non resident UK Ltd

[sp2021]

I have been reading a lot of posts from some members, such as @cangarooo about UK ltds that leverage DTA to become residents in another jurisdiction, potentially lowering tax liabilities that way. I was wondering if anyone would be able to comment on the following hypothetical and purely academic idea: what if the ownership of the UK ltd would be an offshore company, say BVI just as an example, with a nominee director from there. In theory, could this be used to prove that management of the company is being conducted from BVI, therefore having the possibility to request residency in BVI for the UK ltd? Would the tax authority of BVI have to sign off on that request? What else would have to be proven for this to work? Servers located there, office rented? Im theorizing here and I do not want to be misunderstood, I am not promoting or suggesting or looking for ways to engage in tax evasion or anything illegal, just want to understand the mechanics of this concept.

Also, does having a registered address in the UK count as a PE? If yes, how do you go around this - doesn't the UK ltd need to have a UK address?

 

[EliasIT]

What you describe that would have been working fine 10 years ago. Today you need to establish a real company in the BVI i.e. address, staff, utility everything what a real office normally would have.

You can't use only nominees any longer, they will refuse the setup and tell this is a shadow setup after they decline it.

 

[sp2021]

I see, thanks for the reply.

Another hypothetical: in case the UK ltd has a sole employee, a real director in the UAE as resident there, an office and actual business being done from there - would it work then? Even if the UBO is not in the UAE, but technically the economic activity is solely being conducted from the UAE and there is no UK source income.

 

[Marzio]

Another hypothetical: in case the UK ltd has a sole employee, a real director in the UAE as resident there, an office and actual business being done from there - would it work then?

No because only freezone companies pay 0% CIT

 

[sp2021]

@marzio you are right in that it would only be 0% up to 375K AED and then 9% above that, but the question is does the set up work technically? what is needed to make it work in theory?

 

[Marzio]

@marzio you are right in that it would only be 0% up to 375K AED and then 9% above that, but the question is does the set up work technically?

It coud work but why would you put in place such an expensive setup to pay 0% up to $100K?

A better deal imho is by forming a micro-company in Romania and pay 1% up to $500K then distribute dividends tax free to wherever you reside because there aren't withholding taxes for non-resident individuals in Romania.

You would need to hire somebody and rent an office like in UAE but it would cost you much less.

 

[sp2021]

@marzio thanks for the tip, I'll look into it. Are you offering services in this regard?

 

[Marzio]

Are you offering services in this regard?

Nope. Maybe @Don?

 

[Don]

Nope. Maybe @Don?

With the respect to the forum rules I would have to re-activate my membership to answer this question.

As someone with a background in tax advisory, the issue with such threads is that the input is quite generic so you can only expect rather generic answers or simple solutions like move to UAE and do business from there.

What marzio is describing here could be a viable setup in certain cases. Its worth talking with an expert who can help to analyze the exposure of your setup both from legal and tax perspective.

 

[cangarooo]

It coud work but why would you put in place such an expensive setup to pay 0% up to $100K?

A better deal imho is by forming a micro-company in Romania and pay 1% up to $500K then distribute dividends tax free to wherever you reside because there aren't withholding taxes for non-resident individuals in Romania.

You would need to hire somebody and rent an office like in UAE but it would cost you much less.

For Romania, this is partially correct.
- Qualifying small companies can apply for a taxation regime of 1% or 3% on revenue. Usually is 3% .... the 1% regime is for very limited cases
- 5% on dividend distributions to natural persons. Subject to an increase starting with 2023 ... not yet defined but it should go up to 15% to comply with EU rules
- depending on the field of activities, a special license might be required to operate

Hope this helps