How to get paid a Tax Free Salary from your own company?

[JustAnotherNomad]

Get a US LLC, a good accountant, take owner's drawings, have lots of business expenses, buy flights with your business card, pay for some personal expenses that can look like business expenses,

What? None of this makes any sense, an LLC with a single, non-resident member isn't taxable in the US anyway. You wouldn't even be submitting any documents that would contain such information. Or are you talking about choosing to be taxed as a corporation? That would make even less sense.

and pay 0% CT in UAE or a low 9% on your profits, which your accountant will optimize.

What?

Why do you need a salary in the first place? It's taxed everywhere.

What?!
A salary is a deductible business expense in almost every country. There is almost never any withholding tax for nonresidents, unless it's a director's fee and not a salary.

UK, Cyprus, Estonia are just some of the popular European options, but there are probably dozens and dozens of other options.

Singapore company;
CY non dom, salary 100% exempt under 90 days rule;
Employmemt contract structuring necessary in Singapore;
Expect to file a tax rulling request in Cyprus;

Does this really work if it's your own company?
And don't you have to prove you have to work outside of Cyprus, i.e. you would love to be in Cyprus all the time, but it's just not possible because your boss has ordered you to work outside of the country?

UAE company is a holding that receives money from US company

Oh, great, 35% withholding tax/branch office tax.

and you get your salary from the UAE company.

What's the point???? You could just set up a UAE company instead and pay a salary from there instead.

@OP : You can use a company from almost any country. Your assumption that all countries charge withholding tax on salaries is wrong. Like Marzio sais, US or UK could be good options.
US might be even better, especially if you don't have US clients, as there is no risk of CIT.

 

[yngmind]

What? None of this makes any sense, an LLC with a single, non-resident member isn't taxable in the US anyway. You wouldn't even be submitting any documents that would contain such information. Or are you talking about choosing to be taxed as a corporation? That would make even less sense.

It makes sense to optimize the profits, you pay less CT in the UAE.

What?!
A salary is a deductible business expense in almost every country. There is almost never any withholding tax for nonresidents, unless it's a director's fee and not a salary.

UK, Cyprus, Estonia are just some of the popular European options, but there are probably dozens and dozens of other options.

You will have to pay all the social security bs if you get a salary in the US.

What's the point???? You could just set up a UAE company instead and pay a salary from there instead.

The point in payment processing and banking options. UAE sucks for that.

Oh, great, 35% withholding tax/branch office tax.

There is no withholding tax.


UAE is the holding company, it holds US company, then you transfer the profits to the UAE and pay yourself a salary or dividends.

So before asking what???? on everything that I have wrote, read at least what OP asked for.

 

[JustAnotherNomad]

You will have to pay all the social security bs if you get a salary in the US.

No.
There is no US tax if you are a non-resident alien and you don't work physically in the US.
You also don't have to pay out a salary if you're using a single-member LLC, as it's a pass-through entity.

There is no withholding tax.

There is 35% withholding tax on dividends (if the US company is taxed as a corporation) or, alternatively, a 35% branch office tax, if the US company is a pass-through entity that is ETBUS (of which there is always a certain risk, unless you never step foot in the US and don't have any US clients, etc.).

 

[yngmind]

No.
There is no US tax if you are a non-resident alien and you don't work physically in the US.
You also don't have to pay out a salary if you're using a single-member LLC, as it's a pass-through entity.

We are
all aware of that.

The OP asked about the SALARY.

There is 35% withholding tax on dividends (if the US company is taxed as a corporation) or, alternatively, a 35% branch office tax, if the US company is a pass-through entity that is ETBUS (of which there is always a certain risk, unless you never step foot in the US and don't have any US clients, etc.).

I never recommend forming a corporation. My advice was to move to the UAE (if he still hasn't), form a US single-member LLC, which is a pass-through entity with the UAE company as a holding, and get a residency visa. That way, he can get a tax-free salary, optimize his profits for the UAE CT, and get himself a residency visa. You can also hire your friends/family members and optimize your profits even more.

Having a salary is not a bad thing in today's world. I would love to have a salary. Most banks don't like entrepreneurs. They like salaried customers. That's how you can quickly get residency, bank accounts, mortgages, loans, etc.

Getting visas to other countries is way easier if you have a "job" and "salary".

 

[JustAnotherNomad]

The OP asked about the SALARY.

And I told you there is no tax on a SALARY.

