LLC for EU resident/citizen. Is it really the best offshore option?

[bibing]

As per title.

I read on some other forums that EU residents (those who are EU citizens as well) don't get their company bank account reported to their EU country.

According to the FACTA instructions it doesn's seem this is the case.

This apply especially to Model 1 IGA countries.

Anybody can clarify it?

Is a US LLC really the best option for a EU person to keep money and business outside of EU?

I'm too confused about this matter

 

[Sols]

In this case, FATCA would only apply if the bank account is in the US. In that case, it's correct that FATCA should be reciprocal in theory but in reality, the US has done a very bad job at sharing data. They make sure to get data, but the amount of data going out is a fraction by comparison.

If your LLC banks somewhere else, CRS would more likely apply instead, under which reporting is far more common and predictable.

 

[bibing]

So it is safe for a EU resident to use a USA LLC, even if just for banking,since the risk of being reported is minimal?

 

[Sols]

I'm not sure if you understood my answer, or maybe I don't understand your question. Let me clarify what I meant.

FATCA is a US law. Under FATCA, banks in foreign countries must report US persons back to the US. Also under FATCA, US banks are supposed to share data with certain countries. In reality, the US receives much, much more data than they report back.

CRS is an international initiative created by OECD. Most countries have signed up for it and many/most are already sharing information with each other. However, the US has not signed up for CRS. It argues that FATCA is good enough.

Information sharing is not based on country of incorporation. It's based on where you bank.

If your US LLC has a bank account in the US, CRS does not apply. The risk of reporting to Europe is low, but not zero.

If your US LC has a bank account in Switzerland, Singapore, or some other CRS jurisdiction, the risk of reporting to Europe is high.

 

[bibing]

If your US LLC has a bank account in the US, CRS does not apply. The risk of reporting to Europe is low, but not zero.

I understood you very well.

But consider one thing. If I open a LLC, bank account is on the LLC, but of course my data is there (in the bank account). And I suppose at one point my data is reported to IRS (through the various forms etc.)

How can you guys be sure the IRS doesn't report my a*s to my residency country?

I know a lot of people in EU are using US LLC while being resident here but that sounds too dangerous (if they continue having a residency here)

 

[Don]

I understood you very well.

But consider one thing. If I open a LLC, bank account is on the LLC, but of course my data is there (in the bank account). And I suppose at one point my data is reported to IRS (through the various forms etc.)

How can you guys be sure the IRS doesn't report my a*s to my residency country?

I know a lot of people in EU are using US LLC while being resident here but that sounds too dangerous (if they continue having a residency here)

View attachment 5592

It will be reported soon.
The planned first reporting period is from the tax year starting from 2024.

US SMLLC is not necessarily the best solution for hiding wealth.
Note that even crypto will be incorporated into CRS soon.

However, FATCA has a number of loopholes to avoid reporting, including:

• No reporting for Investment Entities managed in the same jurisdiction as its equity interest
• No deeming non-participating investment entities as a Passive NFE, subject to look through
• Custodial Institution in CRS non-participating jurisdiction

There are no mandatory disclosure rules against arrangements to avoid FATCA

 

[James Turner]

I understood you very well.

But consider one thing. If I open a LLC, bank account is on the LLC, but of course my data is there (in the bank account). And I suppose at one point my data is reported to IRS (through the various forms etc.)

How can you guys be sure the IRS doesn't report my a*s to my residency country?

I know a lot of people in EU are using US LLC while being resident here but that sounds too dangerous (if they continue having a residency here)

View attachment 5592

I'm not sure you have understood what @Sols is saying.

If you are an EU citizen and operate banking in a CRS location, they will report you back to your country of residence regardless of the location of your company. As @Sols says the US are very good at extracting information from other countries using their FATCA legislation, but they do not like to divulge information to other countries.

I hope this helps.

 

[Sols]

I understood you very well.

I'm sorry, but I don't think you have. You're focusing on the jurisdiction of incorporation, when it's the jurisdiction of the bank that matters more or FATCA/CRS concerns.

But consider one thing. If I open a LLC, bank account is on the LLC, but of course my data is there (in the bank account). And I suppose at one point my data is reported to IRS (through the various forms etc.)

Where is the bank?

If it's in the US, it might be reported under FATCA.

If it's not in the US but in a CRS jurisdiction, it's safe to assume that it will be reported.

How can you guys be sure the IRS doesn't report my a*s to my residency country?

Anyone who expresses certainty on whether US will reciprocate reporting under FATCA is wrong, regardless of whether they say US will or US won't.

It's an absolute crapshoot to determine whether data is shared by the US. I have seen examples of Europeans having their US assets reported back to them. But it appears to be far from the norm. European and other tax authorities outside of the US have complained about this for years.

Reporting based on incorporation is an older method that was common under TIEA and similar agreements. Those were not automatic arrangements. Governments would send requests to other countries asking for information about companies' directors, shareholders, and beneficial owners. That can and does still happen, but FATCA and CRS are much more effective data collection methods.