US LLC with EU resident traveling outside of EU all year

[offshore8]

Hello folks,

I'm currently forming US LLC in Wyoming as non-resident and I sell digital products and coaching in Czech and Slovak market.
My residency is in Slovakia but for the past year and half I've been traveling around the world outside of EU.
My question is how can I legitimately avoid paying LLC income tax in Slovakia from this company?
These countries have bilateral agreement so If I don't pay taxes in the US I have to pay 20% in Slovakia.

I was told that If I don't want to pay LLC income tax neither in the US nor in Slovakia I have to keep money in the US and cannot have any transactions in the US.
Is this truth? And If yes can I open virtual bank account like Wise? If not what bank account can I open If I can't do transactions in the US.
I understand that I cannot avoid VAT and personal income tax in my country.

What would be the best solution for this? Is it possible to get NHR in Portugal without living there and would it be helpful? Or residency in some other country without having to live there?
Or do you know some better solution for me? I haven't started processing the payments yet through the LLC so I can form a different company if you know something that would work better.
I will only lose set up fees.

Thank you very much.

 

[stronco]

You need to move your personal residency somewhere where they wont tax you.

This could be territorial taxation country, Panama, Paraguay, Malaysia, Thailand*, for example. Dubai could also work, depending on the particulars as you didn't mention any amounts.

If you have been outside Slovakia for 1y+ already, it shouldn't be too hard to move it.

Without doing that, you will be doing tax evasion, which is illegal.

 

[offshore8]

I want to do it legally of course otherwise I will rather pay all taxes.

This is a good idea although I've heard that If you get residency in countries like Panama other countries might not want to do business with you in EU for example.

Do you know which country with territorial taxation has good reputation and its not difficult to get residency there?

Thanks

 

[Cloudbanck]

Well, the question is if your clients are ok with doing business with a US LLC. Sometimes (but usually not) an EU based company is required by clients. Where the owner of the US LLC resides usually doesn't matter in the client relationship.

As to territorial or zero tax countries , I think all the ones mentioned by Stronco are fine and relatively easy to get residence permit in (except maybe that Panama now requires a property investment or local company set up). Id also add to look into Malta (not totally territorial but not bad and easy residence as EU citizen) and Montenegro with its new digital nomad visa which was supposed to be tax free (not quite sure what the final terms are though).

Other interesting places are Caribbean island nations like Barbados or Bahamas where I think you can get residency with proof of income, (Cayman Islands sadly discontinued its global citizens programme which did allow 2 year residency with proof of income).

Also, and my favourite, if you are a bit adventurous, get residency in a subsaharan African country (except South Africa) - they practically all have de facto territorial tax systems, and some even have it formally.

 

[offshore8]

Yes my clients are okey with that. I'm more worried that I will have trouble setting up companies in different countries If I have a residency in low prestige country.

This is interesting. I've never heard someone recommending african countries to get residency. What's the best way to get it and which country in Africa would you recommend? I'm adventurous but I don't want to live in any country 183 days per year which is a requirement in many countries.

Thank you.

 

[Cloudbanck]

Yes my clients are okey with that. I'm more worried that I will have trouble setting up companies in different countries If I have a residency in low prestige country.

This is interesting. I've never heard someone recommending african countries to get residency. What's the best way to get it and which country in Africa would you recommend? I'm adventurous but I don't want to live in any country 183 days per year which is a requirement in many countries.

Thank you.

You can set up a company in the US (and the UK, and many other places) almost regardless of where you are a resident, as long as you are not a resident in a sanctioned country like North Korea or Syria or something.

Well, I got an acquaintance living on Zanzibar in Tanzania and quite likes it there. Namibia and Botswana have formal territorial tax systems, and seem interesting - wealthier and more well functioning than the rest of Africa and safer than South Africa - but I have only been like a day in each country so can't really say more.

I have been quite a bit in West Africa, and really like it. Fast changing, fast growing economies, lots of opportunities, not many westerners.

As to living there, it's totally possible to just get a tourist visa and keep renewing it. Note that it's being out of the tax net of a high tax country that is important, not necessarily to be formally a tax resident somewhere else. Unless your citizenship/previous long term residence country requires a tax residence certificate to let you out of the tax net that is.

