Best country for with territorial tax only and a double taxation agreement with the IRS - for Royalties Accrued in USA.

[SmartestSmarty]

Hello all,

Essentially I would like to structure a company that receives Royalties from the US, so it has to have a double taxation agreement with the IRS so there is no WHT in the USA.
Then when these royalties are received, as they are from outside the territory, they are again not taxed.

Does anyone know which country would be best for this set up?

 

[luap]

Georgia should work

 

[SmartestSmarty]

Georgia should work

Thank you, I was researching a little on this, and wasn’t sure if the foreign sourced income exemption was for tax residents as opposed to companies registered there.

 

[Marzio]

which country would be best for this set up?

Georgia is the only country that satisfy your needs but be aware that territorial taxation in Georgia is ONLY for natural persons, non companies.

The best way to structure this would be to be the single member of a US LLC with tax residency in Georgia.

The only downside is that you have to become Georgian tax resident.

 

[SmartestSmarty]

Georgia is the only country that satisfy your needs but be aware that territorial taxation in Georgia is ONLY for natural persons, non companies.

The best way to structure this would be to be the single member of a US LLC with tax residency in Georgia.

The only downside is that you have to become Georgian tax resident.

Thank you, would the US LLC not then be liable for tax on the royalties, before they are distributed to myself as a Georgian tax resident?

 

[Marzio]

would the US LLC not then be liable for tax on the royalties

Royalties generally are considered passive income.

What kind of royalties are you generating?

For example lets say you are a Youtuber and Google pays you royalties.

While it's true that royalties are considered passive income it is also true that those royalties are the result of scripting, shooting and editing work.

If you do any work in Georgia your US LLC becomes tax resident in Georgia and taxed at 15% (upon distribution).

 

[SmartestSmarty]

Thank you, would the US LLC not then be liable for tax on the royalties, before they are distributed to myself as a Georgian tax resident?

 

[Marzio]

I already answered you.

US LLC will be liable for tax in Georgia (not US) if you perform any work in Georgia to geneate those royalties.

 

[SmartestSmarty]

Hi, they’re royalties from Amazon.com and Amazon.co.uk on historic work, so no new work will be taking place.

However, I’m not sure if I would move to Georgia to become tax resident. How many days per year are required? If it’s more than half, I’m not sure I would enjoy staying there, along with a family and English potentially is a very minimally spoken language. I’m not sure it’s ideal for me.

I was considering this option if it were possible to set up a company but not reside there.

I looked at Hong Kong as well, which seemed like a good option, only to find no double taxation agreement with the US.

So essentially, what I’m trying to achieve is this:

Royalty income from US and UK with no withholding tax.
Paid to a company that doesn’t tax income outside its territory.
> then distribute the profit to myself in a country with low or no dividend tax.

I have considered living in Romania and wonder how that could fit into this equation.

I already answered you.

US LLC will be liable for tax in Georgia (not US) if you perform any work in Georgia to geneate those royalties.

This is new to me. I did not know a company could be taxed in a different country to its incorporation. Glad to learn something new. Is this generally for US LLCs, or this is quite common in many countries?

 

[Marzio]

How many days per year are required?

183+ or you take the HNWI route which doesn't require any minimum stay BUT one of the new criteria is ownership of assets in Georgia with a value of at least 500k USD. I'm not sure you want to invest 500K in Georgia.

Paid to a company that doesn’t tax income outside its territory.

The only option is Georgia.

If you don't like styaing 183+ days or owning $500K asset in Georgia you'll need to form a company on which you'll pay corporate income taxes and personal taxes on dividends distribution.

I have considered living in Romania and wonder how that could fit into this equation.

Romania has 10% US WHT then you'll have to pay corporate income taxes in Romania + personal taxes on dividends distribution.

You'll end up paying 19% if your royalties income is under $500K / year.

A better option both from taxation and lifestyle perspective would be to move to Portugal under NHR where foreign income isn't taxed.

You'll end up paying 10% because there's 10% US WHT.

The real problem is that i don't know how easy would be for you to move to Portugal, if you have a EU passport it's the second best option after Georgia.

 

[SmartestSmarty]

183+ or you take the HNWI route which doesn't require any minimum stay BUT one of the new criteria is ownership of assets in Georgia with a value of at least 500k USD. I'm not sure you want to invest 500K in Georgia.



The only option is Georgia.

If you don't like styaing 183+ days or owning $500K asset in Georgia you'll need to form a company on which you'll pay corporate income taxes and personal taxes on dividends distribution.



Romania has 10% US WHT then you'll have to pay corporate income taxes in Romania + personal taxes on dividends distribution.

You'll end up paying 19% if your royalties income is under $500K / year.

A better option both from taxation and lifestyle perspective would be to move to Portugal under NHR where foreign income isn't taxed.

You'll end up paying 10% because there's 10% US WHT.

The real problem is that i don't know how easy would be for you to move to Portugal, if you have a EU passport it's the second best option after Georgia.

Thank you, I do not have an EU passport but believe I can enter Portugal on digital nomad visa and then apply for the NHR scheme.

How about the Cypriot IPBox scheme which brings tax down to 2.5% I believe there is no WHT in the US under the double taxation agreement.

 

[Marzio]

Cypriot IPBox scheme which brings tax down to 2.5%

You can't access the IPBox even if KDP could be seen as "non obvious, useful or novel rights" because you don't have any R&D expenditure in Cyprus.

Cyprus IP Box Regime - Intellectual Property Law - Taxes and Accounting

CYPRUS IP BOX REGIME - discover more about Intellectual Property Law and Nexus Fraction in Cyprus to start boosting your company business

ipbox.cy

The best solution is personal tax residency in Georgia.

