Us Llc non resident

[Obelix]

Im thinking in open a Us Llc non resident, what i understood is that as non phisical business in us, no usa customers,etc Us Llc have not to pay taxes in US

As is a pass through i have to pay taxes where i have my residence

I live in Cyprus, i asked my accounter about who have to be the shareholder or the Us Llc, me or my Cyprus Ltd, he told me better the Cyprus Ltd, so will receive the dividends from Us Llc and usa will only witholding 5%, if i do as personal will be 15%, and then in Cyprus in both cases only will pay 2.65%

Anyone can tell me if this its correct?

I read in many places that is same way if sharehoder is a person or a company in the Us Llc, but right now im so confuse, and in one website they told me if the shareholder of the Us Llc is another company its taxable in Us, anyone know about this?

Thank you for your help

 

[TRGali]

I don't know much about the details of the US LLC.

I am no expert about them, so I won't say much. Just check that EU reverse hybrid rules won't make your Cyprus company liable for paying Cyprus CIT 12.5% on the profit of the US LLC on the basis that it is a tax transparent entity.

 

[churumbelo]

I wonder whether the Cyprus tax agency considers a US LLC as a transparent or an opaque entity. And in that specific case, they might not see it as if your Cyprus company receives dividends. Also, on the US side, I do not know if a US LLC is considered as a pass-through entity by the IRS when it is own by another company.
Those are some questions I can quickly think of after reading your post. Luckilky someone else will answer to those.

 

[Obelix]

I don't know much about the details of the US LLC.

I am no expert about them, so I won't say much. Just check that EU reverse hybrid rules won't make your Cyprus company liable for paying Cyprus CIT 12.5% on the profit of the US LLC on the basis that it is a tax transparent entity.

Thank you its first i thought, now i talked my accounter in Cyprus, said no 12,5% if come as dividends

I wonder whether the Cyprus tax agency considers a US LLC as a transparent or an opaque entity. And in that specific case, they might not see it as if your Cyprus company receives dividends. Also, on the US side, I do not know if a US LLC is considered as a pass-through entity by the IRS when it is own by another company.
Those are some questions I can quickly think of after reading your post. Luckilky someone else will answer to those.

Every place i read not different if sharehoder is Cyprus Ltd or personal, but one said its different, its why im asking to confirm

 

[CyprusLaw]

Thank you its first i thought, now i talked my accounter in Cyprus, said no 12,5% if come as dividends


Every place i read not different if sharehoder is Cyprus Ltd or personal, but one said its different, its why im asking to confirm

We addressed this issue in the passed - the US LLC would be considered a transparent entity and therefore if you are the shareholder then the tax dept would see it as income and not as dividends. Therefore it is advisable that you have the Cyprus entity as the shareholder and then receive it as dividend.

 

[Jerry1911]

We addressed this issue in the passed - the US LLC would be considered a transparent entity and therefore if you are the shareholder then the tax dept would see it as income and not as dividends. Therefore it is advisable that you have the Cyprus entity as the shareholder and then receive it as dividend.

Would it be the same for other jurisdictions as well? e.g. Belize LLCs, SVG LLCs, etc.?

Out of curiosity, would it be possible to make such entity a corporate tax resident of Cyprus? Not sure if it would fulfil TD 98 form requirements as it mentions corporate seal, shareholders’ meetings, etc.

 

[Obelix]

We addressed this issue in the passed - the US LLC would be considered a transparent entity and therefore if you are the shareholder then the tax dept would see it as income and not as dividends. Therefore it is advisable that you have the Cyprus entity as the shareholder and then receive it as dividend.

