Guidance on my structure required

[JTK]

Hello Offshore community!

I have been at this for awhile, and am close (I think) to figuring out the best solution(s) for my needs. The sturcturing process has so many variables! I am hoping the community here will consider my specifics and provide feedback. Any professionals who would be interested in consulting and assiting in the setup are most welcome. Thank you for your time and consideration.

To begin, I am an Italian citizen living in the Republic of Panama. I wish to open either a Panamanian or Seychelles Foundation (PIF or CPF), leaning toward Sey. Within the foundation, besides real estate held by existing Panama corporations (straightforward), I wish to place a US LLC (single member passthrough) that is 50% owner in a commercial real estate property in the US, and a first lien mortgage+note on the same property. NOTE: I wrote this mortgage+note -- so it is an asset. It is a zero coupon note (no interest payments) at this time, though it is convertable if the lender (me) so chooses. More on this US LLC later... Also in the foundation, a holding company ("Asset IBC"). Because this company does not interface with the public, its domicle can be from a broad range of locations. I am thinking Panama, Sey, or BVI. The "Asset IBC" holding company will own Intelectual Property (IP). The IP is digital media, books to be precise.

Outside the foundation, I wish to have a separate trading company ("Amazon IBC"). This company "Amazon IBC", will license the IP from the "Asset IBC" and interface directly with Amazon. Draft 2 Digital, etc. It will have its own website for sales of its own books. Because it deals with Amazon, it must be within a much smaller range of domiciles acceptable to Amazon (I am leaning toward Costa Rica, as I understand Mauritus is no longer doing GBC2 companies). I do not know for certain whether the domiciles I am leaning toward will work as I intend. My goal is to avoid 30% withholding from Amazon and I do not know if Costa Rica will work. Alternatively, I have been told that a new US LLC will work for this.

Before continuing, I already have found banks that I like for the above that I am happy with.

I have paid attorneys and accountants consulting fees to get this far and have received some differing opinions. Sometimes conflicting opinions. What I have ascertained is that as an Italian in Panama (registered in AIRE -- the foreign registry for Italians living abroad), Italy will not pursue me for taxes as a non-resident. Panama will not pursue taxes from me as all sources are from abroad (outside Panama). The questions that remain are on the US side, where I have paid several opinions from tax attorneys and CPAs and had differing / conflicting opinions. It seems to me that under the best scenario, these professionals are making a "case" -- a rationale that they can reasonably defend and at the end of the day hope it flys. That is assuming they even understand these very complex individual scenarios.

So here is what I don't "get" / need help on:

-The purpose of the two tier "Asset IBC" and "Amazon IBC" is to protect the IP (insulated) and also to legally reduce taxes in a straightforward licensing agreement. I have just been told (in writing) that if I were to have a US LLC for the "Amazon IBC" and it is owned by the foundation, that there will be no withholding and any profits after the licensing fees paid to the "Asset IBC" are not taxable until / unless the foundation makes a distribution. This is because the foundation owns itself (Seychelle) and there are no beneficiaries until a distribution is made to a beneficiary. I am so confused! How can that be right? Does anyone have a similar set-up or know how best to go about this?

-The US LLC that owns the commercial property -- same question, if owned by the foundation, all the income passing through the discarded entity LLC becomes indefinately tax deferred until a distribution is made? And then, the beneficiary(s) would need to file whereever they are tax resident? Does anyone have a similar set-up or know how to go about this?

With the above in mind, what is the community opinion for the foundation domicile -- Panama or Seychelles? The Asset IBC -- Panama, Seychelles, or BVI, Other? What to do for Amazon IBC? What to do for my existing US LLC? I wish to do everything legally, but to the best tax advantage I can. Is there any opinion who is the best service to consult with and open the entities?

Thank you in advance for any and all feedback. I really appreciate it.

- JTK

 

[Tax Cow]

Two legal bodies instead of a complex network seems like a better choice. Especially if you live in Panama, use a Panama Foundation and a Panama IBC.

Keep the assets incl. 100% shares of your IBC in the Foundation and conduct business via the IBC. If you have discrimination issues with your Panama IBC, replace the Panama IBC with a British overseas territory IBC. A U.S LLC might work in the law, but it gives you more burden to demonstrate that no taxes are owed to U.S. An offshore company owned by a non-resident/non-citizen is assumed a non-resident company by default. Unless strong U.S ties are found, you're not bothered, and for that reason, a British overseas territory IBC works better for virtually all types of U.S-source income where the ultimate beneficiary is a non-resident/non-citizen.

