Best management location for US LLC

[A1988]

Thanks for your contribution, very interesting indeed. As I understood, a US LLC was treated as opaque "automatically" by Malta, but apparently this is not the case.

Anyway, it would be interesting to know if with this setup it is still possible to pay 5% for income generated in Malta (For example if the LLC has no substance anywhere)? Or is it only 15%(??) paid on remittances?

For example, US LLC ---> Owned by Holding outside Malta ---> Requested in Malta for Opaque status --> Is it possible to request a refund of 6/7?

It will all depend on, who you are receiving the money from and what your activity is, the law is very specific for certain circumstances so you have to be careful and very specific about your circumstances.

 

[MarkusCostigan]

Thanks for the reply. Just for clarification, will this election definitely require issuing a tax number for the company and producing accounting in Malta?

 

[JustAnotherNomad]

Sorry for the late reply, so I asked my lawyer. My US LLC is treated as tax transparent or disregarded entity in the US and also in Malta but an ELECTION has to be made in malta for the US LLC to be treated as TAX OPAQUE. This election has to be made within 60 days of Incorporation otherwise it's null and void.

I'm still not sure I understand. Isn't this basically allowing the taxpayer to actively create a hybrid mismatch?
Also, how does this make sense? Say I set incorporate a company in some 0% tax country like the BVI or the Seychelles. The company is a corporation (opaque), but I'm the sole shareholder and director. Does that mean that Malta will allow me not to pay tax, even though I run everything from Malta? Doesn't the company's income arise in Malta?!

Hence, the money remitted to Malta is only taxed and the money not remitted is not taxed as non domiciled company.

Yes, if the company's income did not arise in Malta. But how could it arise outside of Malta when everything happens in Malta and the company is only incorporated elsewhere?

There is another tax efficient solution to bring the MONEY as a Shareholder LOAN which is considered as capital and hence it's TAXFREE in malta.

This part at least makes sense, even though many other countries wouldn't allow this,

 

[Marzio]

But how could it arise outside of Malta when everything happens in Malta and the company is only incorporated elsewhere?

Malta sourced income is considered when a service is performed inside Malta and the payment is received from either a maltese resident individual or company.

A

Post in thread 'Best management location for US LLC'

Jan 25, 2025

Malta sourced income is considered when a service is performed inside Malta and the payment is received from either a maltese resident individual or company.

Malta offers generous deductions, the 5k minimum tax is anyways the minimum, you can adjust that with your salary and so it allows decent savings from a tax perspective. Another thing is, tax filing can be done jointly as well in case one has a spouse and then if you have kids then upto 50k euros would not have a large tax leakage considering you are already paying 5k minimum.

• A1988

 

[A1988]

I'm still not sure I understand. Isn't this basically allowing the taxpayer to actively create a hybrid mismatch?
Also, how does this make sense? Say I set incorporate a company in some 0% tax country like the BVI or the Seychelles. The company is a corporation (opaque), but I'm the sole shareholder and director. Does that mean that Malta will allow me not to pay tax, even though I run everything from Malta? Doesn't the company's income arise in Malta?!



Yes, if the company's income did not arise in Malta. But how could it arise outside of Malta when everything happens in Malta and the company is only incorporated elsewhere?



This part at least makes sense, even though many other countries wouldn't allow this,

I'm still not sure I understand. Isn't this basically allowing the taxpayer to actively create a hybrid mismatch?
Also, how does this make sense? Say I set incorporate a company in some 0% tax country like the BVI or the Seychelles. The company is a corporation (opaque), but I'm the sole shareholder and director. Does that mean that Malta will allow me not to pay tax, even though I run everything from Malta? Doesn't the company's income arise in Malta?!



Yes, if the company's income did not arise in Malta. But how could it arise outside of Malta when everything happens in Malta and the company is only incorporated elsewhere?



This part at least makes sense, even though many other countries wouldn't allow this,

Welcome to Malta. Please refer to the CFR website on how company incorporated outside malta is treated amd the concept of non domicile company. Also, Malta treats CAPITAL differently and has various use cases.