Thank you very much for your help, theres people saying even in personal you can decide go to dividends, but i understand as you its a pass through, is why my Cyprus LTD will be the shareholder of the Us Llc, so will receive as dividends, and if im right Usa will withhold 5% of dividends

 

[Jerry1911]

Thank you very much for your help, theres people saying even in personal you can decide go to dividends, but i understand as you its a pass through, is why my Cyprus LTD will be the shareholder of the Us Llc, so will receive as dividends, and if im right Usa will withhold 5% of dividends

Watch out for the branch profits tax in the US

 

[Obelix]

Watch out for the branch profits tax in the US

Ask different companies, they said i have to pay in Cyprus, where shareholder have his residence, in this case the Cyprus LTD, not pay tax profits in US as is an US LLC non resident, will not have shop there, will not have us customers, etc

 

[TRGali]

Thank you very much for your help, theres people saying even in personal you can decide go to dividends, but i understand as you its a pass through, is why my Cyprus LTD will be the shareholder of the Us Llc, so will receive as dividends, and if im right Usa will withhold 5% of dividends

But in that case, the same issue you would face as a CY resident individual, your CY company will face. And your CY company will have to pay 12.5 % tax on this income that will not be seen as dividend (same principle as for an individual). Or reverse hybrid rules might be used against your company. You might be able to get away with it, I actually don't know, but if they look into you then that's when the real problems would start.

 

[Obelix]

But in that case, the same issue you would face as a CY resident individual, your CY company will face. And your CY company will have to pay 12.5 % tax on this income that will not be seen as dividend (same principle as for an individual). Or reverse hybrid rules might be used against your company. You might be able to get away with it, I actually don't know, but if they look into you then that's when the real problems would start.

Perphas and thank you, but i asked Cyprus adviser and Us and told me Cyprus Ltd as shareholder of the Us Llc and sent profits as dividends, ill try, thinking the worst will be the 12,5%, but the opinion of most most people its dividends can be send

 

[CoinMaster]

Perphas and thank you, but i asked Cyprus adviser and Us and told me Cyprus Ltd as shareholder of the Us Llc and sent profits as dividends, ill try, thinking the worst will be the 12,5%, but the opinion of most most people its dividends can be send

did you get setup this way ?

 

[Obelix]

did you get setup this way ?

I opened the us llc non resident, and shareholder is the cyprus ltd, but didnt work yet, and anyway the problem about profits, will be next week
After so much reading and hear people, looks that the true profits from us have to go to the ltd direct and have to pay in Cyprus 12,5%, but most people i talked, send to cyprus and declare there as dividends that receive.
But what i understand is that is not the correct way

 

[JohnDones]

What about a multi member LLC with management in a 0% tax country?

Multi member LLCs are treated slightly different in the US - See this video from JB

I'm guessing that if you ask a lawyer/CPA and they don't know the answer they will lean toward a safer side, which is to pay the tax.

Why would they give you a legal opinion, take liability and get standard hourly rate from you?

I didn't research this enough but if the UK considers LLCs as tax opaque can't you do a UK Ltd holding that owns the LLC? Not sure what happens in this case.

 

[Xshore]

will receive the dividends from Us Llc and usa will only witholding 5%, if i do as personal will be 15%, and then in Cyprus in both cases only will pay 2.65%

Just chiming in to say that US will not withhold 5% or 15% in the USA, that's for dividends and the llc income is not considered as dividends in the US, as it's a pass through entity.

 

[Obelix]

Just chiming in to say that US will not withhold 5% or 15% in the USA, that's for dividends and the llc income is not considered as dividends in the US, as it's a pass through entity.

Thank you, now is clear for me, my mistake was because menay people told me that they are saying receive as dividend in his residence countrie

 

[22kay]

As @Xshore is saying, the US LLC does not have shareholders, it has members and thus no dividends (share->dividends, no shares->no dividends). If you use the pass-through entity and in your case setup as sole proprietorship (one owner) any profit from your US LLC will be declared on your personal US tax return. It doesn't matter if you are person or legal entity, it's the same. For foreign legal entity, it will be on that US tax return.

Since you are taxing an income in USA you would need to include that in your tax residency country as well, with that country's tax return (2 tax returns alltogether).