I struggle to understand why you're thinking of using Seychelles and Costa Rica in your structure. Are there any benefits you can't realize otherwise? Are the Amazon U.S witholding taxes different?

 

[fshore]

What kind of income will you get from the US? The income generated by the property might be taxable in the US no matter how you organise your companies. A US tax guy should be able to advice you on that. For amazon - is it sales or royalties? There is no withholding taxes on any sales on the amazon platform, and there shouldn't be any federal tax liability just be selling on amazon. If it is royalty income then withholding taxes will apply, and can only be reduced by tax treaties.
A US LLC should be fine for amazon, as amazon don't even ask for its name or existence. The amazon tax interview tells you to chose sole proprietor and write the name of the llc member only if it's a single member llc. So you don't even tell them that you are selling through a US LLC.

 

[JTK]

Two legal bodies instead of a complex network seems like a better choice. Especially if you live in Panama, use a Panama Foundation and a Panama IBC.

Keep the assets incl. 100% shares of your IBC in the Foundation and conduct business via the IBC. If you have discrimination issues with your Panama IBC, replace the Panama IBC with a British overseas territory IBC. A U.S LLC might work in the law, but it gives you more burden to demonstrate that no taxes are owed to U.S. An offshore company owned by a non-resident/non-citizen is assumed a non-resident company by default. Unless strong U.S ties are found, you're not bothered, and for that reason, a British overseas territory IBC works better for virtually all types of U.S-source income where the ultimate beneficiary is a non-resident/non-citizen.

I struggle to understand why you're thinking of using Seychelles and Costa Rica in your structure. Are there any benefits you can't realize otherwise? Are the Amazon U.S witholding taxes different?

Thank you for your reply.

The only considerations for Seychelles over Panama structures is A) Sey has a few more benefits / protections and B) there is no question regarding non-resident , non-taxable. I was told when I first arrived in Panama that the government has close ties to the US and while lax now, they could for example, suggest I live here, create books here and thus demand tax here in the future. I have paid Panamanian tax attorneys to comment on that idea and was told "nonsense!" So you are probably right -- keep it simple stupid. Panama structures would immediately open up much more banking options for me.

As for Costa Rica, it was only for interfacing with Amazon. They only will accept a short list of countries to do business with. I do not know the withholding consequences -- though I was told zero. That's not what I think though, because the US does not have a tax treaty with either Costa Rica or Popt My understanding is that withholding is automatically 30% unless the US has a tax treaty with the other country (of your IBC). If I am correct, that makes the list even shorter. Neither Costa Rica or Panama would tax the foreign earned income IF Amazon doesn't take 30% off the top!

I completely agree with the US LLC probably working but at the cost of demonstrating that there is no tax due in the US. US tax compliance is cumbersome and would prefer to structure around it if possible. As for the British Overseas Company, like BVI, I don't believe that will work for interfacing with Amazon. While UK is listed, I believe BVI is treated as a separate domicile. If I cold use BVI, I would love to!

Do you know if Amazon allows a BVI IBC to sell on their platform?

Thanks so much for your time!

 

[JTK]

What kind of income will you get from the US? The income generated by the property might be taxable in the US no matter how you organise your companies. A US tax guy should be able to advice you on that. For amazon - is it sales or royalties? There is no withholding taxes on any sales on the amazon platform, and there shouldn't be any federal tax liability just be selling on amazon. If it is royalty income then withholding taxes will apply, and can only be reduced by tax treaties.
A US LLC should be fine for amazon, as amazon don't even ask for its name or existence. The amazon tax interview tells you to chose sole proprietor and write the name of the llc member only if it's a single member llc. So you don't even tell them that you are selling through a US LLC.

Thank you for your reply.

The sales from books are considered royalties. I need to find a structure that eliminates the withholding by Amazon. Once the royalties escape Amazon, the tax liability can be reduced by 85% via licencing the IP from the Asset holding company I described. So, the trick is which countries are acceptable to Amazon, have a tax treaty in place to eliminate the withholding, AND won't tax foreign earned income?

A US LLC would do the trick but I hate the idea of filing compliance in the US. But if I have to -- I will. When you choose sole proprietor (as you describe), does it ask for a social security number or EIN? I don't have the former, but the latter is easy to get.

Thank you very much!

 

[fshore]

When you choose sole proprietor (as you describe), does it ask for a social security number or EIN? I don't have the former, but the latter is easy to get.

No, as you write your foreign name and address. The US llc is not mentioned.