.

So if you earn a profit for your UK company that's treaty non-resident, you'd pay 35% tax in Bangladesh (because your company is tax resident there) but UK won't come and ask for its 19% or 25%.

Is it like this;

Company ABC PVT LTD non us/uk registered->Makes a new offshore company called XYZ and only shareholder is ABC PVT LTD (for this example let's say in UK)-> 2 scenarios of earning;

1. XYZ LTD earns income from IT/Marketing/Courses etc from non uk customers which means foreign income into UK
2. XYZ LTD earns income from IT/Marketing/Courses etc from uk customers which means local income as per UK

There is no difference between foreign and local income in UK for companies. UK companies are taxed on their worldwide income.

Also for both these scenarios does XYZ LTD have to do annual audit (need hire external auditor right u can't do self audit I assume?) & return submissions or not?

Audits are not a statutory requirement in UK. Most small and medium businesses do not require audits.

Annual returns, VAT filings, and so on are required, though.

And what about self assessment is that same thing as annual return?

They are related but not identical.

https://www.gov.uk/self-assessment-tax-returns
https://www.gov.uk/browse/tax/self-assessment

So now incase Company XYZ LTD pays dividends to it's shareholder ABC PVT LTD then probably there is a dividend tax XYZ LTD has to withhold and pay to UK?

There is no withholding tax on dividends in UK.

https://taxsummaries.pwc.com/united-kingdom/corporate/withholding-taxes

XYZ LTD pays dividends after any related dividend tax in Uk->ABC PVT LTD recieves dividends->ABC PVT LTD declares it as foreign income in tax submission and annual return and in annual audit->Tax department exempts it->ABC PVT LTD then pays only the tax for local income from inside it's registered country and related dividend tax when payout to director of ABC PVT LTD.

There is a lot more to consider than just this. Depending on how it's structured, you may have to take into account CFC, BEPS, and transfer pricing regulations. Company tax residence and Permanent Establishments are big headaches. If you're based in Bangladesh, both ABC and XYZ are probably going to be Bangladeshi companies for tax purposes. The only meaningful advantage a foreign company has in this case seems to be easier access to certain banks and PSPs.

The gist of it is that UK is not a place you go to for 0% corporate tax (unless you're a multinational mega corporation). A lot of small businesses get away with tax evasion because the HMRC doesn't have infinite resources to go after everyone, though.

 

[NwWork]

UK LTDs are taxed on worldwide income

Isn't this the case if the shareholder/directors are UK citizens while in my case it is a non resident company owning this company?

"Audits are not a statutory requirement in UK. Most small and medium businesses do not require audits.

Annual returns, VAT filings, and so on are required, though."

Hmmm no annual audits sounds good, I geuss this is why all these people going around saying no tax non resident companies possible on the Internet regarding UK since effectively if there is no external audit who is to double confirm all your values u file for annual return and VAT fillings since the related Gov departments would have very limited resources to go really in depth into the docs to find you out unless you do a multi million pound business of course.

"You'd have to read the Double Tax Treaty in question, but it's generally only available if the company pays taxes similar to or greater than UK corporate tax on its worldwide income."
Essentially we do pay more than the UK tax rate for local income but have a tax exemption for foreign income which probably won't count since UK Gov probably has no idea on it...

"Company tax residence and Permanent Establishments are big headaches. If you're based in Bangladesh, both ABC and XYZ are probably going to be Bangladeshi companies for tax purposes."

The tax residence and PE wise not going to have any physical presence(offices/property etc) besides like the virtual address provided by QFC service for registering company and PSPs

"The gist of it is that UK is not a place you go to for 0% corporate tax (unless you're a multinational mega corporation). A lot of small businesses get away with tax evasion because the HMRC doesn't have infinite resources to go after everyone, though."

Yes this is correct but in this scenario I described then either I would end up paying 19% CIT to UK on income via XYZ LTD which is still not bad considering ABC PVT LTD would have had to pay 30% so at least a partial saving is there and once that income comes out as dividends if no dividend tax as you said in UK then the tax exemption for foreign income in ABC PVT LTD country would also exempt that income on dividend tax there possibly so effectively income comes out after minus 19%.

So UK offshore establishment pros;
No annual audit expense
Low formation cost around 20GBP or less
Access to Payment processors like PP/Stripe/Wise business etc
No witholding dividends tax
CIT of 19% threshold basis brackets

Cons;
Still need do annual returns and tax submissions
CIT of 19%
Punctual late fees collections for payments and submissions past due with no mercy

Considering above is there really any better options than UK with lower CIT and low formation cost with same pros?

