USA - UAE double taxation, W8

[yngmind]

Hi guys, I'm UAE resident, I have UK LLP and conduct some business with US and rest of the world, but the question is about US.

As US doesn't have the tax treaties with the UAE, UAE residents which conduct business in USA, have to pay 30% taxes.

If I use my UK LLP, can I avoid legally paying taxes in the US? Since UK and US have the tax treaties, after that I just transfer the money to my personal accounts in the UAE.

I also use Google Adsense and they asked me the same question recently, I think I can just put there my UK LLP and choose that I'm qualified for the tax treaties and I will pay my taxes in the UK.

My lawyer told me that it will work, but is there is anyone who tried it?

So yeah, who thinks that UAE is a tax heaven, that's not in the case of the United States

 

[Mr Gus]

No it's not legal, however it might still work in practice. But if it's a lot of money I wouldn't risk it.

Treaty benefits are only granted if the company is actually resident in the UK, so you need to create actual substance there.

But all of the shitfluencers in Dubai are using a LLP to "avoid" the US withholding taxes, so you would not be the only one, not sure if that's a good or bad thing.

 

[yngmind]

No it's not legal, however it might still work in practice. But if it's a lot of money I wouldn't risk it.

Treaty benefits are only granted if the company is actually resident in the UK, so you need to create actual substance there.

But all of the shitfluencers in Dubai are using a LLP to "avoid" the US withholding taxes, so you would not be the only one, not sure if that's a good or bad thing.

Thank you, sir for the reply. I think I have raised a very important topic which hasn't been discussed here yet, maybe it's been but I haven't seen it.

So everyone who thinks that will avoid the US taxes moving in UAE, it won't be possible.

The only thing you can do is to get UAE tax residency and live in the country which has US tax treaties and taxes is low or 0 in that country.

UAE will help you only with European taxes, but not the US sadly.

 

[Mr Gus]

Thank you, sir for the reply. I think I have raised a very important topic which hasn't been discussed here yet, maybe it's been but I haven't seen it.

So everyone who thinks that will avoid the US taxes moving in UAE, it won't be possible.

The only thing you can do is to get UAE tax residency and live in the country which has US tax treaties and taxes is low or 0 in that country.

UAE will help you only with European taxes, but not the US sadly.

Yeah that's what I did. I actually setup in UAE just before Google announced to switch payments from trading to royalties, so had to pick a different place.

Cyprus, Georgia, Malta and Bulgaria are countries that are low tax and have a treaty with the US.

 

[yngmind]

Yeah that's what I did. I actually setup in UAE just before Google announced to switch payments from trading to royalties, so had to pick a different place.

I have solved the Google problem just with using my home country address and my country has the tax treaties with the US and withdrawing the money just to EMI then to UAE.

I think there is will be a problem with Stripe too if I put if I'm UAE resident and they see customers from the US, so the only way to provide them with documents from your home country that way you won't be taxes with W8 or moving somewhere.

Where did you move btw

 

[JustAnotherNomad]

As US doesn't have the tax treaties with the UAE, UAE residents which conduct business in USA, have to pay 30% taxes.

That's not true. There is withholding tax on dividends/royalties, yes. But not on conducting business.

If I use my UK LLP, can I avoid legally paying taxes in the US? Since UK and US have the tax treaties, after that I just transfer the money to my personal accounts in the UAE.

No, unless your UK LLP has enough substance (operations) in the UK (=subject to UK tax) that would allow it to use the treaty.

 

[JustAnotherNomad]

I have solved the Google problem just with using my home country address and my country has the tax treaties with the US and withdrawing the money just to EMI then to UAE.

Congratulations, you have committed tax fraud.

 

[Zaki]

Congratulations, you have committed tax fraud.

Why, Can you clarify, please.

 

[JustAnotherNomad]

Why? Because how much you pay in taxes is determined by where you live, not by the address you enter somewhere.
If they ask where you pay taxes and you give a different address (where you don't live/pay taxes), then that is a lie. If that lie means you pay less tax, it's tax fraud.
Is it really so difficult to understand?

 

[Mr Gus]

I have solved the Google problem just with using my home country address and my country has the tax treaties with the US and withdrawing the money just to EMI then to UAE.