I never recommend forming a corporation. My advice was to move to the UAE (if he still hasn't to), form US single-member LLC which is pass-through entity with the UAE company as a holding

A single-member LLC cannot have a "holding" company. A member is not a holding company. That's why there cannot be withholding tax on dividends (since a single-member LLC cannot pay dividends), which was the reason why the branch office tax was invented.
But that's actually an interesting idea - if the UAE tax authority doesn't understand that either, you might be able to avoid UAE CIT. But then again, I wouldn't want to risk that.

you can also hire your friends/family members and optimize your profits even more.

Until they look into it and say you've violated the GAAR.
But I think this point will be moot soon anyway - they'll introduce income tax by 2030. Mark my words.

 

[yngmind]

And I told you there is no tax on a SALARY.

There will be some social security contributions, and that's how it works in most countries.

A single-member LLC cannot have a "holding" company. A member is not a holding company. That's why there cannot be withholding tax on dividends (since a single-member LLC cannot pay dividends), which was the reason why the branch office tax was invented.
But that's actually an interesting idea - if the UAE tax authority doesn't understand that either, you might be able to avoid UAE CIT. But then again, I wouldn't want to risk that.

Other corporations can own a US single-member LLC.
UAE considers US LLC as a corporation.

The scheme was discussed here long time ago -

The difference only that now we have CT in the UAE.

 

[JustAnotherNomad]

There will be some social security contributions,

No. Since you're so sure about this, it should be easy for you to find a source for this?

and that's how it works in most countries.

No. Not even European countries do this.
At least not the UK, Estonia or Cyprus, probably no other countries either (especially since social security laws should be harmonized across the EU).

Other corporations can own a US single-member LLC.

Of course, they can. It's literally what being a member means.
Any income from the US company will be considered income of the member (not parent) in the eyes of the IRS. So there is no profit to transfer, it's already the income of the member.
However, 35% branch office tax applies if any ECI is transferred to the member (possibly only if transferred outside the US, I don't remember the exact rules).

UAE considers US LLC as a corporation.

Source? It would be quite the revolution if there was any kind of legal statement from UAE authorities on this.
Nobody really knows anything. The FTA has written a lot about partnerships - so they are definitely aware of tax-transparent entities.
It seems far more likely that they will view it as a partnership.
In any case, I doubt that you'll find any official statement on this. No, people trying to sell you stuff are not the same as legally binding statements from a tax authority.

The difference only that now we have CT in the UAE.

Lol. A very minor difference for sure.
As long as there was not CIT, it didn't matter. Now 9% CIT is at stake for the UAE.

 

[yngmind]

No. Not even European countries do this.
At least not the UK, Estonia or Cyprus, probably no other countries either (especially since social security laws should be harmonized across the EU).

There are National insurance contributions (NICs) in the UK, and most countries have something like that. The solid source can be PWC, that's a link for the US for example - United States - Individual - Other taxes

Of course, they can. It's literally what being a member means.
Any income from the US company will be considered income of the member (not parent) in the eyes of the IRS. So there is no profit to transfer, it's already the income of the member.
However, 35% branch office tax applies if any ECI is transferred to the member (possibly only if transferred outside the US, I don't remember the exact rules).

Any income of the single-member LLC will be taxed on the personal level, which will be UAE in the case of the UAE holding company. Since the company is managed from the UAE , it's a UAE company for tax purposes, and because it's a transparent entity, there is no tax in the US, so there is no 35% branch tax.

US company is a branch of the UAE company.

Source? It would be quite the revolution if there was any kind of legal statement from UAE authorities on this.
Nobody really knows anything. The FTA has written a lot about partnerships - so they are definitely aware of tax-transparent entities.
It seems far more likely that they will view it as a partnership.
In any case, I doubt that you'll find any official statement on this. No, people trying to sell you stuff are not the same as legally binding statements from a tax authority.

It's common sense, which was discussed on this forum many times.

 

[CyprusLawyer101]

Does this really work if it's your own company?
And don't you have to prove you have to work outside of Cyprus, i.e. you would love to be in Cyprus all the time, but it's just not possible because your boss has ordered you to work outside of the country?

These are valid concerns. The current case that I am working on has a different owner of the employer company than the employee. However it does not appear that the legislation forbids any established businessman abroad from entering the country and recieving salaries from and for his business abroad. Obviously your business should not involve the Cyprus market. Also, relative substance is advisable to be maintained in the Singaporean/ Offshore company to satisfy it being established abroad.