 

[Roamer]

In the UK, the Corporation Tax increases to 25% from 2023 (in three months).

 

[NwWork]

In the UK, the Corporation Tax increases to 25% from 2023 (in three months).

Are you sure? Meaning the minimum 19% 1st bracket raised to 25?

 

[NwWork]

Isn't this the case if the shareholder/directors are UK citizens while in my case it is a non resident company owning this company?

"Audits are not a statutory requirement in UK. Most small and medium businesses do not require audits.

Annual returns, VAT filings, and so on are required, though."

Hmmm no annual audits sounds good, I geuss this is why all these people going around saying no tax non resident companies possible on the Internet regarding UK since effectively if there is no external audit who is to double confirm all your values u file for annual return and VAT fillings since the related Gov departments would have very limited resources to go really in depth into the docs to find you out unless you do a multi million pound business of course.

"You'd have to read the Double Tax Treaty in question, but it's generally only available if the company pays taxes similar to or greater than UK corporate tax on its worldwide income."
Essentially we do pay more than the UK tax rate for local income but have a tax exemption for foreign income which probably won't count since UK Gov probably has no idea on it...

"Company tax residence and Permanent Establishments are big headaches. If you're based in Bangladesh, both ABC and XYZ are probably going to be Bangladeshi companies for tax purposes."

The tax residence and PE wise not going to have any physical presence(offices/property etc) besides like the virtual address provided by QFC service for registering company and PSPs

"The gist of it is that UK is not a place you go to for 0% corporate tax (unless you're a multinational mega corporation). A lot of small businesses get away with tax evasion because the HMRC doesn't have infinite resources to go after everyone, though."

Yes this is correct but in this scenario I described then either I would end up paying 19% CIT to UK on income via XYZ LTD which is still not bad considering ABC PVT LTD would have had to pay 30% so at least a partial saving is there and once that income comes out as dividends if no dividend tax as you said in UK then the tax exemption for foreign income in ABC PVT LTD country would also exempt that income on dividend tax there possibly so effectively income comes out after minus 19%.

So UK offshore establishment pros;
No annual audit expense
Low formation cost around 20GBP or less
Access to Payment processors like PP/Stripe/Wise business etc
No witholding dividends tax
CIT of 19% threshold basis brackets

Cons;
Still need do annual returns and tax submissions
CIT of 19%
Punctual late fees collections for payments and submissions past due with no mercy

Considering above is there really any better options than UK with lower CIT and low formation cost with same pros?

Considering above is there really any better options than UK with lower CIT and low formation cost with same pros?

 

[JackAlabama]

Considering above is there really any better options than UK with lower CIT and low formation cost with same pros?

Uk is a quite a good spot. You will also have some crypto friendly banking options there. Or it was at least not so long ago. Also you will find competent lawyers.
(I did a venture there).

 

[NwWork]

Uk is a quite a good spot. You will also have some crypto friendly banking options there. Or it was at least not so long ago. Also you will find competent lawyers.
(I did a venture there).

What pros and cons did u experience?

 

[Sols]

Hmmm no annual audits sounds good, I geuss this is why all these people going around saying no tax non resident companies possible on the Internet regarding UK since effectively if there is no external audit who is to double confirm all your values u file for annual return and VAT fillings since the related Gov departments would have very limited resources to go really in depth into the docs to find you out unless you do a multi million pound business of course.

Illegal tax evasion is indeed a way to achieve 0% tax.

But it's not just HMRC you need to worry about. If a bank or a tax authority at home asks you to prove that the money in your bank is clean and taxed, things might get difficult.

What do you do if tax man is local financial crime investigator asks you to prove that the 50,000 GBP dividend you got was earned lawfully?

The tax residence and PE wise not going to have any physical presence(offices/property etc) besides like the virtual address provided by QFC service for registering company and PSPs

In that case, the company is probably Bangladeshi for tax purposes (has to pay tax like a Bangladeshi company).

Considering above is there really any better options than UK with lower CIT and low formation cost with same pros?

If incorporation cost is an important factor, then only US is comparable to UK. You can get a US LLC for a few hundred USD.

All other jurisdictions (that have access to PayPal, Stripe, and so on) cost closer to one thousand or several thousand to incorporate and per year.