I think there is will be a problem with Stripe too if I put if I'm UAE resident and they see customers from the US, so the only way to provide them with documents from your home country that way you won't be taxes with W8 or moving somewhere.

Where did you move btw

It's not that simple, unless you create substance and become tax resident in your home country it will not work.

I moved my a*s to Malta, but probably not for very long..

 

[yngmind]

It's not that simple, unless you create substance and become tax resident in your home country it will not work.

I moved my a*s to Malta, but probably not for very long..

I'm still a tax resident in my home country, since I haven't been in UAE for 183 days, it's been like 5 months here.

Yeah, many people can't stay for a long time in Malta, but the nature is good there

 

[yngmind]

That's not true. There is withholding tax on dividends/royalties, yes. But not on conducting business.



No, unless your UK LLP has enough substance (operations) in the UK (=subject to UK tax) that would allow it to use the treaty.

Thank you! That's very important to understand, what exactly US will withhold.

So it's not good for youtube creators in UAE, they won't avoid it, but for business activities I think that will work you think?

Because I wanted to get the new stripe with UAE POA and get the customers from the US, in that case will I be charged with 30% or I just pay taxes in UK for my LLP (which don't have taxes)

 

[Fred]

Thank you! That's very important to understand, what exactly US will withhold.

So it's not good for youtube creators in UAE, they won't avoid it, but for business activities I think that will work you think?

Because I wanted to get the new stripe with UAE POA and get the customers from the US, in that case will I be charged with 30% or I just pay taxes in UK for my LLP (which don't have taxes)

You won't get charged 30% in that case - of course you can serve clients in the US and receive the money tax free.

With Google it's other story the were most likely forced to switch the trading to royalties by the tax authorities.

@JustAnotherNomad is right - so try to build substance in the UAE or at least decrease your substance in home country.

I'm not wondering that this schemes working for you - have seen over the past years majority of people doing this and all got away with it for now.

 

[yngmind]

You won't get charged 30% in that case - of course you can serve clients in the US and receive the money tax free.

With Google it's other story the were most likely forced to switch the trading to royalties by the tax authorities.

@JustAnotherNomad is right - so try to build substance in the UAE or at least decrease your substance in home country.

I'm not wondering that this schemes working for you - have seen over the past years majority of people doing this and all got away with it for now.

Thank you!

I also have my US LLC in my LLP and me, hope that won't cause the problem.

It will be good to meet in Dubai just to exchange the experience.

 

[Mr Gus]

I'm still a tax resident in my home country, since I haven't been in UAE for 183 days, it's been like 5 months here.

Yeah, many people can't stay for a long time in Malta, but the nature is good there

It's not only about 183 days, you can even spend 270 days in the UAE and still be tax resident in your home country.

 

[Zaki]

If you're providing services to US companies then There Should be NO US Withholding on Payments to Non-US Residents -->No need to file w8 forms.
Reference: Publication 515 (2021), Withholding of Tax on Nonresident Aliens and Foreign Entities | Internal Revenue Service
ctr+f: Services performed outside the United States
--in case your US clients request it then send them IRS reference they will understand--
in case of FDEP(FDAP is an acronym for Fixed or Determinable, Annual or Periodic. in your case google royalties).
in that case, to avoid the 30% withholding taxes; I have a hypothetical crazy idea, I don't know if it'll work or not:
you can register a company in Estonia using the E-residency program
and put your Estonian company underneath US LLC(I mean US LLC would Be owned by the Estonian company)
and then file the W8BEN-E form to reduce the 30% rate, using tax treaty between us and Estonia
(Why W8BEN-E? US SMLLC owned by a person files W8BEN.
US SMLLC owned by a foreign company files W8BEN-E)
P.S: some tax treaties only apply to citizens and residents while some only cover citizens; So like I stated before I don't know if this would work or not, I can't read the whole tax treaty
Good luck.

