US LLC + Cyprus residency

[JustAnotherNomad]

Does anyone have experience with US LLCs (disregarded entities) and Cyprus residency? (I assume the LLC would have to be owned by a Cypriot company for this to work.)
Or is there a catch?

 

[fshore]

In many countries a us llc is considered a separate entity and not disregarded for taxes. I’m not sure how Cyprus classifies a us llc, so that is worth checking. Disregarded status is a IRS way of viewing it and not directly related to the company that is formed at the state level.

 

[Sols]

What are you trying to achieve exactly?

The Cyprus tax authority almost never goes after well behaved foreigners but you might sleep better at night if you set up a structure that's fully compliant, rather than rely on lack of enforcement.

 

[JustAnotherNomad]

My idea was to have income from the US LLC classified as a tax-free dividend, although the LLC would be tax-transparent from the US side.
But it seems like you will always pay tax on sales to US clients (even without US presence/nexus) if the LLC is owned by a corporate entity.
And I guess without that, it doesn’t work from the Cyprus side...

 

[Sols]

Income from an LLC is not dividends, so you would be looking at personal income tax in Cyprus. In reality, this is almost never checked by the tax office but it is probably not compliant. One way around this would be to have the LLC opt to be taxed as a corporation, in which case you're looking at a different tax structure (US corporate tax, relief under DTA, and then dividends).

But for anyone living in Cyprus, I'd almost always recommend forming a Cypriot company. It's not the cheapest and it's not zero tax, but it's one of the best structures you can have today within the EU. You get to sleep at night knowing your structure is compliant and sustainable.

 

[JustAnotherNomad]

I was hoping that Cyprus might still classify the income as dividends, even though the LLC is tax transparent.
Can you have a US corporation that doesn’t pay corporate income tax in the US per the DTA? I thought you always have to pay tax in the US first with a corporation (of course you can reduce profits using deductions and salaries - but then there’s US payroll tax etc.).
Or at least you would be paying tax on sales to US clients?

Actually I’m strongly inclined now to just go for UAE residency with a US LLC. I like Dubai much better than Cyprus. I was only hesitant because free zone companies are so expensive. But it seems like you can just get a freelance visa instead, which is much cheaper.

 

[fshore]

My idea was to have income from the US LLC classified as a tax-free dividend, although the LLC would be tax-transparent from the US side.
But it seems like you will always pay tax on sales to US clients (even without US presence/nexus) if the LLC is owned by a corporate entity.
And I guess without that, it doesn’t work from the Cyprus side...

You pay the same taxes to the us that you would have without the llc. If the foreign company would pay tax on those sales then you will also pay tax on the sales when selling through the llc.

 

[fshore]

Income from an LLC is not dividends, so you would be looking at personal income tax in Cyprus.

A us llc can pay dividends, it all depends on how Cyprus will regard the income.
How irs in the us regards the income and the llc doesn’t necessarily relate to how other countries regards the company.

 

[Sols]

A us llc can pay dividends, it all depends on how Cyprus will regard the income.
How irs in the us regards the income and the llc doesn’t necessarily relate to how other countries regards the company.

Not sure why you cut my quote off right before I clarified exactly that.

 

[fshore]

Not sure why you cut my quote off right before I clarified exactly that.

I think we all use these treads for general information, not always just related to the specific case in question.
Thats why I pointed out that there is nothing with a llc that says it can't pay dividends.

 

[hernanday]

Does anyone have experience with US LLCs (disregarded entities) and Cyprus residency? (I assume the LLC would have to be owned by a Cypriot company for this to work.)
Or is there a catch?

I am curious what you are trying to achieve with this structure