 

[Alexmorgan]

You can do that.
Or just pay a salary directly from the US LLC. Then it is probably treated as a distribution in the US filing, and a salary in the UAE filing. How to do this on the UAE side is not clear though, but Im guessing that what is a distribution on the US side, can be split into salary and dividends on the UAE side.

There is a limit to what considered salary in UAE

Let say you got 10 Million income in your US and your expenses 4 Millions and you move 6 M to your bank account in UAE

They will say this is not a salay this is distribution and you should pay 9% Corporate tax of your US company

 

[JustAnotherNomad]

There are National insurance contributions (NICs) in the UK,

Yes, for UK residents, and also former UK residents (up to a certain number of years).

and most countries have something like that.

Yes, for residents.

The solid source can be PWC, that's a link for the US for example - United States - Individual - Other taxes

Yes, for residents.

because it's a transparent entity, there is no tax in the US, so there is no 35% branch tax.

US company is a branch of the UAE company.

Lol. I have been on this forum for a while, but I have never seen anyone be so wrong and so confident about it.
You even write that the US company is a BRANCH, but you say there is no BRANCH tax? Lol!
The BRANCH office tax was invented PRECISELY because there was no way to tax such structures. Maybe go look it up, before you write about it.
It only applies if you have ECI (are ETBUS), but it's still a risk. That's why it's usually not advisable to have companies be the member of a SMLLC.

It's common sense, which was discussed on this forum many times.

Lol! Ok, please tell that to the judge when they sentence you to a couple of years in jail.

They will say this is not a salay this is distribution and you should pay 9% Corporate tax of your US company

Yes, but this genius says you just hire your whole family, your neighbor and his dog, and you're good. Lol.

 

[yngmind]

Yes, but this genius says you just hire your whole family, your neighbor and his dog, and you're good. Lol.

Who will say lol?
Are you making $10M+ to have an investigation on you or what? or are you as famous as Shakira? Even in her case, it took 10 years to start the investigation.

Nobody cares about you until you reach a certain level.
It's a common thing to hire your family members, you can always prove that they are working for the company and don't see any risks at all, my accountant confirmed that you can do that.

Lol! Ok, please tell that to the judge when they sentence you to a couple of years in jail.

For using common sense and paying my taxes because I think I should?

Lol. I have been on this forum for a while, but I have never seen anyone be so wrong and so confident about it.
You even write that the US company is a BRANCH, but you say there is no BRANCH tax? Lol!
The BRANCH office tax was invented PRECISELY because there was no way to tax such structures. Maybe go look it up, before you write about it.
It only applies if you have ECI (are ETBUS), but it's still a risk. That's why it's usually not advisable to have companies be the member of a SMLLC.

Please send me a document that says a UAE company branch will be taxed in the US.

Yes, for UK residents, and also former UK residents (up to a certain number of years).

Yeah, it seems like it's for residents only in the UK. I'm not sure about the US.

 

[JustAnotherNomad]

Are you making $10M+ to have an investigation on you or what? or are you as famous as Shakira? Even in her case, it took 10 years to start the investigation.

Nobody cares about you until you reach a certain level.

Shakira was in Spain. The hacienda may suck, but there is still rule of law. It's not the UAE.
In the UAE, you are beyond screwed if you get in trouble. There is no rule of law, they can just make up rules as they go along.
The rules are so unclear that they can always stick you with something if they want to. Lawyers are incredible expensive and there is nothing you can do.
Fines are extremely high and they could even throw you into jail. If it's fine for 99.9% of all people doesn't help you, if you're one of the 0.1% that get in trouble.
It's just utterly, utterly stupid to do grey-area stuff in the UAE.

It's a common thing to hire your family members, you can always prove that they are working for the company and don't see any risks at all, my accountant confirmed that you can do that.

Ah, your accountant said so... Then it must be true. Lol.
Of course you can do that, probably in many cases it will be fine. Until it's not anymore.
But even if you do that and you're not overdoing - then there isn't much point in using the US company. It's also doubtful you'd get access to US payment providers with a UAE corporate member.
You'd probably be better of setting up a US corp, shifting profits using invoices and paying some tax in the US.

For using common sense and paying my taxes because I think I should?

You don't seem to understand that common sense is a concept that doesn't apply in the UAE.
Well, common sense generally doesn't help much for taxes, but definitely not in the UAE.

Please send me a document that says a UAE company branch will be taxed in the US.

United States - Corporate - Branch income

Detailed description of corporate branch income tax rules in United States

taxsummaries.pwc.com

Yeah, it seems like it's for residents only in the UK. I'm not sure about the US.

