US LLC for UAE resident (how to structure)

[Evi]

Hi!

what are the pros and cons of having a US LLC owned directly by a UAE resident or by transferring the ownership to the UAE company?

It would be taxable 9% in both cases.
If UAE company owns a US LLC accounting has to be done at the UAE level, thus accounting everything.

So the questions I can't find answer are:

1. How the accounting would be done in case it is directly owned by an individual (UAE resident)?
Would LLC in this case have to be registered as a tax payer in the UAE, make accounting and submit all the reports as any UAE company? Or the only obligation is to pay 9% on the part, that is distributed to the owner?

2. What is better for banking: banks better accept money transferred from the US LLC bank account to the owners individual bank account in the UAE or it is easier to transfer it to the corporate bank account of the UAE company, that owns US LLC?

Would be happy any clarifications on those issues!

 

[Cloudbanck]

1. Nobody really knows. Guess in theory the US LLC with PE in the UAE should have the same requirements as a local UAE company. In practice however, bureaucrats are usually pretty lost when it comes to another country's stuff, so I would expect things to be much more lenient for a US LLC.
Guess best is to make sure the US LLC doesnt have PE in the UAE, by staying less than 180 days in the UAE - summer elsewhere is nice - (could be 90 days though, not entirely sure), or creating PE somewhere else.

2. Well sending from a UAE company bank account to a UAE personal bank account will be easier than transfer from a US LLC bank account (in the US I presume) to a personal UAE bank account. The latter is not a problem though, first time I did it they asked to verify that I was indeed the recipient and after that, no problems.

 

[kekmaw]

From what I've gathered it would be best to have the US LLC managed from another country to avoid PE.

In another thread it was mentioned that Oman and Bahrain could be good options for this.

I also heard Serbia could work but not too sure, the PE rules look a bit different than most places from what I can tell.

 

[Evi]

1. Nobody really knows. Guess in theory the US LLC with PE in the UAE should have the same requirements as a local UAE company. In practice however, bureaucrats are usually pretty lost when it comes to another country's stuff, so I would expect things to be much more lenient for a US LLC.
Guess best is to make sure the US LLC doesnt have PE in the UAE, by staying less than 180 days in the UAE - summer elsewhere is nice - (could be 90 days though, not entirely sure), or creating PE somewhere else.

2. Well sending from a UAE company bank account to a UAE personal bank account will be easier than transfer from a US LLC bank account (in the US I presume) to a personal UAE bank account. The latter is not a problem though, first time I did it they asked to verify that I was indeed the recipient and after that, no problems.

there is no issue with paying 9% tax, as staying less than 180 days is not possible. The issue is how practically the banks will accept money easier from the US LLC.
Do you think, that UAE bank will easier accept a bank transfer from the US LLC to the UAE company bank account than to a personal one? Or there is no difference?

 

[mraleph]

Hi!

what are the pros and cons of having a US LLC owned directly by a UAE resident or by transferring the ownership to the UAE company?

It would be taxable 9% in both cases.
If UAE company owns a US LLC accounting has to be done at the UAE level, thus accounting everything.

So the questions I can't find answer are:

1. How the accounting would be done in case it is directly owned by an individual (UAE resident)?
Would LLC in this case have to be registered as a tax payer in the UAE, make accounting and submit all the reports as any UAE company? Or the only obligation is to pay 9% on the part, that is distributed to the owner?

2. What is better for banking: banks better accept money transferred from the US LLC bank account to the owners individual bank account in the UAE or it is easier to transfer it to the corporate bank account of the UAE company, that owns US LLC?

Would be happy any clarifications on those issues!

US federal CIT is 21% regardless of state's CIT where limited liability company is incorporated.

For proper taxation, you should specify in which federal state you prefer to incorporate the company and will you have US operations - from where will you source the income.

US knows two different taxation schemes in regards to companies, C and S. As you most certainly aren't US citizen or national, you won't be able to select S corp option - a pass thru one.

So, wherever you incorporate, it will be C corp which means that the legal entity will pay CIT - it won't pass thru tax liabilities to the owner.

The owner - a natural or legal UAE entity - would pay WHT at 30% rate as there is no tax treaty between US and UAE.

If you are willing to pay up to 30% WHT, there would be no problem for transfering dividends from US entity towards its UAE owner.

 

[Sols]

US federal CIT is 21% regardless of state's CIT where limited liability company is incorporated.

It's a small detail but LLCs aren't incorporated. They are formed or organized.

For proper taxation, you should specify in which federal state you prefer to incorporate the company

What's a federal state?