 

[yngmind]

If you're providing services to US companies then There Should be NO US Withholding on Payments to Non-US Residents -->No need to file w8 forms.
Reference: Publication 515 (2021), Withholding of Tax on Nonresident Aliens and Foreign Entities | Internal Revenue Service
ctr+f: Services performed outside the United States
--in case your US clients request it then send them IRS reference they will understand--
in case of FDEP(FDAP is an acronym for Fixed or Determinable, Annual or Periodic. in your case google royalties).
in that case, to avoid the 30% withholding taxes; I have a hypothetical crazy idea, I don't know if it'll work or not:
you can register a company in Estonia using the E-residency program
and put your Estonian company underneath US LLC(I mean US LLC would Be owned by the Estonian company)
and then file the W8BEN-E form to reduce the 30% rate, using tax treaty between us and Estonia
(Why W8BEN-E? US SMLLC owned by a person files W8BEN.
US SMLLC owned by a foreign company files W8BEN-E)
P.S: some tax treaties only apply to citizens and residents while some only cover citizens; So like I stated before I don't know if this would work or not, I can't read the whole tax treaty
Good luck.

Just Estonian company will work with NO LLC, I have estonian e residency card BTW. But then there is will be a problem in Estonia with dividend taxes, UK llp should work too but that mostly depends where do you physically live since I'm in the UAE the royalty dodge will be illegal since there is no treaties.

 

[Mr Gus]

Just Estonian company will work with NO LLC, I have estonian e residency card BTW. But then there is will be a problem in Estonia with dividend taxes, UK llp should work too but that mostly depends where do you physically live since I'm in the UAE the royalty dodge will be illegal since there is no treaties.

Yeah your only option is just to move to a country with low or no withholding taxes on US royalty income. Or you could just take the risk with the UK LLP and stay in Dubai like a lot of people are doing, but one day some of them will get into trouble.

It's just so easy to find on the UK company registry who is evading the US withholding taxes with LLP's, mainly because most of them are public figures, you just look up their names in the registry. It will even state that they claim residence in UAE haha

 

[ElBotellon]

Just Estonian company will work with NO LLC, I have estonian e residency card BTW. But then there is will be a problem in Estonia with dividend taxes, UK llp should work too but that mostly depends where do you physically live since I'm in the UAE the royalty dodge will be illegal since there is no treaties.

from Georgia you can receive royalties at 0% WHT from US. There is an old double tax treaty recognized only by US (the Soviet Union CCCP-USA DTA 1973) and give a special exemption on royalties. It's funny that the US consider Belarus, Armenia, etc.. within the same CCCP DTA after 25+ years from soviet union dissolution.

https://www.irs.gov/pub/irs-trty/ussr.pdf

 

[OffshorePhantom]

If you're providing services to US companies then There Should be NO US Withholding on Payments to Non-US Residents -->No need to file w8 forms.
Reference: Publication 515 (2021), Withholding of Tax on Nonresident Aliens and Foreign Entities | Internal Revenue Service
ctr+f: Services performed outside the United States
--in case your US clients request it then send them IRS reference they will understand--
in case of FDEP(FDAP is an acronym for Fixed or Determinable, Annual or Periodic. in your case google royalties).
in that case, to avoid the 30% withholding taxes; I have a hypothetical crazy idea, I don't know if it'll work or not:
you can register a company in Estonia using the E-residency program
and put your Estonian company underneath US LLC(I mean US LLC would Be owned by the Estonian company)
and then file the W8BEN-E form to reduce the 30% rate, using tax treaty between us and Estonia
(Why W8BEN-E? US SMLLC owned by a person files W8BEN.
US SMLLC owned by a foreign company files W8BEN-E)
P.S: some tax treaties only apply to citizens and residents while some only cover citizens; So like I stated before I don't know if this would work or not, I can't read the whole tax treaty
Good luck.

Can someone confirm this? If the LLC is owned by an Estonian company can we leverage the tax treaty between Estonia and USA while submitting the W8BEN-E ?

The problem will be that then the money goes from LLC to the Estonian company and from there you cannot take it out as dividends since they are taxed I think.

Another possible solution I think can be a Thailand resident. They have a tax treaty with US and have a territorial tax regime so I think that an LLC owned by a Thailand resident could solve the issue, am I right?

I do not know if there are other possible solutions, Thailand is quite far from Europe.

About the W8BEN-E form, it seems they are not shared to IRS but are stored only by the withholding agent (in this case Google) so IRS may not even know or check if the information in the form is correct or not, at least easily but I am not really sure of this.