Second best is NHR

 

[SmartestSmarty]

You can't access the IPBox even if KDP could be seen as "non obvious, useful or novel rights" because you don't have any R&D expenditure in Cyprus.

Cyprus IP Box Regime - Intellectual Property Law - Taxes and Accounting

CYPRUS IP BOX REGIME - discover more about Intellectual Property Law and Nexus Fraction in Cyprus to start boosting your company business

ipbox.cy

The best solution is personal tax residency in Georgia.

Second best is NHR

I see, and as a Georgian resident, the WHT would be 0% but I would require a limited company to offer protection. Based on your comment of the beneficial owner being the determining factor of WHT under the treaties, how would I slot in the company in the middle? I can’t be based in Georgia as it would attract 15% tax, where could it be based?

If it is a US LLC there would be no withholding tax I assume, and then I distribute the profit from there to myself in Georgia?

 

[Marzio]

I would require a limited company to offer protection.

US LLC will give you all the protection you need.

A single member US LLC is treated as a disregarded entity in US, this means that all income will flow to the member and will be taxed where member is resident.

If it is a US LLC there would be no withholding tax I assume

There would be no WHT not because it's a US LLC but because you are tax resident in Georgia.

 

[SmartestSmarty]

Ok thank you for this, it makes sense.

If I positioned myself in this way, would this be correct:

Establish a company in Hong Kong, input the beneficial owner on Amazon's/IRS tax interview questionnaire as Romania.

Incur 10% WHT, no corp tax in Hong Kong, and then distribute profits from the company by way of dividend and pay 8% dividend tax in Romania?
Major issue with this is 10% WHT is off the revenue (before advertising etc...) rather than profit.

Not the most tax effective, but just trying to find a way if I do move to Romania to limit the tax.


---

Alternatively register the company in Romania, 10%WHT in US, pay 1-3% corp tax on revenue in Romania, but I believe the dividends are then untaxed. Is this correct?

 

[Mr Gus]

Ok thank you for this, it makes sense.

If I positioned myself in this way, would this be correct:

Establish a company in Hong Kong, input the beneficial owner on Amazon's/IRS tax interview questionnaire as Romania.

Incur 10% WHT, no corp tax in Hong Kong, and then distribute profits from the company by way of dividend and pay 8% dividend tax in Romania?
Major issue with this is 10% WHT is off the revenue (before advertising etc...) rather than profit.

Not the most tax effective, but just trying to find a way if I do move to Romania to limit the tax.


---

Alternatively register the company in Romania, 10%WHT in US, pay 1-3% corp tax on revenue in Romania, but I believe the dividends are then untaxed. Is this correct?

If you want to got to Romania just go with the micro company thing if you revenue is low enough, you can get tax credit for tax paid abroad as well so that may vanish your corporate tax burden in Romania completely. Dividends are taxed at 8% since 2023.

 

[SmartestSmarty]

What about a Swiss company?

If you want to got to Romania just go with the micro company thing if you revenue is low enough, you can get tax credit for tax paid abroad as well so that may vanish your corporate tax burden in Romania completely. Dividends are taxed at 8% since 2023.

Thank you.


Considering the WHT is 10% and the tax on revenue will likely be 3% without any employees of the company, how likely is it that the tax credit will be 10% and equal a 3% offset and 7% refund?

Or is it only likely to eliminate the 3% tax and the remainder carry over to to future tax years.

Also apparently there is no dividend tax in Romania if one owns more than 10% share of the Romanian company for at least 1 year. Is my understanding correct?

 

[Marzio]

So we started with

which country would be best

when reality is

just trying to find a way if I do move to Romania

Please stop the fantasy setup game.

Establish a company in Hong Kong

What about a Swiss company?

If you move to Romania, forming any offshore company (Hong Kong, Switzerland, Singapore) and managing it from Romania it will make it tax resident in Romania.

If you move to Romania you have to use a romanian company.

 

[SmartestSmarty]

So we started with



when reality is



Please stop the fantasy setup game.




If you move to Romania, forming any offshore company (Hong Kong, Switzerland, Singapore) and managing it from Romania it will make it tax resident in Romania.

If you move to Romania you have to use a romanian company.

Thank you, that’s something I learned today. I did not know that managing a company from another made it a tax resident in that country. I thought a company was a separate entity and regardless of who managed it and where they were, it was an entity of said country.

My initial enquiry was not based on my location hence why I asked where would be best ‘for a company’. It quickly became apparent that foreign income untaxed was for a resident of Georgia not a Georgian company.

As I said, I’ve learnt something new, and all I have tried to achieve here is efficiency, not a ‘fantasy set up game’. I also believe most people on this forum are here for the same reasons.

Thanks for your input.

So we started with



when reality is



Please stop the fantasy setup game.




If you move to Romania, forming any offshore company (Hong Kong, Switzerland, Singapore) and managing it from Romania it will make it tax resident in Romania.

If you move to Romania you have to use a romanian company.

I’m considering the Romanian micro company structure. Do you happen to know if dividend tax is disregarded for someone that owns at least 10% of company. Is this correct?

 

[LimitlessPossibilities]

US LLC will give you all the protection you need.

A single member US LLC is treated as a disregarded entity in US, this means that all income will flow to the member and will be taxed where member is resident.


There would be no WHT not because it's a US LLC but because you are tax resident in Georgia.

If you tell Amazon that you are an LLC disregarded entity, they will ask for your ITIN.

Amazon Taxes & Tax Exemption | Taxes for Expats

Find out why non-us Amazon resellers should file U.S tax returns to receive refunds and learn everything about Amazon tax exemption.

www.taxesforexpats.com

If you use a non-US company, you will incur WHT tax.

The best option to pay less taxes on amazon is to be an NHR Portugal.