WebApp / IT Services Company (can relocate to anywhere)

[giggitty]

Forgive me if this is same newbie question that's been asked a million times but, after reading the posts on here, I am still unsure of the "best" structure for me given my unique situation.

First about me: I am an EU citizen, but have lived in the US as a green card holder ("LPR") for the last ~19 years. I have reached a point where I'm almost certain that I want to "abandon" the green card and permanently leave the US (more for sociopolitical reasons than financial). I just need a good "exit plan" first. I am 100% flexible on where I can live personally (looking for a quite place that's sparsely populated, where I can get a large tract of land and develop a home, farm, whatever). Obviously, giving up my US residency will relieve me of the atrocious "worldwide income" obligation.

About my company: I own a subscription-based geospatial analytics "Web App" that allows people to create geographic maps and analyze data. It's used by people in all kinds of industries, from commercial, to academic, and even various governments around the world (including the US DOJ) are my customers. No crypto, 0 chargebacks in over 2 years with 10,000+ transactions processed, 0 fraud, 100% legit, and 0% shady bulls**t! The company is currently a Florida corporation.

Since I am almost ready to relocate (the business and me personally), I want to restructure things in a way that are 100% legal in allowing me to minimize the tax obligation, financial reporting, etc. But at the same time I would like to be in a well-reputed location so that I can interoperate with other jurisdictions, e.g. US customers, or transfer funds to/from US institutions if needed to pay vendors or whatever. Privacy is also important to me... not because I'm hiding but I don't like anyone knowing my business or trying to contact me (just socially awkward in general and want maximum disconnect from the world... hence wanting to live on a farm in the middle of nowhere).

I was looking at Panama (partly because I was considering residence and partly because of parity with the US Dollar), but I don't see Panama mentioned very often on here. So, should it be somewhere else? UAE I've heard is good, but I found it too hot and too far away to be visiting, if would be needed to do business.

Also, would I set up a new offshore company and run everything through that, or would I keep running things though the US corporation and then pay royalties to the offshore entity? (seems kinda shady to me and I don't want the US having any excuses to come knocking once I'm gone).

Anyway - perhaps someone could please help point me in the right direction. I'm sure there some threads I've missed that are specific to giving up US residency / citizenship and Web services that aren't crypto related.

Thank you!

 

[JustAnotherNomad]

I don't know much about the US, but I would check with a US CPA if you could simply change your US company to be taxed as a disregarded entity instead of a corporation.
If you live in Panama, Panama might consider the income from the US LLC as foreign income that wouldn't be taxed in Panama.

But you should probably decide where you want to live first. Most of Central/South America has quite favorable tax laws, but there are also many options in most of the rest of the world if you avoid the larger EU countries (Georgia for example).

 

[bigbill27]

I think you might be also a classified as a covered expatriate and will be subject to an exit tax when you give up the green card. Here’s a link, but you probably should check this as well. Green Card Holder Exit Tax: 8-Year Abandonment Rule (New)

 

[uplana]

If you want to relocate permanent I would go as many already did the Dubai setup. It may work well for you if you stay there or at least avoid the EU if you want to relocate again after a few years.

 

[giggitty]

I think you might be also a classified as a covered expatriate and will be subject to an exit tax when you give up the green card. Here’s a link, but you probably should check this as well. Green Card Holder Exit Tax: 8-Year Abandonment Rule (New)

I believe you're right. I need to look further, but based on that like I might be OK if I get them to revoke the greencard (I'm already outside the US right now for 1 month - can easily do a year until they considered it abandoned). But also, these last few years I've had very lot profit/income owning to re-investments. It seems like I may be below the threshold for the expat tax (150k+/year in the last few years), if I'm reading that correctly. I expect this and next year may be different as I scale back on investments and retain the profits.

I don't know much about the US, but I would check with a US CPA if you could simply change your US company to be taxed as a disregarded entity instead of a corporation.
If you live in Panama, Panama might consider the income from the US LLC as foreign income that wouldn't be taxed in Panama.

I had not heard of this - but thanks for the pointer. Almost none of my customers are in Panama, so this was one of the reasons I like the idea of being there (no tax on foreign-earned income). I thought what people were doing was basically having their Panama corp charge the US corp a royalty fee that's large enough to get all the profits out. But, this seems like a loophole that would either be closed already or will be soon.