And regarding getting residency in an African country, the below is for Ghana, but most African countries have similar requirements:

"A foreign national who wishes to study, carry on business, work or employment in Ghana must apply for and be issued with a Residence Permit to carry on the activity for which the permit is sought. Retirees or persons with regular income or landed property who can demonstrate that they will not be charged on public funds may be eligible for a Resident Permit."

And on one side bureaucracy is typically slow and inefficient, but on the other side, everything can be arranged. If you got money there is always going to be a way to stay in an African country if you want to.

 

[clemens]

Risky to stay in Ghana don't you think so ?

 

[Cloudbanck]

Risky to stay in Ghana don't you think so ?

In what way do you mean?
And Ive only been on short term trips to Ghana.

 

[JustAnotherNomad]

You seem to have zero understanding of how taxes work.

My residency is in Slovakia

That's not really that interesting. Are you tax resident in Slovakia?
Probably that answer is yes, but in quite a few countries you can be resident without being tax resident.

My question is how can I legitimately avoid paying LLC income tax in Slovakia from this company?

Don't be tax resident in Slovakia and don't have permanent establishment (office, employees, possibly servers, ...) in Slovakia.

These countries have bilateral agreement so If I don't pay taxes in the US I have to pay 20% in Slovakia.

This sentence doesn't make any sense. I have no idea who told you something like that, but they have no idea what they were talking about.

I was told that If I don't want to pay LLC income tax neither in the US nor in Slovakia I have to keep money in the US and cannot have any transactions in the US.

My brain hurts from reading such nonsense.

I understand that I cannot avoid VAT

Depends who you sell to.

and personal income tax in my country.

What is "your country"? And what kind of tax were you hoping to avoid, if not personal income tax?

My head is hurting from reading this post.

 

[offshore8]

You seem to have zero understanding of how taxes work.




That's not really that interesting. Are you tax resident in Slovakia?
Probably that answer is yes, but in quite a few countries you can be resident without being tax resident.



Don't be tax resident in Slovakia and don't have permanent establishment (office, employees, possibly servers, ...) in Slovakia.



This sentence doesn't make any sense. I have no idea who told you something like that, but they have no idea what they were talking about.



My brain hurts from reading such nonsense.



Depends who you sell to.



What is "your country"? And what kind of tax were you hoping to avoid, if not personal income tax?

My head is hurting from reading this post.

Yes I'm tax resident in Slovakia Im sorry about the confusion.

Thanks for the tip. Can I have contractors in Slovakia?

I sell to Slovakia and Czech Republic and currencies are EUR and CZK so I think I cannot avoid paying 20% VAT legally.

I would like to legally avoid Corporate income tax which is currently 21% in Slovakia and If I understand it correctly I have to pay that even though my company is in the US because of the bilateral agreement US has with Slovakia.

Then I would like to pay myself in dividends which is only 7% tax so that's how I would minimize tax on money I pay myself personally.

Thank you very much for suggestions I highly appreciate it!

 

[JustAnotherNomad]

You can avoid corporate income tax by not having a corporation (according to Google, this is called S.R.O. in Slovakia?), but a tax-transparent entity like a partnership (seems like this is called K.S. in Slovakia).
Or you could operate as a sole proprietor (seems like this is called SZČO.
Then you legally don't have to pay corporate income tax, because you will be paying personal income tax instead. Is that what you want?

Your best option would really be to move out of Slovakia. You can still visit from time to time. Why don't you want to do that if you're a nomad anyway? What's the advantage with being tax resident in Slovakia?

 

[offshore8]

S.R.O in Slovakia is the same like LLC in the US.

I already operate as a sole proprietor in Slovakia (SZČO) which has acceptable tax until you want to scale your business.

That make sense. Yes I pay personal income tax from SZČO but I wonder how is it gonna work with the US LLC.

Do you think I can start accepting payments from Slovakia and Czech Republic customers directly to bank account of the US LLC through stripe or I need to register american company in Slovakia first? I know I will have to register the company when it reaches 49790 EUR for VAT but Im not sure if Its compulsory to register it beforehand.

I think the only way how to stop being tax resident in Slovakia is to have a proof that I set up residency somewhere else which I haven't done yet cause I don't know which country could work better than mine.

