Is a UK or Cyprus Nominee Director enough to avoid PE in Portugal? (digital business)

[alexx999]

Hello,
I am publishing books on amazon, after a lot of research i came to the conclusion that based on my circustances the best solution would be to:

-Take the NHR
- Create a company in Cyprus or the UK
-Create a Publisher and Copyright agreement to receive royalties (from my LTD to my personal account), my company would work as the publisher company and I would be the Author, therefore I can pay myself up to 95% of the gross I receive in the account of my LTD in royalties (tax free in Portugal) and deductible in both the UK and Cyprus

-The only doubt I have is... If I live in Portugal and I am a single member, is it enough to use a nominee director to avoid PE in Portugal? I don't have an office, employee, or anything, I just publish books on Amazon ....

What could go wrong in this setup? Which risks I am not calculating? How can I improve this structure?

My business is very simple...i contract ghostwriter from upwork or outside, I publish books on Amazon, I pay ads and I receive royalties, that's it !

 

[koohl]

You will need a real person nominee if you want this to work.

 

[Marzio]

-Take the NHR
- Create a company in Cyprus or the UK
-Create a Publisher and Copyright agreement to receive royalties (from my LTD to my personal account), my company would work as the publisher company and I would be the Author, therefore I can pay myself up to 95% of the gross I receive in the account of my LTD in royalties (tax free in Portugal) and deductible in both the UK and Cyprus

IRS has something to say about this.

Both Cyprus and UK have a LOB clause in the treaty with USA to prevent very smart people like you to abuse the system.

Article 26 for Cyprus.

Article 23 for UK

 

[alexx999]

IRS has something to say about this.

Both Cyprus and UK have a LOB clause in the treaty with USA to prevent very smart people like you to abuse the system.

Article 26 for Cyprus.

Article 23 for UK

So what is your advice, then .... I can not seem to find a solution.... The LLC thing as you said is seen as a corporation in Portugal therefore I can be seen as CEO and taxed in the country ...at this point the NHR doesn't make sense to me

 

[Marzio]

The LLC thing as you said is seen as a corporation in Portugal therefore I can be seen as CEO and taxed in the country

I have a different opinion which i shared in the other thread BUT there are other options.

Do you have any ties to your home country (family, house and so on)?

Also which is your home cuntry? J

ust to know which double tax treaties you have at your disposal

 

[CyprusLawyer101]

Back to back licensing arrangements of the type you describe have been considered abusive and various anti avoidance rules in force attempt to counter them. Also you do not appear to eliminate the withholding tax imposed by the US.
Marzio's favourite structure which i have talked about before, utilizing a Maltese non dom company, may work well in this case and allow some substantial tax benefits although overall risks and benefits should be assessed prior to moving ahead with such set up.

 

[koohl]

You better listening to some of the people in this thread, they tell you something that can prevent you from getting really big troubles.

 

[JustAnotherNomad]

This question comes up all the time... Use the search function.

https://www.offshorecorptalk.com/threads/us-withholding-tax-on-royalties-solutions.35856/https://www.offshorecorptalk.com/threads/low-tax-options-for-company-with-us-royalties-income.34924/

 

[alexx999]

I decided to Incorporate a Company in Cyprus with @CyprusBusiness since he is very experienced and professional, I discovered that I can create a Publisher Agreement between myself and the LTD in Cyprus and pay myself up to 95% of the total gross income with Royalties, so I will receive the royalties from the US Market on the Cyprus LTD, with a 0% withholding, then, with the LTD and Publisher agreement I'll be able to pay myself Royalties as I'll function as author and copyright holder of the books, royalties are deductible from the company, the remaining amount will be taxed at a 12.5% rate, then, I'll take residency in Portugal with the NHR, where I will receive foreign royalties with a 0% tax rate, and I will use a physical nominee director and secretary in Cyprus to offset the risk of PoEM.
This is the best setup I found, thanks to the VAT Number of the LTD, I'll not be charged the VAT on ADS, with the Author and Publisher agreement I have flexibility to decide to pay myself, the remaining part can stay in the business account and I'll use that amount to pay the expenses of the business and deduct the costs, I know it is not 10000% safe because of the PoEM but it is relatively safe in my opinion, at least until you remain a small enough fish

 

[Marzio]

I'll take residency in Portugal with the NHR, where I will receive foreign royalties with a 0% tax rate

You'll be in for a very very very bad surprise.

This is taken from US-Cyprus double tax treaty.

In other words your publisher agreement is against the treaty so let's hope that IRS will never investigate what you are doing.

In the end you will have to move to Cyprus, you have no alternatives and you'll pay much more than you foresee right now.

 

[alexx999]

EDIT: I mistakenly cited the WRONG PERSON in the previous message, please ignore it since I made a mistake