Moving Maltese entities to LLC

[mallshtow]

Hi, I have a 2-tier setup in Malta (Holding + Trading companies).

I'm thinking about incorporating in the US (LLC) and don't know what would be best for the Maltese companies...

1). Liquidating them and then once the shareholders receive the assets put them on the LLC? The liquidated assets will be sent as dividend to the shareholders and the tax for receiving those dividends is 0%. How would then work to put those assets into the LLC? Donation? Or maybe it would be just the initial capital with which the LLC is formed with?

2). Just transferring one of the companies (not sure if the Trading or the Holding) to the new jurisdiction (US)? I would anyways have to liquidate the other comapny?

Finally, just for me to know, but what could it be the legal/accountant costs for doing any of these things? Just to have a reference

Thanks!!

 

[Sols]

Where do you reside?

Hi, I have a 2-tier setup in Malta (Holding + Trading companies).

That's good.

I'm thinking about incorporating in the US (LLC)

Why?

and don't know what would be best for the Maltese companies...

Nine times out of ten, I'd keep them and forget about the LLC setup.

1). Liquidating them and then once the shareholders receive the assets put them on the LLC? The liquidated assets will be sent as dividend to the shareholders and the tax for receiving those dividends is 0%. How would then work to put those assets into the LLC? Donation? Or maybe it would be just the initial capital with which the LLC is formed with?

2). Just transferring one of the companies (not sure if the Trading or the Holding) to the new jurisdiction (US)? I would anyways have to liquidate the other comapny?

Many ways to go about it. The first proposed method would work. When you form the LLC, simply grant the assets to the LLC or include them in the LLC Operating Agreement.

Another option is to have the LLC buy the Malta holding company from you. Suppose the Malta company is worth 100,000 EUR. You'd put 100,000 EUR into the LLC, buy the Malta company, and then that money goes back into your own pocket. — You can do something similar where the LLC buys just the trading company.

Whatever option you go for, have your accountant in Malta or another Maltese tax adviser guide you.

Finally, just for me to know, but what could it be the legal/accountant costs for doing any of these things? Just to have a reference

Costs for corporate services are a total crapshoot in Malta. Huge variation depending on who you ask, and who you know.

Liquidations in particular are priced so high that it's cheaper to just keep the company going for another 1–2 years instead.

Best you can do is shop around. You will probably get quotes ranging from a few thousand up to 10,000 (or more). I wouldn't go for the absolutely cheapest option, but unless your structure is complex, you'll probably be fine with some middle of the road option.

 

[mallshtow]

Why?

because i'm tired of maltese tax lawyers not being clear, there's always some issue, etc, etc. also, it's hard to open bank accounts or any other service because usually Malta is not on their supported list of jurisdictions.

so, i'm planning to have the llc as a disregarded entity possibly combining it with portugal's nhr and transfer dividends tax-exempt (there are some rulings where these LLCs are deemed transparent in Portugal

Liquidations in particular are priced so high that it's cheaper to just keep the company going for another 1–2 years instead.

why going for another 1-2 years, what happens after that?

Nine times out of ten, I'd keep them and forget about the LLC setup.

wouldn't that be costly? i'd have to keep on doing the tax report, auditing, everything, right?

Another option is to have the LLC buy the Malta holding company from you. Suppose the Malta company is worth 100,000 EUR. You'd put 100,000 EUR into the LLC, buy the Malta company, and then that money goes back into your own pocket. — You can do something similar where the LLC buys just the trading company.

interesting, ty

Best you can do is shop around. You will probably get quotes ranging from a few thousand up to 10,000 (or more). I wouldn't go for the absolutely cheapest option, but unless your structure is complex, you'll probably be fine with some middle of the road option.

wow, another reason why to move out from this jurisdiction i guess

 

[Sols]

because i'm tired of maltese tax lawyers not being clear, there's always some issue, etc, etc. also, it's hard to open bank accounts or any other service because usually Malta is not on their supported list of jurisdictions.

so, i'm planning to have the llc as a disregarded entity possibly combining it with portugal's nhr and transfer dividends tax-exempt (there are some rulings where these LLCs are deemed transparent in Portugal

So you're going from a structure that's legally sound to a structure that's not, but will work and continue to work so long as Portugal continues to not really enforce its tax laws. To each their own. I'm not saying Malta is perfect. I fully relate to the irritation with inconsistency of tax advice between different lawyers in Malta. It can take a lot of unnecessary time to get clarity.

However, I don't understand how dividends being tax exempt goes with Portugal having issued rulings that LLCs are transparent. Transparent companies don't pay dividends. It means income from an LLC is personal income; more like a salary than a dividend.

why going for another 1-2 years, what happens after that?

It's just how the math works out in most cases. For example, liquidation might cost 10,000 but keeping the company alive costs 4,000. 10/4=2.5. I.e., it's cheaper to keep the company for two more years than to liquidate.

wouldn't that be costly? i'd have to keep on doing the tax report, auditing, everything, right?

Those costs are deductible, though.

 

[mallshtow]

However, I don't understand how dividends being tax exempt goes with Portugal having issued rulings that LLCs are transparent. Transparent companies don't pay dividends. It means income from an LLC is personal income; more like a salary than a dividend.

sorry, let me clarify this:

Portuguese tax authorities did not consider the US LLC as transparent for Portuguese tax purposes, even though it was transparent in the US. As a result, the income was classified as "other income." which is exempt under the NHR.

 

[mallshtow]

any idea @Sols ?

 

[saponaire]

sorry, let me clarify this:

Portuguese tax authorities did not consider the US LLC as transparent for Portuguese tax purposes, even though it was transparent in the US. As a result, the income was classified as "other income." which is exempt under the NHR.

do you have any reference to this?

 

[MarkusCostigan]

Where do you reside?


That's good.


Why?


Nine times out of ten, I'd keep them and forget about the LLC setup.


Many ways to go about it. The first proposed method would work. When you form the LLC, simply grant the assets to the LLC or include them in the LLC Operating Agreement.

Another option is to have the LLC buy the Malta holding company from you. Suppose the Malta company is worth 100,000 EUR. You'd put 100,000 EUR into the LLC, buy the Malta company, and then that money goes back into your own pocket. — You can do something similar where the LLC buys just the trading company.

Whatever option you go for, have your accountant in Malta or another Maltese tax adviser guide you.


Costs for corporate services are a total crapshoot in Malta. Huge variation depending on who you ask, and who you know.

Liquidations in particular are priced so high that it's cheaper to just keep the company going for another 1–2 years instead.

Best you can do is shop around. You will probably get quotes ranging from a few thousand up to 10,000 (or more). I wouldn't go for the absolutely cheapest option, but unless your structure is complex, you'll probably be fine with some middle of the road option.

Hello Sols, for a non dom Maltese resident, do you suggest to opening a Maltese company (trading + holding) structure instead of looking for solutions elsewhere?

 

[Sols]

Hello Sols, for a non dom Maltese resident, do you suggest to opening a Maltese company (trading + holding) structure instead of looking for solutions elsewhere?

Each situation should be considered based on the merits of the specific circumstances. In many/most cases, sticking with a Maltese fiscal unit (MT holding+trading) is the best choice. But I would recommend you speak with a lawyer/tax adviser before making a final decision.

 

[JustAnotherNomad]

Portuguese tax authorities did not consider the US LLC as transparent for Portuguese tax purposes, even though it was transparent in the US. As a result, the income was classified as "other income." which is exempt under the NHR.

Portugal's NHR scheme is dead. If you're not already in, you're out.