You can avoid corporate income tax by not having a corporation (according to Google, this is called S.R.O. in Slovakia?), but a tax-transparent entity like a partnership (seems like this is called K.S. in Slovakia).
Or you could operate as a sole proprietor (seems like this is called SZČO.
Then you legally don't have to pay corporate income tax, because you will be paying personal income tax instead. Is that what you want?

Your best option would really be to move out of Slovakia. You can still visit from time to time. Why don't you want to do that if you're a nomad anyway? What's the advantage with being tax resident in Slovakia?

 

[JustAnotherNomad]

S.R.O in Slovakia is the same like LLC in the US.

No, not necessarily. A US LLC can either be taxed as a corporation (similar to the S.R.O.) - then it's 21%+ tax in the US (depending on the state, 21% is the minimum), under US law. This is called opaque taxation - the company pays corporate income tax and it can pay dividends. But then you can simply register a S.R.O. and also pay 21%, so I don't understand why you would want to register the company in the US.

But Slovakia can also say they want to tax the US company if you are tax resident in Slovakia or if you work in Slovakia or have employees in Slovakia (basically if there is any link to Slovakia, not just customers).
So then you may have to pay 21% in Slovakia as well, so 42% in total - double taxation.
There's a tax treaty, and if you don't have operations in the US, probably the result would be that you don't have to pay tax in the US (you would get the tax paid in the US back), so then you would only pay 21% in Slovakia - same result as if you just had a S.R.O. - but with lots of extra paperwork. Doesn't make sense.

But here's the difference to the S.R.O.: You can say you want the LLC to be taxed "transparent", then it is taxed like a SZČO in the US. If you don't work in the US, then usually there is no tax in the US. But then the company also cannot pay dividends, just like a SZČO cannot pay dividends.
But then the question is how Slovakia will look at the company - they can either say it's opaque (they have their own rules for US companies) - then you pay 21% in Slovakia, like a S.R.O.
Or they can say, it's like a SZČO - so then you pay tax like a SZČO.
In any case, there's zero advantage for you if Slovakia decides to tax the company - you would be better off just using a SZČO or S.R.O. directly.

So as you can see, the only way to save tax with a US LLC (if you really want to use a US LLC), you would have to make it "transparent" (taxation as SZČO in the US) and then make sure that Slovakia won't tax the company.
Probably this will only be possible if you are no longer tax resident in Slovakia.

That make sense. Yes I pay personal income tax from SZČO but I wonder how is it gonna work with the US LLC.

See above.

I already operate as a sole proprietor in Slovakia (SZČO) which has acceptable tax until you want to scale your business.

Yeah, but you don't pay corporate income tax. So "I want to avoid corporate income tax" doesn't make sense.

Yes I pay personal income tax from SZČO but I wonder how is it gonna work with the US LLC.

You could set up a corporation (opaque company) somewhere else and pay dividends, but if you are managing the company, then Slovakia will probably always demand 21% corporate income tax.

Do you think I can start accepting payments from Slovakia and Czech Republic customers directly to bank account of the US LLC through stripe or I need to register american company in Slovakia first?

That depends on Stripe's rules. Probably they would be fine with it - but you would still have to pay tax in Slovakia. So no advantage.

I know I will have to register the company when it reaches 49790 EUR for VAT but Im not sure if Its compulsory to register it beforehand.

Registration for VAT is a completely separate matter.

I think the only way how to stop being tax resident in Slovakia is to have a proof that I set up residency somewhere else which I haven't done yet cause I don't know which country could work better than mine.

Yeah, then you should start researching that. You have to find out if residency is good enough or if you need full tax residency.
If you need full tax residency, Dubai/UAE is often a good option, but there's some uncertainty now because the UAE is introducing 9% corporate income tax:

UAE clarification of Freezone Qualifying Income

Just read this article but it's not clear to me about all the talk that foreign sourced income will be exempt. What do you guys think? https://www.arabianbusiness.com/industries/banking-finance/uae-corporate-tax-finance-ministry-announces-freezone-tax-policy-exemptions I'm not a lawyer or...

www.offshorecorptalk.com

Otherwise, a good option for nomads could be Thailand, for example, or other countries with territorial taxation:

List of Territorial Tax Countries with formal and de-facto treatment of foreign income

In the thread "Where to relocate to not pay capital gains tax and live cheap" it was mentioned that some countries "don't tax foreign income" in the context of owning a business registered elsewhere while living in the country that "doesn't tax foreign income", i.e. a territorial tax country...

www.offshorecorptalk.com

 

[offshore8]

No, not necessarily. A US LLC can either be taxed as a corporation (similar to the S.R.O.) - then it's 21%+ tax in the US (depending on the state, 21% is the minimum), under US law. This is called opaque taxation - the company pays corporate income tax and it can pay dividends. But then you can simply register a S.R.O. and also pay 21%, so I don't understand why you would want to register the company in the US.

