Seeking Advice on LLC Formation for IT, Zero Taxation, and Bank Account Options

[MyPrinter]

Hi everybody! We need advice. Here is a brief overview:
Our business in the fields of IT, particularly in computer vision/graphics and Big Data/Cloud technologies.
We are going to register a foreign company (LLC) for commercial activity and we want to reduce taxes down to zero, thus, we are searching for a jurisdiction with the territorial tax system.
Then we want to open a bank account in an on-line bank (or maybe a payment system - we don't know cons/pros yet).
Is it possible? If so, which jurisdictions or services would you recommend?
In next post I will put what I found and thinking

 

[MyPrinter]

This jurisdiction shouldn't be in classical offshore zone (why? I don't know, I think that customer won't pay to that - maybe I'm wrong)
Following list what I found:
1. Hong Kong (+) on paper it should be possible to claim tax exemption but each year (-) some comments says this is not working - I don't know what is true
2. Foreign USA LLC (+) seems very good approach
3. Estonia, Georgia, Slovakia, Costa Rica (-) they have non-zero dividends which can be considered as taxes, I don't know is it way to avoid them?

I though, that Singapore provided territorial tax system and for overseas profits and without repatriation of profit that can be zero taxes and had a call with register, but he said this is not true and your company should pay taxes.

 

[Marzio]

Where you will be tax resident?

 

[MyPrinter]

UA resident, based on rules, if controlled foreign company has less 2M EUR this not subject to tax. BUT! dividends is still taxable. But I'm sure, I can do something with that - this is next set of questions.
Now I'm thinking how to accumulate amount on corporate's bank account and do not pay corporate taxes (or pay with 0% rate)

If foreign company has non-zero dividends (like Estonia lets say) - this is still problem.
If Hong Kong has zero for dividends and I get tax exception in that year - fine! from that moment I can move amount from company's account and that will be zero and only my current resident may ask to pay something but I will have some time and resources to prepare for that, I hope.

 

[Marzio]

UA resident, based on rules, if controlled foreign company has less 2M EUR this not subject to tax.

If you manage any offshore company from Ukraine CFC rules doesn't matter because you are creating a PE in Ukraine so any income should be taxed at UA CIT rates.

That said if you manage a US LLC from Ukraine, use a US bank account and never transfer any money outside of your US LLC bank account but pay any expeses with US LLC business card you'll essentially be tax free.

Obviously this is not compliant but i guess you are justified given the situation.

If that's not enough money for you then you could register as a private entrepreneur in UA and invoice your US LLC for the amount you need and pay income taxes on that amount.

 

[daniels27]

@Marzio maybe a Hong Kong Limited with a director in Malta or something. He can then get the dividends tax-free under the threshold he claims while he just works as freelancer for the company as self-employed for a nominal salary of 100 hryvnia per month?

 

[MyPrinter]

Thank for reply!
I'm not worry to pay taxes when transfer money from US LLC's account to my personal
I'm worry to my US LLC's company should not pay corporate taxes when get amount from customers

 

[MyPrinter]

@daniels27
Yes, with few notes: no reason to have a director in Malta or something. I can do that by myself and thus provide invoices on behalf of my company, I think.

Problem is: once my company provides some services, get payments on company's account, year was done... company should pay taxes. This (corporate) taxes should be zero.

 

[VladKiri]

You should take into consideration that opening a bank account for a US LLC with a UA passport/residency is going to be hard.

 

[MyPrinter]

@VladKiri
Well, actually I'm considering neobanks, Revolut (or better options?)
Moreover, as I'm going to apply territorial tax system for company's activity.
That means, it will be better for company does not have:
- any local activity
- a local bank account
- local customers
Just papers, reports to gov and rent address - that's all
Company should accumulate amounts and not pay any corporate taxes (1), when moving or transferring money with 0% dividends (2)
Personal or shareholder's residence is changeable while accumulation - that's the point

This is how I imagine Hong Kong LLC, each year they will ask to pay 8.25%-15%-16.5% but LLC will claim to reduce it to 0%.
But some comments says that paper rules sometimes different to practice - please, help me find the truth

 

[Marzio]

I can do that by myself and thus provide invoices on behalf of my company, I think

We all know you can do that but by doing that the company, as i said, will be considered tax resident in UA while with a director in Malta it will not (well at least you'll give a facade of more compliancy than straight tax evasion).

You should take into consideration that opening a bank account for a US LLC with a UA passport/residency is going to be hard.

True, didn't considered that.

For example he will not be able to open a bank account with Mercury

 

[VladKiri]

Well, actually I'm considering neobanks, Revolut (or better options?)

You’ll have problems especially with neobanks. Forget about Revolut as well. If you had residency in countries such as France, Germany, Italy (and a couple more that I can't recall right now), you might have a slightly better chance. Otherwise, forget it. You may look into Puerto Rico banks, such as CBiBank, a Chinese-owned bank. They're maybe more relaxed with a UA Passport/Residents.

 

[MyPrinter]

You’ll have problems especially with neobanks. Forget about Revolut as well. If you had residency in countries such as France, Germany, Italy (and a couple more that I can't recall right now), you might have a slightly better chance. Otherwise, forget it. You may look into Puerto Rico banks, such as CBiBank, a Chinese-owned bank. They're maybe more relaxed with a UA Passport/Residents.

Many thanks for the suggestions regarding Puerto Rico and other options.
Are the challenges mainly related to the on-boarding process, or are there other issues that arise afterward?

maybe a Hong Kong Limited with a director in Malta or something

will be considered tax resident in UA while with a director in Malta it will not

Ok, Got it, now I understand.
That will be easy to open and manage bank accounts if the LLC has a director based in Malta, right?
The US or Hong Kong governments won’t be concerned about residence of director, right?

Also, if it will be some difficulties with banks or neo banks, has payment systems can be considered?

 

[daniels27]

That will be easy to open and manage bank accounts if the LLC has a director based in Malta, right?

Yes, it will be much easier if you have a director in a proper jurisdiction as he can open the bank account.

The US or Hong Kong governments won’t be concerned about residence of director, right?

No, they don't care (unless it is in their own jurisdiction which means you would be liable to taxation).

Also, if it will be some difficulties with banks or neo banks, has payment systems can be considered?

Certainly more difficult than a normal resident Hong Kong company, but most likely easier than a normal UA company. Normally, it will be possible.

You can check the thread there to find a good jurisdiction for the director of the US LLC or Hong Kong Limited.

J

Thread 'Best management location for US LLC'

Jan 23, 2025

It seems like US LLCs (and similar entities with no clear corporate tax residency) can be problematic.
This can cause problems like:
* The tax authority in the member's residency country could claim there is a PE / it is managed from there
* For payments to such an entity, the tax authority in the payer's country could claim it is transparent and the payment should be treated as a payment to the member (in his country of tax residency), or it could be treated as non-deductible due to unclear tax residency status

I would guess that these issues can be avoided by having a director in a...

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