Rate the PT Setup

[yngmind]

Please rate my PT setup, and let's discuss possible issues.

- US LLC
- Non western passport that doesn't impose taxes if you are a tax resident nowhere
- UAE residency
- travel across Asia, the EU, and South Africa

Use fake bills for the banks with the UAE address. If the home country asks where you are a tax resident, you say UAE or nowhere.

There are many variations of my setup, like renting a cheap apartment in the UAE and using it as your address/buying it.

The possible issue I see:
- Your banks will require KYC, and if they see something suspicious, they can close your account.

- Tax forms can be an issue, too. Like a US tax form, you have to claim that you're a resident somewhere and provide your address.
I don't think providing some fake address to the US is a good idea.

- For some people, it won't work because their country will require a tax certificate, which you can only get if you've lived 183 days, but let's imagine my home country has only 183 days test.

My setup is ready to be criticized.

 

[Nomado]

Fake bills for banks, isn't that a bit riscky if you get cought?

 

[Clank]

Usually banks accept a bank statement as a proof of address, you can use your UAE bank statement as proof of address.

 

[yngmind]

Yeah, proof of address is easy.

But what about US tax returns

 

[Clank]

Yeah, proof of address is easy.

But what about US tax returns

as long as you don’t live in the US they won’t make you pay any taxes, provide any address you want.

 

[Don]

You say that your residency is in UAE? What kind of residence permit you have or will get?

Do I understand correctly that to US, you declare that the company operations are based in UAE? Yet, I understand that you don't pay corporate income tax and acquire relevant business licenses in UAE for the US LLC.

What if any country asks where the company is a tax resident and where the operations are performed, e.g., management?
E.g., if UAE asks this question what will you tell them?

 

[Cloudbanck]

You say that your residency is in UAE? What kind of residence permit you have or will get?

Do I understand correctly that to US, you declare that the company operations are based in UAE? Yet, I understand that you don't pay corporate income tax and acquire relevant business licenses in UAE for the US LLC.

You don't need UAE licenses for a non-UAE company. And there would be no permanent establishment in the UAE for the US LLC if the owner doesnt stay long in the UAE, so no corporate income tax. Then it's still up in the air how PE rules are applied in practice in the UAE.

What if any country asks where the company is a tax resident and where the operations are performed, e.g., management?
E.g., if UAE asks this question what will you tell them?

I think this is only an issue with high tax countries which share information with the US bilaterally. They are not going to ask you where the company is tax resident, that's not how it works. They are going to say Hey, you are a tax resident in say France and we see you have a foreign company, now you must pay tax and penalties.

So the key is to not stay long enough to be a tax resident in any country, and especially not in a high tax country.

 

[yngmind]

I will say UAE

You say that your residency is in UAE? What kind of residence permit you have or will get?

Do I understand correctly that to US, you declare that the company operations are based in UAE? Yet, I understand that you don't pay corporate income tax and acquire relevant business licenses in UAE for the US LLC.

What if any country asks where the company is a tax resident and where the operations are performed, e.g., management?
E.g., if UAE asks this question what will you tell them?

 

[Cloudbanck]

An interesting question though is what happens if you stay long enough in the UAE to be a tax resident there and your US LLC gets a permanent establishment in the UAE.

The US doesn't have any tax information exchange agreements or tax treaties with the UAE. (See https://home.treasury.gov/policy-issues/tax-policy/treaties) There is a FATCA Model 1 IGA between the US and the UAE though, which could mean reciprocity. But I dont think this reciprocity is in effect in practice, i.e. it's questionable whether US banks report to the UAE. Also not sure if it applies to business accounts as well as individual accounts.

So it's a bit hard for the UAE to enforce, both in terms of determining if there is PE, and to get info from the US about the US LLC. But in theory the US LLC (unless treated as a transparent non-incorporated entity by the UAE) should pay 9% corporate income tax to the UAE on profits above 375K AED per year.

 

[Don]

You don't need UAE licenses for a non-UAE company. And there would be no permanent establishment in the UAE for the US LLC if the owner doesnt stay long in the UAE, so no corporate income tax. Then it's still up in the air how PE rules are applied in practice in the UAE.


I think this is only an issue with high tax countries which share information with the US bilaterally. They are not going to ask you where the company is tax resident, that's not how it works. They are going to say Hey, you are a tax resident in say France and we see you have a foreign company, now you must pay tax and penalties.

So the key is to not stay long enough to be a tax resident in any country, and especially not in a high tax country.

Unless the circumstances are quite obvious and they have sufficient proof they cant just slap foreign companies with tax residency, but they can start an international tax audit to investigate further.
Obvious circumstances could be "effective management and control" which is a test for corporate tax residence in UAE noting that for legal entities it is generally public information who is the director/manager.
Although the chances are not high that they would go after a PT, it leaves the structure exposed.
If you want to legally operate with a foreign company in UAE, you do need a relevant license.

 

[Konstanz]

I will say UAE

They will probably ask for your tax residence certificate from UAE as you say "- Non western passport that doesn't impose taxes if you are a tax resident nowhere"
TRC is proof of your tax residence elsewhere. And you have to stay 180+ days in UAE to get TRC. It will not be enough to say "I am tax resident in UAE" for sure..

 

[Cloudbanck]

Unless the circumstances are quite obvious and they have sufficient proof they cant just slap foreign companies with tax residency, but they can start an international tax audit to investigate further.
Obvious circumstances could be "effective management and control" which is a test for corporate tax residence in UAE noting that for legal entities it is generally public information who is the director/manager.

But when it is just one person with a laptop "effective management and control" is not obvious at all. And for a US LLC it is not public information who is director/manager (the IRS knows though).

