How to avoid Controlled Foreign Company (CFC) Rules ? is there any loophole or structure/setup to avoid it ?

[troubled soul]

How to avoid Controlled Foreign Company (CFC) Rules ? is there any loophole or structure/setup to avoid it ? ?

As example
Dubai resident, Register single person USA LLC...as per CFC and UAE New corporate tax , USA LLC will be subjected to 9% tax.,...
If there anyway to avoid this ?
Like creating some complex structure for USA LLC ownership ?
is there any setup or trick to avoid paying tax ?

Thanks

 

[Au999]

Depends on your tax resident country and how long you're running the foreign company from your location - as different countries have different rules.

I'm no expert but here are things I picked up from speaking to tax experts:

As an example in UK you can run a foreign company for up to a year (while setting it up) without CFC kicking in.

There's also a 'low profit exemption' rule in UK that exempts small/low-income companies from CFC - letting you earn up to £500k active / £50k passive without HMRC bothering you.

Quite a generous exemption!

 

[troubled soul]

Depends on your tax resident country and how long you're running the foreign company from your location - as different countries have different rules.

I'm no expert but here are things I picked up from speaking to tax experts:

As an example in UK you can run a foreign company for up to a year (while setting it up) without CFC kicking in.

There's also a 'low profit exemption' rule in UK that exempts small/low-income companies from CFC - letting you earn up to £500k active / £50k passive without HMRC bothering you.

Quite a generous exemption!

Thanks for reply....I am asking for Dubai resident......

 

[Marzio]

USA LLC will be subjected to 9% tax.,...

Not because of CFC rules but because of PE rules (you are managing US LLC from UAE).

Also, at least from US point of view US LLC doesn't distribute dividends so any income from a US LLC, even if managed outside UAE, will be subject to tax.

is there any setup or trick to avoid paying tax ?

Create a non-trasparent subsidiary in a tax free jurisdiction and establish substance so that dividends from that offshore company to UAE holding will be tax free.

 

[Sols]

Create a non-trasparent subsidiary in a tax free jurisdiction and establish substance so that dividends from that offshore company to UAE holding will be tax free.

Wouldn't transparent also work? For example, an LLC which is manager managed and member owned. Managers provide substance somewhere outside of UAE, and the profits fall on the members (owners). Is there something in the UAE tax regime that separates dividends from personal income?

 

[Marzio]

Wouldn't transparent also work?

Yes, woud work if the US LLC is owned by a physical UAE resident.

In this thread I (mistakenly) thought that the UAE resident was a company, that's why i suggested a non-transparent subsidiary.

I guess soon @Martin Everson will start his side hustle by managing US LLC's from Bahamas

 

[troubled soul]

Can anybody simplify this ? with example....
Not able to understand this complex thing.....

 

[anubis92]

if you have a US LLC and you are the owner, you can get dividend. But if you actively running the business from the UAE, you will be considered as a local UAE company, through the PE / Place of effective management mecanisms. So ideally the LLC has substance outside the UAE, and you just get passive dividends here in UAE.

Though I'm not sure where you would create substance, perhaps workers in Thailand would work. Please someone correct me