US knows two different taxation schemes in regards to companies, C and S. As you most certainly aren't US citizen or national, you won't be able to select S corp option - a pass thru one.

Why are you talking about S and C Corps when the topic is LLCs?

LLCs can be pass-through for non-resident aliens.

If you are willing to pay up to 30% WHT, there would be no problem for transfering dividends from US entity towards its UAE owner.

LLCs do not distribute dividends.

All in all, you seem to be a little confused or maybe just misread. The topic is about LLC, which is a type of entity different from corporations (whether S Corp or C Corp).

 

[Cloudbanck]

US federal CIT is 21% regardless of state's CIT where limited liability company is incorporated.

For proper taxation, you should specify in which federal state you prefer to incorporate the company and will you have US operations - from where will you source the income.

US knows two different taxation schemes in regards to companies, C and S. As you most certainly aren't US citizen or national, you won't be able to select S corp option - a pass thru one.

So, wherever you incorporate, it will be C corp which means that the legal entity will pay CIT - it won't pass thru tax liabilities to the owner.

The owner - a natural or legal UAE entity - would pay WHT at 30% rate as there is no tax treaty between US and UAE.

If you are willing to pay up to 30% WHT, there would be no problem for transfering dividends from US entity towards its UAE owner.

Yes, it is true that non-residents can't open US S Corps, but they can open US LLCs which are also pass-through/disregarded. With a US LLC there will not be any US corporate income tax, nor any withholding tax (except for royalties and other types of passive income flows.)

See here for differences between an S Corp and an LLC: LLC vs S Corp (What's the Difference?) - MarketWatch.

 

[mraleph]

All in all, you seem to be a little confused or maybe just misread. The topic is about LLC, which is a type of entity different from corporations (whether S Corp or C Corp).

All in all, it appears that you are a little bit confused, got it wrong or misread something. I have not became a member here to be tuted publicly with erroneous and misleadind naratives. Your stance speaks for itself. You took every possible ambiguity in my wording and sliced it sadisticaly. As you opted to do it publicly, I'll reply with reciprocity - couldn't care less whoever you may be. If I'm not welcomed, good bye!

It's a small detail but LLCs aren't incorporated. They are formed or organized.

Business entities are established, founded, formed, organized or incorporated - mutualy interchangable key words. Strictly speaking, corporations - companies limited by shares do have Articles of incorporation whilst limited liability companies have Articles of organization. Whether it's AG or Ltd it's a company limited by shares - somewhere founded, incorporated or simply formed. Analogy in case of GmbH or LLC - limited liability company.

LLCs do not distribute dividends.

Limited liability companies do distribute it's profits - though differently than companies limited by shares. Also, they may allocate profit as well. I'm quite sure you know the nuances and circumstances.

Why are you talking about S and C Corps when the topic is LLCs?

LLCs can be pass-through for non-resident aliens.

Without elaborating about US tax regimes read this as introduction and go from there

Single Member Limited Liability Companies | Internal Revenue Service

Review information about the Limited Liability Company (LLC) structure and the entity classification rules related to filing as a single-member limited liability company.

www.irs.gov

Mere mentioning the conditional form "can be" is misleading from your side. Tax regime depends upon selection of the shareholders or members.

What's a federal state?

What is the political form of US? Is it maybe federal republic with member states?

Yes, it is true that non-residents can't open US S Corps, but they can open US LLCs which are also pass-through/disregarded. With a US LLC there will not be any US corporate income tax, nor any withholding tax (except for royalties and other types of passive income flows.)

See here for differences between an S Corp and an LLC: LLC vs S Corp (What's the Difference?) - MarketWatch.

You may be correct under conditions that member(s) select specific options for tax regime.

 

[Sols]

All in all, it appears that you are a little bit confused, got it wrong or misread something. I have not became a member here to be tuted publicly with erroneous and misleadind naratives. Your stance speaks for itself. You took every possible ambiguity in my wording and sliced it sadisticaly. As you opted to do it publicly, I'll reply with reciprocity - couldn't care less whoever you may be. If I'm not welcomed, good bye!

Sadistically? The usage of that word implies a degree of effort I'm not sure I'm even cable of over something — I thought — so trivial.

I was just surprised why in a discussion about LLCs, you'd bring up C and S Corps and pointed out some minor incorrect details. For other readers' benefit. Not as an attack on you. I'm sorry if that's how it came across. I promise it's not that deep.