But Slovakia can also say they want to tax the US company if you are tax resident in Slovakia or if you work in Slovakia or have employees in Slovakia (basically if there is any link to Slovakia, not just customers).
So then you may have to pay 21% in Slovakia as well, so 42% in total - double taxation.
There's a tax treaty, and if you don't have operations in the US, probably the result would be that you don't have to pay tax in the US (you would get the tax paid in the US back), so then you would only pay 21% in Slovakia - same result as if you just had a S.R.O. - but with lots of extra paperwork. Doesn't make sense.

But here's the difference to the S.R.O.: You can say you want the LLC to be taxed "transparent", then it is taxed like a SZČO in the US. If you don't work in the US, then usually there is no tax in the US. But then the company also cannot pay dividends, just like a SZČO cannot pay dividends.
But then the question is how Slovakia will look at the company - they can either say it's opaque (they have their own rules for US companies) - then you pay 21% in Slovakia, like a S.R.O.
Or they can say, it's like a SZČO - so then you pay tax like a SZČO.
In any case, there's zero advantage for you if Slovakia decides to tax the company - you would be better off just using a SZČO or S.R.O. directly.

So as you can see, the only way to save tax with a US LLC (if you really want to use a US LLC), you would have to make it "transparent" (taxation as SZČO in the US) and then make sure that Slovakia won't tax the company.
Probably this will only be possible if you are no longer tax resident in Slovakia.




See above.



Yeah, but you don't pay corporate income tax. So "I want to avoid corporate income tax" doesn't make sense.



You could set up a corporation (opaque company) somewhere else and pay dividends, but if you are managing the company, then Slovakia will probably always demand 21% corporate income tax.



That depends on Stripe's rules. Probably they would be fine with it - but you would still have to pay tax in Slovakia. So no advantage.



Registration for VAT is a completely separate matter.



Yeah, then you should start researching that. You have to find out if residency is good enough or if you need full tax residency.
If you need full tax residency, Dubai/UAE is often a good option, but there's some uncertainty now because the UAE is introducing 9% corporate income tax:

UAE clarification of Freezone Qualifying Income

Just read this article but it's not clear to me about all the talk that foreign sourced income will be exempt. What do you guys think? https://www.arabianbusiness.com/industries/banking-finance/uae-corporate-tax-finance-ministry-announces-freezone-tax-policy-exemptions I'm not a lawyer or...

www.offshorecorptalk.com

Otherwise, a good option for nomads could be Thailand, for example, or other countries with territorial taxation:

List of Territorial Tax Countries with formal and de-facto treatment of foreign income

In the thread "Where to relocate to not pay capital gains tax and live cheap" it was mentioned that some countries "don't tax foreign income" in the context of owning a business registered elsewhere while living in the country that "doesn't tax foreign income", i.e. a territorial tax country...

www.offshorecorptalk.com

Thank you very much for great responses. I already have EIN for US LLC. Do you think I also need TIN in Slovakia for tax purposes? It's called DIČ. Or will I be able to tax the US LLC without it in Slovakia?

I believe Slovakia will cancel my tax residency only If I have tax residency somwhere else that Slovakia has Double tax treaty with. I think Thailand doesn't have this treaty with Slovakia. I was considering Dubai but I'm still waiting what's gonna happen with this 9% tax they just introduced.

 

[stronco]

>I believe Slovakia will cancel my tax residency only If I have tax residency somwhere else that Slovakia has Double tax treaty with.

This sounds highly unusual.

The difficulty of changing tax residency depends on personal situation. Most difficult is you first one, when your nationality matches with your residency. It could be more difficult if moving to well known tax haven.

If going directly to Thailand is problematic, move to another EU country first, so Slovakia wont blink twice. Following that, the other EU country wont give you troubles when you move to Thailand as you are not their national anyway.