US LLC + Portugal NHR to receive royalties from the US or Cyprus LTD + Portugal or what other set up for digital nomad ? Looking for clarification

[alexx999]

I am receiving royalties from amazon us,

Not much at the moment,
around 5k per month and half of that is marketing and advertising, I am aware that Portugal has a 10% tax wittholding on royalties but i would like to have a clarification by reading on internet, it does look like that as soon as you insert your US LLC EIN number amazon stops to charge the 10% withholding, from here, what is the right process?
As a transparent entity i'd be taxed in the country where I have residency, therefore I'd be taxed in Portugal, but how should I pay the 10%? Is it even right that I have to pay the 10%? Is it on the total gross income or can I deduct marketing expenses and advertising costs from there? Can I get away without paying that 10%?

The other best option would be Cyprus + NHR but I see that the incorporation costs and the recurring fees would be very high and I would spend at least 10k to set-up everything including miscellaneous costs, and I think based on what I earn it is a little bit too much, especially since Amazon is well known to Ban account randomly without a single explanation so it would be dramatic if that would happen in the first year for example ... I am looking for something cheaper


I would still love to have personal liability protection so I'd prefer not to publish as a person.


What other options do I have? I checked UK LTD but you'd have to pay a 21.4% social security tax in Portugal on 70% of your salary, +19% corporate tax, +8% on dividends up to 35k GBP, it is good as long as you withdraw 1k/month but after that it is heavily taxes

 

[Marzio]

what is the right process?

Is it even right that I have to pay the 10%?

Of course not, we all should live tax free.

 

[alexx999]

Of course not, we all should live tax free.

I ask about the withholding because i know a guy from spain (5% tax withholding) that said by setting up a LLC in the US, he managed to remove the 5% withholding... maybe once you insert your EIN on amazon they pass the responsibility to yourself to declare the 10% and pay taxes accordingly,
Now I have some doubt about the LLC setup, since in Portugal it is not recognized as a Transparent entity I am wondering how that would be taxed... I think I may be taxed as a corporation, how would that work?

 

[Marzio]

You said you are receivig royalties, this means that you are licensing your IP to another company that pays you royalties.

It doesn't matter if PT sees LLC as transprent of opaque, the thing that matters is that under NHR passive income is tax exempt.

Amazon they pass the responsibility to yourself to declare the 10% and pay taxes accordingly

This is nonsense since 10% is a withholding tax paid to US, not PT

The way it works is that you file form W8-BEN-E, check LLC as disregarded entity, write down beneficial owner as Portugal resident and Amazon will withhold the 10% tax.

 

[johnwickert]

For receiving royalties from Amazon US, a US LLC with a Portugal NHR may be a viable option to avoid the 10% withholding tax. However, the tax implications and deductibility of expenses need to be carefully analyzed. Other options such as Cyprus + NHR or UK LTD also have their own tax implications.

 

[JustAnotherNomad]

You can't just use a UK Ltd. or anything like that, there are limitations on benefits in the tax treaty (you only get the benefits if you live in the UK).
There is WHT in the US, period. Unless a treaty says something else, but see above. If you use your own LLC, then the obligation to withhold taxes probably falls on your own LLC, instead of Amazon.

 

[johnwickert]

You can't just use a UK Ltd. or anything like that, there are limitations on benefits in the tax treaty (you only get the benefits if you live in the UK).
There is WHT in the US, period. Unless a treaty says something else, but see above. If you use your own LLC, then the obligation to withhold taxes probably falls on your own LLC, instead of Amazon.

Yes, it's true that there are limitations on tax treaty benefits with the UK LTD. As for the US withholding tax, it's generally true that there will be withholding unless there is a treaty in place that reduces or eliminates the withholding. It's possible that if you use your own LLC, the obligation to withhold taxes could fall on your LLC instead of Amazon, but this would need to be carefully analyzed.

 

[SmartestSmarty]

You said you are receivig royalties, this means that you are licensing your IP to another company that pays you royalties.

It doesn't matter if PT sees LLC as transprent of opaque, the thing that matters is that under NHR passive income is tax exempt.



This is nonsense since 10% is a withholding tax paid to US, not PT

The way it works is that you file form W8-BEN-E, check LLC as disregarded entity, write down beneficial owner as Portugal resident and Amazon will withhold the 10% tax.

Does this mean that the withholding tax is always calculated on where the beneficial owner is located rather than the location of the company?

 

[Marzio]

Does this mean that the withholding tax is always calculated on where the beneficial owner is located rather than the location of the company?

WHT is calculated based on the tax residency of the beneficial owner.

The beneficial owner could be either an individual or legal entity.

If the legal entity is the beneficial owner, to receive the benefits of the treaty it has to satisfy any of the criteria of the limitation on benefit article in the treaty.

Every country has a slightly different limitation on benefits article.

https://www.irs.gov/pub/irs-utl/Tax_Treaty_Table_4.pdf

 

[SmartestSmarty]

WHT is calculated based on the tax residency of the beneficial owner.

The beneficial owner could be either an individual or legal entity.

If the legal entity is the beneficial owner, to receive the benefits of the treaty it has to satisfy any of the criteria of the limitation on benefit article in the treaty.

Every country has a slightly different limitation on benefits article.

https://www.irs.gov/pub/irs-utl/Tax_Treaty_Table_4.pdf

Under these circumstances would what the OP proposes work?

Given the the LLC can be the beneficial owner, there would be 0%WHT

and then NHR in Portugal 0% tax.

 

[Marzio]

LLC can be the beneficial owner, there would be 0%WHT

LLC Is non existent for US WHT purposes, they only care where the LLC member is tax resident.

Since LLC is disregarded, the beneficial owner is tax resident in Portugal so the 10% US WHT apply.

 

[SmartestSmarty]

LLC Is non existent for US WHT purposes, they only care where the LLC member is tax resident.

Since LLC is disregarded, the beneficial owner is tax resident in Portugal so the 10% US WHT apply.

Thank you for making this clear and understandable for me. Much appreciated.