 

[MarkusCostigan]

So at this point, assuming the owner is a non-dom Maltese resident, why not register the US LLC as opaque, request a tax number and pay 35% and then request a refund of 6/7? Or pay directly 5% if the US LLC is owned by a Maltese holding?
It seems like a fairly logical choice. Where is the downside? With no customers in EU it really seems like the best.
I mean... it's about 5%. Where can you find a better 100% legal solution today?

 

[JustAnotherNomad]

Malta sourced income is considered when a service is performed inside Malta and the payment is received from either a maltese resident individual or company.

Where is the source for this? I spoke to a lawyer and he said the income would have to be linked to an asset outside Malta - otherwise it would be seen as Malta-sourced.

 

[JustAnotherNomad]

So at this point, assuming the owner is a non-dom Maltese resident, why not register the US LLC as opaque, request a tax number and pay 35% and then request a refund of 6/7?

You haven't been paying attention. We're discussing 0% tax here.

Or pay directly 5% if the US LLC is owned by a Maltese holding?

You can do that with a Maltese company without any risk. Doesn't make sense to set up something exotic only to pay the same tax as everyone with a standard setup.

 

[MarkusCostigan]

You haven't been paying attention. We're discussing 0% tax here.

Oh ok, I want to see who will have to explain at the first audit that the company is resident but not domiciled, violating all kinds of EU anti-abuse rules.

You can do that with a Maltese company without any risk. Doesn't make sense to set up something exotic only to pay the same tax as everyone with a standard setup.

The reasons can be multiple based on the business (better regulations for example)... but also the privacy issue, a US LLC with registered agent has definitely much more privacy than a Maltese LTD (everything public, balance sheets, directors, shareholders, personal addresses etc.. etc..) and also UBO for those who have "specific interest" (not only authorities)


Anyway, thanks for the clarification.

 

[JustAnotherNomad]

Oh ok, I want to see who will have to explain at the first audit that the company is resident but not domiciled, violating all kinds of EU anti-abuse rules.

That's my point exactly: If you register a Maltese company, you pay 5% tax (minimum) on all income of the company (except for strictly defined "foreign income"), plus you have to pay for accounting etc.
But if you set up a US LLC and register it as opaque (your choice even!), then you don't need accounting and you pay 0% tax? So Malta basically let's you choose "Hey, do you want to pay tax on this company, or would you want it to be a hybrid mismatch, so you don't pay tax? Ok cool."
It just sounds too good to be true for me, and I also don't see how this would be in Malta's interest.

Even if Malta treats the US LLC as opaque, if you're the only person behind the company and you live in Malta, they should say there is a PE in Malta, and then they should tax the PE like a branch (35% with refund). This is what would make sense, and this is also what a Maltese lawyer told me. He also said it could be different if the company has income from an asset outside of Malta, like royalty income etc. - then such income may indeed not be taxed in Malta - but it would be the same with a Maltese company.

Anyway, I trust that @A1988 has done his research, and a lot of people seem to be running such setups, so it seems like this does indeed work in practice.
Even though it reminds me of Cyprus residents with their HK and Seychelles offshore companies, living off "dividends"... Since apparently Cyprus doesn't enforce PE rules either.
Then again, I have heard that there are like 3 tax inspectors for the whole country, so I'm not quite sure if this is intended by Cyprus or if they just lack the resources to enforce the law. Or maybe the lack of resources is intentional...

The reasons can be multiple based on the business (better regulations for example)... but also the privacy issue, a US LLC with registered agent has definitely much more privacy than a Maltese LTD (everything public, balance sheets, directors, shareholders, various addresses etc.. etc..) and also UBO for those who have "specific interest" (not only authorities)

Fair point, but I would guess, if you really want to do it by the book, you would have to register a Maltese branch of the US LLC, and then you would have to make this information public, just like for a Maltese company.