UK Ltd vs UK LLP : Which is a good company to save tax?

[tweedshin]

Hello
I am considering establishing a corporation in UK

① UK LTD 100% owned by Japan company (corporate shareholders) as parent company. = subsidiary
② UK LLP = 95% share by Japan company + 5% share by Estonia company.

They're all non-UK residents.

The common point is that the profits earned at 1) or 2) should be transferred to the Japan company.
In this case, what type of company (ltd or llp?) shoulde i create to save taxes?
I am inquiring because I heard that the LLP configuration is free of tax.

 

[Sols]

UK LTD is subject to 19% corporate tax in UK plus corporate tax in the country where you are resident. With luck and a bit of paperwork, you can use the 19% paid in the UK as tax credit and offset against your local tax, so if your local tax is 30% you would only have to pay 11%. Read the details of the double taxation treaty between UK and Japan.

The only way you would avoid this 11% (or whatever the difference is), is for the UK company to qualify as tax resident solely in the UK and nowhere else. You will have to study the law here. But in general, Japan considers a company tax resident if it is has its main or principal office in Japan. This means if you run the company from home in Japan, it's probably a Japanese company. Normally, to get around this, you will need to have operations and management of the UK company in the UK.

UK LLP is not subject to any tax in the UK, provided it is owned by non-residents. Instead, the Japanese and Estonian companies would likely have to pay full income tax on whatever is received from the UK company, which would likely be considered profit by default.

In essence: you can't save on taxes this way. With all the modern tax evasion legislation, something like this only "works" if it's not detected by the tax authorities somehow or if your company is not tax resident in Japan.

 

[tweedshin]

UK LTD is subject to 19% corporate tax in UK plus corporate tax in the country where you are resident. With luck and a bit of paperwork, you can use the 19% paid in the UK as tax credit and offset against your local tax, so if your local tax is 30% you would only have to pay 11%. Read the details of the double taxation treaty between UK and Japan.

The only way you would avoid this 11% (or whatever the difference is), is for the UK company to qualify as tax resident solely in the UK and nowhere else. You will have to study the law here. But in general, Japan considers a company tax resident if it is has its main or principal office in Japan. This means if you run the company from home in Japan, it's probably a Japanese company. Normally, to get around this, you will need to have operations and management of the UK company in the UK.

UK LLP is not subject to any tax in the UK, provided it is owned by non-residents. Instead, the Japanese and Estonian companies would likely have to pay full income tax on whatever is received from the UK company, which would likely be considered profit by default.

In essence: you can't save on taxes this way. With all the modern tax evasion legislation, something like this only "works" if it's not detected by the tax authorities somehow or if your company is not tax resident in Japan.

it was very helpful to me,
Thank you for your detailed reply.