Are you sure? Meaning the minimum 19% 1st bracket raised to 25?

https://taxsummaries.pwc.com/united-kingdom/corporate/significant-developments

From 1 April 2023, an increase from 19% to 25% in the main rate of corporation tax and the introduction of a 19% small profits rate of corporation tax for companies whose profits do not exceed GBP 50,000.

 

[NwWork]

Illegal tax evasion is indeed a way to achieve 0% tax.

But it's not just HMRC you need to worry about. If a bank or a tax authority at home asks you to prove that the money in your bank is clean and taxed, things might get difficult.

What do you do if tax man is local financial crime investigator asks you to prove that the 50,000 GBP dividend you got was earned lawfully?


In that case, the company is probably Bangladeshi for tax purposes (has to pay tax like a Bangladeshi company).


If incorporation cost is an important factor, then only US is comparable to UK. You can get a US LLC for a few hundred USD.

All other jurisdictions (that have access to PayPal, Stripe, and so on) cost closer to one thousand or several thousand to incorporate and per year.



https://taxsummaries.pwc.com/united-kingdom/corporate/significant-developments

Absolutely no point in trying to evade tax since it eventually leads to more headaches, only thing we can do is to find and legally implement strategies that can lower the tax exposure with related tax exemption laws permited by governments.

Right so my initial hunch was right, it has to be a US or UK offshore company to get least amount of ongoing troubles, so let us compare the CIT of both these options;
UK 2023= 19% CIT if profits do not exceed GBP 50,000 and if it does 25%
USA current 21% CIT and 2023 speculating 28% CIT it seems

Any pros vs cons comparisons on the 2 done before which is looked into in a non resident corporate entity owning them?

 

[Sols]

Absolutely no point in trying to evade tax since it eventually leads to more headaches, only thing we can do is to find and legally implement strategies that can lower the tax exposure with related tax exemption laws permited by governments.

Right so my initial hunch was right, it has to be a US or UK offshore company to get least amount of ongoing troubles, so let us compare the CIT of both these options;
UK 2023= 19% CIT if profits do not exceed GBP 50,000 and if it does 25%
USA current 21% CIT and 2023 speculating 28% CIT it seems

No corporate tax in US if you go for a US LLC (which is what the vast majority do), since LLCs are tax transparent. Profits from an LLC become personal income for the members, which is generally not in scope for US income tax if you're a non-resident alien. There is a very small risk that US income tax is owed but for people with similar setups, they pay nothing in the US and IRS doesn't go after them.

As for what happens where you live, that's a more difficult question to answer. Not all jurisdictions agree that LLCs are tax transparent, so double check with a local tax adviser. If you're lucky, you can declare the income from your US LLC as whatever type of income is subject to the lowest tax (i.e. income, foreign salary, dividends, capital gains, or something else).

 

[NwWork]

No corporate tax in US if you go for a US LLC (which is what the vast majority do), since LLCs are tax transparent. Profits from an LLC become personal income for the members, which is generally not in scope for US income tax if you're a non-resident alien. There is a very small risk that US income tax is owed but for people with similar setups, they pay nothing in the US and IRS doesn't go after them.

As for what happens where you live, that's a more difficult question to answer. Not all jurisdictions agree that LLCs are tax transparent, so double check with a local tax adviser. If you're lucky, you can declare the income from your US LLC as whatever type of income is subject to the lowest tax (i.e. income, foreign salary, dividends, capital gains, or something else).

Profits from US LLC i don't think would become personal income in the scenario I described;

ABC PVT LTD makes new US LLC called XYZ LLC->ABC PVT LTD is only shareholder->XYZ LLC earns foreign income(from outside USA) and if doesn't cross 109KUSD limit then it is fully exempted->XYZ LLC distributes dividends to ABC PVT LTD

So in above case I think u need pay CIT and/or dividend tax?

 

[Sols]

https://www.irs.gov/businesses/small-businesses-self-employed/limited-liability-company-llc

Depending on elections made by the LLC and the number of members, the IRS will treat an LLC as either a corporation, partnership, or as part of the LLC’s owner’s tax return (a “disregarded entity”). Specifically, a domestic LLC with at least two members is classified as a partnership for federal income tax purposes unless it files Form 8832 and affirmatively elects to be treated as a corporation. For income tax purposes, an LLC with only one member is treated as an entity disregarded as separate from its owner, unless it files Form 8832 and elects to be treated as a corporation. However, for purposes of employment tax and certain excise taxes, an LLC with only one member is still considered a separate entity.

The US LLC is not itself taxable in US.