Business entities are established, founded, formed, organized or incorporated - mutualy interchangable key words. Strictly speaking, corporations - companies limited by shares do have Articles of incorporation whilst limited liability companies have Articles of organization. Whether it's AG, AB, SpA or Ltd it's a company limited by shares - somewhere founded, incorporated or simply formed. Analogy in case of GmbH, LLC, Sarl, BV - limited liability company.

Chill. I even said it was a small detail. Meant mostly as an aside. But LLCs are indeed not incorporated.

Limited liability companies do distribute it's profits - though differently than companies limited by shares. Also, they may allocate profit as well. I'm quite sure you know the nuances and circumstances.

I didn't say LLCs don't distribute profits. I wrote that they don't distribute dividends, as per the line of text you quoted.

The difference between distribution of profits and distribution of dividends can be quite important. For example, it can be the difference between paying income tax and paying some other form of tax. I think that's a detail that's worth considering and a detail worth getting right. Tax authorities seem to think so, too.

Since LLCs that opt for pass-through treatment can't defer taxes, you should consider the implication of the company's full profits (maybe) becoming taxable for the members.

In the case of UAE, it seems like they will treat LLCs as taxable entities. (Unless they updated the FAQ again and changed their minds.) If that's the case, what happens to an LLC that opts for pass-through treatment? Since the profits are automatically distributed, you could end up in a situation where every cent of profit is due to the owners. So it is distribution of profit or is it dividends?

Without elaborating about US tax regimes read this as introduction and go from there

Single Member Limited Liability Companies | Internal Revenue Service

Review information about the Limited Liability Company (LLC) structure and the entity classification rules related to filing as a single-member limited liability company.

www.irs.gov

Mere mentioning the conditional form "can be" is misleading from your side. Tax regime depends upon selection of the shareholders or members.

I don't see what's misleading. Even the link you posted corroborates my post.

Here's what the IRS writes:

Depending on elections made by the LLC and the number of members, the IRS will treat an LLC either as a corporation, partnership, or as part of the owner's tax return (a "disregarded entity").

and

If a single-member LLC does not elect to be treated as a corporation, the LLC is a "disregarded entity," and the LLC's activities should be reflected on its owner's federal tax return.

Here's what I wrote:

LLCs can be pass-through for non-resident aliens.

I must be daft because I don't at all understand how what I wrote was misleading. It seems to have been entirely factual.

 

[mraleph]

Sadistically? The usage of that word implies a degree of effort I'm not sure I'm even cable of over something — I thought — so trivial.

I was just surprised why in a discussion about LLCs, you'd bring up C and S Corps and pointed out some minor incorrect details. For other readers' benefit. Not as an attack on you. I'm sorry if that's how it came across. I promise it's not that deep.


Chill. I even said it was a small detail. Meant mostly as an aside. But LLCs are indeed not incorporated.


I didn't say LLCs don't distribute profits. I wrote that they don't distribute dividends, as per the line of text you quoted.

The difference between distribution of profits and distribution of dividends can be quite important. For example, it can be the difference between paying income tax and paying some other form of tax. I think that's a detail that's worth considering and a detail worth getting right. Tax authorities seem to think so, too.

Since LLCs that opt for pass-through treatment can't defer taxes, you should consider the implication of the company's full profits (maybe) becoming taxable for the members.

In the case of UAE, it seems like they will treat LLCs as taxable entities. (Unless they updated the FAQ again and changed their minds.) If that's the case, what happens to an LLC that opts for pass-through treatment? Since the profits are automatically distributed, you could end up in a situation where every cent of profit is due to the owners. So it is distribution of profit or is it dividends?


I don't see what's misleading. Even the link you posted corroborates my post.

Here's what the IRS writes:

and


Here's what I wrote:


I must be daft because I don't at all understand how what I wrote was misleading. It seems to have been entirely factual.

Your further comment simply proves my original assumption which is by now, a fact.

Sadism - different forms of aggression exist. A passive, cultivated one is a most dangerous. Once uncovered, it has a tendency to play naive

You haven't proved anything apart from yourself. For that, I thank you.

I will not discuss with you further nor comment your post anywhere - you are in privileged position and quite "cultivated" in discussion - it's pointless to lose my time with somebody with your traits.

 

[JackAlabama]

there is no issue with paying 9% tax, as staying less than 180 days is not possible. The issue is how practically the banks will accept money easier from the US LLC.
Do you think, that UAE bank will easier accept a bank transfer from the US LLC to the UAE company bank account than to a personal one? Or there is no difference?

nah that doesnt matter.

 

[Evi]

nah that doesnt matter.

did you try sending profits from the UAE to a bank account in the UAE? Do you have any suggestions where to open a bank account?