Depending on which US state, there could be local state taxes you would need to pay, so you would need to check with a local US CPA on tax implications (try a couple of different states unless you already have a favorite one). Once you know this, you know the "cost" of running invoices through US LLC.

I assume the income, would show up as revenue on your Cyprus legal entity. For a person it will show up as regular income in your personal tax return in Cyprus.

There wouldn't be any US federal tax on your personal US tax return, since you are not a tax resident in USA (US doesn't care, pay your taxes somewhere else ).

You know your own (Cyprus) tax residency tax brackets and can easily know if that would be worth it. It seems it would just add up to your Cyprus income, unless Cyprus tax law taxes foreign income in some beneficial way (I doubt this).

For the legal entity in Cyprus, you still need to know how the income would flow from the US LLC (via the Cyprus legal entity registered with an TIN-number in the US). If it flows only as income, eg. reveneu and just adds up to the Cyprus legal entitys tax return, what is the point? Does Cyprus not collect tax on foreign based income (I doubt it)?

It all comes down to YOUR tax residency country if considering the concept of the US LLC and pass-through taxation.

---

Now, if you would like to run dividends from the US using a legal entity, that would in that case be an incorporated business (INC), taxed as a C-corp (with shareholders, shares and thus dividends) which pretty much omits the idea (and benefit in some cases) of the pass-through taxation concept (C-corps are taxed twice).

And on top of that, the IRS will be hunting you for all income, due to their crazy CFC, GILTI and what ever to be, tax hunting laws on foreigners. The content of all this is that you will spend more money on US "tax-lawyers" (ask ten of those and you will have ten different recommendations and with that ten really nice bills to pay) so that you would be better of just skipping the whole US inc, foreign CFC-thingy forever (and probably ever).

 

[JohnLocke]

I'm surprised that your agent, who helped you with your setup in Cyprus, isn't able to assist you with the tax-related part and what might be beneficial for you! Otherwise, I would contact a tax expert in Cyprus who can quickly put something together for you, I'm sure.

Cyprus is not as difficult tax-wise as many other countries.

 

[Xshore]

As @Xshore is saying, the US LLC does not have shareholders, it has members and thus no dividends (share->dividends, no shares->no dividends). If you use the pass-through entity and in your case setup as sole proprietorship (one owner) any profit from your US LLC will be declared on your personal US tax return. It doesn't matter if you are person or legal entity, it's the same. For foreign legal entity, it will be on that US tax return.

In the US you can elect to treat your LLC as a corporation for tax, so it's not quite right that a LLC can't issue dividends. The same in other countries, you could elect to issue dividends from the LLC also in other countries, even if the US consider it as a transparent entity.

 

[22kay]

In the US you can elect to treat your LLC as a corporation for tax, so it's not quite right that a LLC can't issue dividends. The same in other countries, you could elect to issue dividends from the LLC also in other countries, even if the US consider it as a transparent entity.

Kind of not...the dividends would be profit distribution on a members share (but for an LLC it is not fixed parts like stock, it is a fixed part of the entire profit (profit share - not really a dividend). From an IRS point of view they will treat the profit distribution as part of your income. Which means you may jump up in tax bracket and so paying a lot more in tax compared to the capital gains on "regular" stock dividends which has it's own tax percentage. This was not always the case, but now it is, thank you IRS.

I understand your point, but I dont think the wording "dividends" is to be used with LLC's, but rather profit share...well, tomatoe, tomato...anyway the mechanism (profit share vs stock) is differently taxed. But if you ask a CPA in the US they will tell you the C-Corp has share holders that make income through stock dividends vs an LLC that has members that make income on their share of the LLC with other members.

But what hell, there are for sure probably some way to issue dividends from an LLC in this wonderfully blessed country called USA, just as much as there is the possiblity to use campaign funding to pay for embarrasing stories...or wait, that is perhaps not possible anymore...damn it, IRS strikes again.