LLC for EU resident (Dividends and other questions)

[itwasntme]

Hey forum, thank you for accepting me, i currently run LTD company here in Cyprus, but local authorities and banks are a nightmare, even though we operate 100% clean ecommerce in baby industry they are giving as hardest time for every move.

What we do ecom selling goods to US/EU/AU
we want all perks that US LLC has (i.e afterpay, shop pay) and many other that simply not available for Cyprus
Also, there is 0 tax on dividents (in certain cases, which we are)

Plan is, open LLC, get somehow banks, wise business, stripe and etc, operate with all benefits US LLC has
then pay dividends back to Cyprus with 0% tax

Here are 2 doubts
1. i heard that LLC is taxable for US operation revenues, is selling physical products to us citizen will be considered as such?
2. LLC doesnt releasae dividents as such, so what that would be ? local authorities will treat it like a normal income with relevant taxation?

Mb you can route me in the right direction? Thank you

 

[Marzio]

local authorities will treat it like a normal income with relevant taxation?

Exactly

 

[Gediminas]

Hey forum, thank you for accepting me, i currently run LTD company here in Cyprus, but local authorities and banks are a nightmare, even though we operate 100% clean ecommerce in baby industry they are giving as hardest time for every move.

What we do ecom selling goods to US/EU/AU
we want all perks that US LLC has (i.e afterpay, shop pay) and many other that simply not available for Cyprus
Also, there is 0 tax on dividents (in certain cases, which we are)

Plan is, open LLC, get somehow banks, wise business, stripe and etc, operate with all benefits US LLC has
then pay dividends back to Cyprus with 0% tax

Here are 2 doubts
1. i heard that LLC is taxable for US operation revenues, is selling physical products to us citizen will be considered as such?
2. LLC doesnt releasae dividents as such, so what that would be ? local authorities will treat it like a normal income with relevant taxation?

Mb you can route me in the right direction? Thank you

Hey,

US LLC can be either a taxable entity or a non-taxable entity (a disregarded entity for corporate income tax purposes).

If a US company has substance in the US, like office, employees, etc. (in other words creates permanent establishment for tax purposes) – a US entity cannot be disregarded for tax purposes. As a general rule, only the fact that the company has local customers should not create a taxable presence, however, I noticed that US tax advisors sometimes have different opinions on this.

Tax transparent US LLC does not distribute dividends, this is more like they sharing a part of the profits. Thus if you live in Cyprus and benefit from a non-dom regime (you don’t pay defense tax) and generally your dividends are nontaxable (only GESY applies), tax transparent US LLC will not work for you.

We have a few legal / tax opinions that say, that whatever you receive from a tax-transparent LLC is not dividends and should be taxed as other income. Moreover, Stripe and other platforms generally speaking do not like tax transparent entities (it might be an issue in the long run), because it speaks for itself that such entity does not have substance in the country.

In most cases, I would suggest setting up a taxable entity, but under the general transfer pricing principles to allocate profit to Cyprus, so even a US entity is generally a taxable entity in fact it will pay tax only on a small profit margin.

Alternatively, it can be a non-taxable entity, but owned by a CY corporation, and then you directly attribute and tax income at a corporate level in CY.

I hope this helps.

 

[itwasntme]

Hey,

US LLC can be either a taxable entity or a non-taxable entity (a disregarded entity for corporate income tax purposes).

If a US company has substance in the US, like office, employees, etc. (in other words creates permanent establishment for tax purposes) – a US entity cannot be disregarded for tax purposes. As a general rule, only the fact that the company has local customers should not create a taxable presence, however, I noticed that US tax advisors sometimes have different opinions on this.

Tax transparent US LLC does not distribute dividends, this is more like they sharing a part of the profits. Thus if you live in Cyprus and benefit from a non-dom regime (you don’t pay defense tax) and generally your dividends are nontaxable (only GESY applies), tax transparent US LLC will not work for you.

We have a few legal / tax opinions that say, that whatever you receive from a tax-transparent LLC is not dividends and should be taxed as other income. Moreover, Stripe and other platforms generally speaking do not like tax transparent entities (it might be an issue in the long run), because it speaks for itself that such entity does not have substance in the country.

In most cases, I would suggest setting up a taxable entity, but under the general transfer pricing principles to allocate profit to Cyprus, so even a US entity is generally a taxable entity in fact it will pay tax only on a small profit margin.

Alternatively, it can be a non-taxable entity, but owned by a CY corporation, and then you directly attribute and tax income at a corporate level in CY.

I hope this helps.

Oh, thank you a lot, you just exaplained in 5 minutes, what i was trying to understand in months!

I dont have a problem paying taxes, as long as they are not too high(we currently pay 12.5% as non-dom) and have a friendly business infrastructure (Cyprus is not), also to benefit from the tech perks that are only available in US, AU, UK, ES and some other big countries.

I was thinking to set up LLC , owned by Cyprus LTD, so we pay CY taxes 12.5 , have majority of day to day busienss activities as LLC including perks and banks and only deal with Cyprus one a while for annual audit.

Any other options you might suggest? Thank you

 

[Gediminas]

Oh, thank you a lot, you just exaplained in 5 minutes, what i was trying to understand in months!

I dont have a problem paying taxes, as long as they are not too high(we currently pay 12.5% as non-dom) and have a friendly business infrastructure (Cyprus is not), also to benefit from the tech perks that are only available in US, AU, UK, ES and some other big countries.

I was thinking to set up LLC , owned by Cyprus LTD, so we pay CY taxes 12.5 , have majority of day to day busienss activities as LLC including perks and banks and only deal with Cyprus one a while for annual audit.

Any other options you might suggest? Thank you

We can setup whatever you need based on your needs, feel free to email me.