Georgia - Low cost setup with individual entrepreneur scheme

[ska]

If georgia considers your US LLC as a permanent establishment and taxes you 15% corporate tax, will you as an individual also become subject to personal income tax 20%? In that case the US LLC becomes worthless, and the tax free plan falls apart

I think you can just invoice your foreign company as an individual entrepreneur and pay 1-3% taxes if you're doing the work yourself

 

[Marzio]

I think you can just invoice your foreign company as an individual entrepreneur and pay 1-3% taxes if you're doing the work yourself

As soon as RS will notice that 99% of your income comes from invoicing an offshore company owned by you imagine what will happen next.

 

[ska]

As soon as RS will notice that 99% of your income comes from invoicing an offshore company owned by you imagine what will happen next.

1. How can they see that it comes from a specific client? They don't ask for invoices or anything, just monthly declarations of revenue
2. We're talking about an US LLC, how can they know it's managed by yourself?

Maybe you're right, I'm just missing some parts I guess

 

[khinkali]

how can they know

I'm not saying that you're wrong, but isn't this what everyone says before they get prosecuted? I mean none of those people in jail or with massive fines, expected to be caught.

Once you cross the line, you must never ever make an enemy of anyone who knows or suspects your illegalities. In Dubai, it's "don't shout at your neighbour for playing loud music, if he can send the morality police round to count the toothbrushes and get you arrested for fornication" and in most places it's "don't fail to pay your blackmailing bookkeeper who knows where the money went". Some people thrive on illicit dealings, but it's a very bad move for those who aren't prepared for that lifestyle.

 

[ska]

I'm not saying that you're wrong, but isn't this what everyone says before they get prosecuted? I mean none of those people in jail or with massive fines, expected to be caught.

Once you cross the line, you must never ever make an enemy of anyone who knows or suspects your illegalities. In Dubai, it's "don't shout at your neighbour for playing loud music, if he can send the morality police round to count the toothbrushes and get you arrested for fornication" and in most places it's "don't fail to pay your blackmailing bookkeeper who knows where the money went". Some people thrive on illicit dealings, but it's a very bad move for those who aren't prepared for that lifestyle.

2. We're talking about an US LLC, how can they know it's managed by yourself? >> I need to file the Form 5472 once a year with the IRS.

Will USA with the FACTA report my revenues to Georgia? If I search online I see they signed the FACTA agreement... is this in both ways?

 

[Marzio]

1. How can they see that it comes from a specific client? They don't ask for invoices or anything, just monthly declarations of revenue

Maybe in Georgia works differently but usually when you sell B2B you have to provide an invoice.

If you are 100% sure that you don't have to provide invoices when selling B2B then there's no way for RS to know that you are managing a Delaware LLC or New Mexico LLC, FATCA works only in one direction, US isn't part of CRS and US and Georgia don't have a tax exchange agreement.

 

[TheCryptoAnt]

US and Georgia don't have a tax exchange agreement.

weirdly enough, they do. But only the US recognizes it.

The US started applying the USSR one to all the independent nations after 91, but from the GE side they dont recognize it.

 

[khinkali]

We're talking about an US LLC, how can they know it's managed by yourself?

When I wrote "Once you cross the line, you must never ever make an enemy of anyone who knows or suspects your illegalities" I meant that if you make an enemy of someone who knows your dealings, then you have a risk. This can be a provider, business partner, family member, etc. Some people are better at managing these risks than others.

 

[Marzio]

weirdly enough, they do.

I'm not talking about tax treaty between US and USSR, i'm talking about tax exchange agreements where countries without double tax treaty agreements exchange tax informations.

Tax Information Exchange Agreements (TIEAs) - OECD

Bilateral Agreements that have been signed to establish exchange of information for tax purposes.

www.oecd.org

 

[I'mRobot]

Georgia has the individual entrepreneur scheme which is very interesting for startups. This is handy before you start venturing out in more expensive offshore structures.

Do you feel it is still interesting ?

 

[I'mRobot]

This can be a provider, business partner, family member, etc. Some people are better at managing these risks than others.

You comment on the structure of ownership right or do you mean in general?

 

[khinkali]

You comment on the structure of ownership right or do you mean in general?

The comment is about this:

We're talking about an US LLC, how can they know it's managed by yourself?

My point is just that a "How can they know?" based approach (i.e. relying on not getting caught) has risk if you fall out with someone who knows about the scheme.

 

[I'mRobot]

got it, thank you for elaborating. I agree someone should keep his business affairs close and not tell anyone about anything unless it is necessary.

 

[Ilia Kekutia]

Georgia tax regime for small businesses with 1% and 3% taxes respectively is only applicable to certain types of businesses. You cannot for instance do consulting services of any kind and pay 1% tax, in that case, you will be liable to pay 20%.
Georgian law is often complex and has many ambiguities, be careful with that. The best advice is to hire a local lawyer that knows the law in detail. Some international focused lawyers don't know the details of this and will deliberately tell you that you can actually pay 1% with no problem no matter what your business is, and that's totally false. I saw this claimed in many websites trying to attract foreign investors into Georgia. Don't fall into this trap. Georgia is an optimal jurisdiction in many cases, but things are not that simple as it looks like in the surface.

I agree with you, well said. In order to attract clients, many lawyers and law firms especially, who are far from tax issues mislead people about the status of both small businesses entrepreneur and IT companies in Georgia. Therefore, be sure to consult a good tax expert first, because the tax legislation of Georgia is very complex and not everything is clearly written. You can check out our very good article here on small business entrepreneur here.

 

[uplana]

Nice to have a repr. from the company INC.GE around, I'm sure you will get attraction here since people in the past have been looking for services you offer.