Repercussions of your foreign company being a local tax resident

[European]

Hi all,
Imagine you are in or move to a EU country with low tax on dividends. You set up a company abroad, for instance a US LLC, and do business through it. The LLC is not ETBUS and thus pays no federal income tax in the US.
You disburse dividends to yourself, declare them before the local tax authority and pay the associated (low) dividend tax rate on that income. So no hiding the company or its distributions.
The tax office then reviews your file and comes asking questions about the LLC paying the dividends. After some back and forth they finally rule your LLC is a local tax resident.
What happens next?
Do you pay the associated CIT and that is it? Are penalties likely and of what type?

Thanks

 

[Mike Forman]

Depending how far they go back in time as they will and interest rates rating over 10pct a year.

Aasume after some investigation of 3 to 6 months you get the tax bill from 7 years.

You will be taxed in some countries which can be can be 105 percent due to some high tax in a tax shifting or tax evasion law.

And you will get a fine + interest on top

You can assume the tax you would have normally paid multiplied by 2 or 3.

Higlikely you will be taxed as a sole proprietary in your case and pay personal income tax + social contributions etc mutlipled by two and more interests.

This is without any legal fees as you better get a tax lawyer from the start or they will let you bend over.

You can then appeal which will be rejected ayway and since then you are liable to pay without 30 days.

If you don't pay this tax it becomes a legal case. When u lose you will end up having to pay everything (add 2 more years interest for the court case duration) or all your assets as well as any future salary for many years (the part above a minimum set income) having seized.