If you want to legally operate with a foreign company in UAE, you do need a relevant license.

Do you have any source for this? From what I can find a foreign company needs to set up a branch or representative office in the UAE, if it wishes to conduct business in the UAE - and then licenses are required. But what we are talking about here is a foreign company that conducts business outside the UAE, so no branch or representative office is needed. Guess one could argue that since it is effectively managed and controlled from the UAE license requirements apply, but I dont see anything confirming this.

I practice it seems the UAE treats such cases as if the owner of the US LLC is an employee based in the UAE of a foreign company. That's for example how it works with remote worker visas.

 

[yngmind]

They will probably ask for your tax residence certificate from UAE as you say "- Non western passport that doesn't impose taxes if you are a tax resident nowhere"
TRC is proof of your tax residence elsewhere. And you have to stay 180+ days in UAE to get TRC. It will not be enough to say "I am tax resident in UAE" for sure..

it will, because UAE doesn't issue TRC for my country, even if I've stayed 183+ days in the UAE.
So, I normally say to the banks that UAE doesn't issue it for my country, and I give them my emirates id.

 

[Konstanz]

it will, because UAE doesn't issue TRC for my country, even if I've stayed 183+ days in the UAE.
So, I normally say to the banks that UAE doesn't issue it for my country, and I give them my emirates id.

They issue now "domestic certificate" if you stay 90 days with some conditions or 180+ days. Even if country is not on DTA list
How you can say you are tax resident in UAE while you are not tax resident even according their local laws?

 

[Don]

Important points for this structure would also be the location of your clients. Do you have any clients in US or UAE?
Some countries will not consider such entity invoices as deductible for corporate tax purposes or apply withholding taxes since it doesn't have tax residence certificate.

 

[yngmind]

Important points for this structure would also be the location of your clients. Do you have any clients in US or UAE?
Some countries will not consider such entity invoices as deductible for corporate tax purposes or apply withholding taxes since it doesn't have tax residence certificate.

US yes

 

[Don]

US yes

Disregarded entities don’t have to pay any income taxes in US unless the Foreign Owned SMLLCs are generating income that are FDAP or effectively connected to US Trade or Business.

 

[yngmind]

Disregarded entities don’t have to pay any income taxes in US unless the Foreign Owned SMLLCs are generating income that are FDAP or effectively connected to US Trade or Business.

I'm aware of that.

So, seems like my setup is legit, there are some possible issues, but I think I will be able to solve them.

 

[scooterguy]

I have a question about your setup: doesn't the UAE residency result in increased unnecessary costs? I'd understand this if your business was set up as a UAE FZ, but this is not the case.

Why not just do the US LLC + travel around the world part?

And for dealing with foreign banks, you can just use some residency in SEA.

For instance, you can easily and cheaply get 12-month visas in places such as Thailand (ED visa, Thai Elite, etc.), Laos (business visa), or Vietnam (multiple entry visa or student visa), and you can also even more easily rent modern/luxury apartments for $300/mo (both to use for banks and to actually use yourself).

You can also use those visas to get bank accounts as a resident of those countries, for increased diversification and for even more proof of your residency there if foreign banks ever request it (bank statements).

This will all save you the costs and headaches of having to rent in UAE. The stuff you can get for "cheap" in UAE is depressing, even if you don't plan on using it; just visiting those cockroach-infested places will take years out of your life. Plus, you'll have to deal with Ejari, registering with DEWA, etc.

None of that BS in SEA; you get your apartment in 2 days and it's an apartment where you will actually want to spend time in. And as long as you don't spend more than 6 months in any of those ASEAN countries, even if you have visas, long-term leases and bank accounts, you won't have a tax liability.

Thoughts?

 

[yngmind]

I have a question about your setup: doesn't the UAE residency result in increased unnecessary costs? I'd understand this if your business was set up as a UAE FZ, but this is not the case.

Why not just do the US LLC + travel around the world part?

And for dealing with foreign banks, you can just use some residency in SEA.

For instance, you can easily and cheaply get 12-month visas in places such as Thailand (ED visa, Thai Elite, etc.), Laos (business visa), or Vietnam (multiple entry visa or student visa), and you can also even more easily rent modern/luxury apartments for $300/mo (both to use for banks and to actually use yourself).

You can also use those visas to get bank accounts as a resident of those countries, for increased diversification and for even more proof of your residency there if foreign banks ever request it (bank statements).

This will all save you the costs and headaches of having to rent in UAE. The stuff you can get for "cheap" in UAE is depressing, even if you don't plan on using it; just visiting those cockroach-infested places will take years out of your life. Plus, you'll have to deal with Ejari, registering with DEWA, etc.

None of that BS in SEA; you get your apartment in 2 days and it's an apartment where you will actually want to spend time in. And as long as you don't spend more than 6 months in any of those ASEAN countries, even if you have visas, long-term leases and bank accounts, you won't have a tax liability.

Thoughts?

That sounds good. I have a freelance visa, which is 3-4k a year, so it's not a big deal.

I didn't plan to rent in the UAE. I've rented in the past and have my old Ejari. I can change the lease date there lol.

Yeah, I think it's a good idea to get a visa in SEA.

I can go to Thailand for 90 days visa-free, and the visa runs works, so I think I can even live on a tourist visa in Thailand.

In my opinion, UAE looks more legit since I'm a resident there, but in SEA, I'm a tourist, even with a Thai Elite - I'm a tourist.

Have you guys seen the new Indonesia kitas prices? We should create a new thread about that.

There are some good updates about Malaysia my second home as well.