There is no tax in the US if the employee is a non-resident alien and no work was performed in the US.

 

[yngmind]

Shakira was in Spain. The hacienda may suck, but there is still rule of law. It's not the UAE.
In the UAE, you are beyond screwed if you get in trouble. There is no rule of law, they can just make up rules as they go along.
The rules are so unclear that they can always stick you with something if they want to. Lawyers are incredible expensive and there is nothing you can do.
Fines are extremely high and they could even throw you into jail. If it's fine for 99.9% of all people doesn't help you, if you're one of the 0.1% that get in trouble.
It's just utterly, utterly stupid to do grey-area stuff in the UAE.



Ah, your accountant said so... Then it must be true. Lol.
Of course you can do that, probably in many cases it will be fine. Until it's not anymore.
But even if you do that and you're not overdoing - then there isn't much point in using the US company. It's also doubtful you'd get access to US payment providers with a UAE corporate member.
You'd probably be better of setting up a US corp, shifting profits using invoices and paying some tax in the US.



You don't seem to understand that common sense is a concept that doesn't apply in the UAE.
Well, common sense generally doesn't help much for taxes, but definitely not in the UAE.

United States - Corporate - Branch income

Detailed description of corporate branch income tax rules in United States

taxsummaries.pwc.com

There is no tax in the US if the employee is a non-resident alien and no work was performed in the US.

In UK you have to pay NIC if you have a director of the company and you get a salary.

 

[JustAnotherNomad]

In UK you have to pay NIC if you have a director of the company and you get a salary.

Not sure what one thing has to do with the other. But if you get paid a salary and you have never lived in the UK, there shouldn't be any social security contributions, no.
Maybe if you draw a diretor's fee instead of a salary, not sure.

 

[yngmind]

Not sure what one thing has to do with the other. But if you get paid a salary and you have never lived in the UK, there shouldn't be any social security contributions, no.
Maybe if you draw a diretor's fee instead of a salary, not sure.

You pay NIC only if you are a company director. If you're an employee and nonresident, you don't pay.

I told you that in lots of countries, you will have to pay social security on your salary. That's why my lawyer and accountant recommended that I find a way around this.

 

[JustAnotherNomad]

If you're an employee and nonresident, you don't pay.

Like I said.

All you do in this thread is make bold claims and not back them up with anything. Most countries do not charge social security for nonresidents. It's simply not true that "lots of countries" do this. Just incorporate somewhere else then. Estonia, Cyprus, USA, ... whatever, none of those countries do that.
I also don't think the UK does that for salaries. If you pay a director's fee, probably. Then don't pay a director's fee (or only a very low one), and pay a salary otherwise.

 

[churumbelo]

Like I said.

All you do in this thread is make bold claims and not back them up with anything. Most countries do not charge social security for nonresidents. It's simply not true that "lots of countries" do this. Just incorporate somewhere else then. Estonia, Cyprus, USA, ... whatever, none of those countries do that.
I also don't think the UK does that for salaries. If you pay a director's fee, probably. Then don't pay a director's fee (or only a very low one), and pay a salary otherwise.

I confirm that if you aren't a resident in Estonia you can pay yourself a salary from the Estonian company without paying tax or SS in Estonia. BUT the Estonian tax agency can request you proofs that you are paying the tax and SS in the country where you are a resident. If you are required to pay those in that country.

 

[yngmind]

Like I said.

All you do in this thread is make bold claims and not back them up with anything. Most countries do not charge social security for nonresidents. It's simply not true that "lots of countries" do this. Just incorporate somewhere else then. Estonia, Cyprus, USA, ... whatever, none of those countries do that.
I also don't think the UK does that for salaries. If you pay a director's fee, probably. Then don't pay a director's fee (or only a very low one), and pay a salary otherwise.

Cyprus - Individual - Other taxes

Detailed description of other taxes impacting individuals in Cyprus

taxsummaries.pwc.com

There is some logic behind it like you don't live in the country, why would you pay social security, but I think it will be a pain in the a*s to prove it, and it's not that common to have overseas employees.

 

[JustAnotherNomad]

There is some logic behind it like you don't live in the country, why would you pay social security, but I think it will be a pain in the a*s to prove it, and it's not that common to have overseas employees.

There's a lot of thinking and feeling in your comments. I can tell you it's not an issue. No EU country cares about this if you can explain to them that you are not an EU resident.
It's just a PITA if you live in another EU country, then you have to show coverage with form A1.