If you want to relocate permanent I would go as many already did the Dubai setup. It may work well for you if you stay there or at least avoid the EU if you want to relocate again after a few years.

I've been reading that Dubai is very expensive to start up- something like $20,000 to get all set up, and expensive annual fees. I'm still somewhat in start-up mode, so trying to be cost effective.

Admittedly, I'm not sure how expensive Panama and the other places are in comparison to Dubai.

 

[JustAnotherNomad]

If your customers are in Panama, you'll want to make sure that your income wouldn't be considered locally sourced and subject to tax in Panama.

 

[bigbill27]

You are an EU citizen , might be easier to take a look at Malta or Cyprus. Less residency paperwork and jurisdiction wise, should meet your needs. Plot of land you require might be a deal breaker

 

[CyprusLaw]

Forgive me if this is same newbie question that's been asked a million times but, after reading the posts on here, I am still unsure of the "best" structure for me given my unique situation.

First about me: I am an EU citizen, but have lived in the US as a green card holder ("LPR") for the last ~19 years. I have reached a point where I'm almost certain that I want to "abandon" the green card and permanently leave the US (more for sociopolitical reasons than financial). I just need a good "exit plan" first. I am 100% flexible on where I can live personally (looking for a quite place that's sparsely populated, where I can get a large tract of land and develop a home, farm, whatever). Obviously, giving up my US residency will relieve me of the atrocious "worldwide income" obligation.

About my company: I own a subscription-based geospatial analytics "Web App" that allows people to create geographic maps and analyze data. It's used by people in all kinds of industries, from commercial, to academic, and even various governments around the world (including the US DOJ) are my customers. No crypto, 0 chargebacks in over 2 years with 10,000+ transactions processed, 0 fraud, 100% legit, and 0% shady bulls**t! The company is currently a Florida corporation.

Since I am almost ready to relocate (the business and me personally), I want to restructure things in a way that are 100% legal in allowing me to minimize the tax obligation, financial reporting, etc. But at the same time I would like to be in a well-reputed location so that I can interoperate with other jurisdictions, e.g. US customers, or transfer funds to/from US institutions if needed to pay vendors or whatever. Privacy is also important to me... not because I'm hiding but I don't like anyone knowing my business or trying to contact me (just socially awkward in general and want maximum disconnect from the world... hence wanting to live on a farm in the middle of nowhere).

I was looking at Panama (partly because I was considering residence and partly because of parity with the US Dollar), but I don't see Panama mentioned very often on here. So, should it be somewhere else? UAE I've heard is good, but I found it too hot and too far away to be visiting, if would be needed to do business.

Also, would I set up a new offshore company and run everything through that, or would I keep running things though the US corporation and then pay royalties to the offshore entity? (seems kinda shady to me and I don't want the US having any excuses to come knocking once I'm gone).

Anyway - perhaps someone could please help point me in the right direction. I'm sure there some threads I've missed that are specific to giving up US residency / citizenship and Web services that aren't crypto related.

Thank you!

Cyprus would be a good option. Corporate tax is 12.5% plus 2.65% GHS on dividend payments.

It is also likely that your business would fall under the IP Box regime, this would drive the corporate tax down to 2.5%.

Also, it’s quite easy to get a plot of land build a farm etc.

Happy to discuss more.

 

[giggitty]

If your customers are in Panama, you'll want to make sure that your income wouldn't be considered locally sourced and subject to tax in Panama.

I have questions about the nuances of this. Maybe you can help...

Say I have 500 subscribers from all over the world, but with 0 in Panama; most in the US but some in Europe, some in Asia, etc. If the Panamanian corporation is billing these foreign customers directly, e.g. using a credit card merchant based in Panama, then does that count as foreign-sourced (untaxed) income because the customers are outside of Panama, or is it local income because the merchant account is in Panama and they are remitting funds to the Panama company?

If considered untaxed income, then at what point would that change if I get some customers in Panama? For example, do I just count the Panama customers separately and pay tax on just that revenue, or is there a threshold or something, e.g. when 20% of revenue comes from Panama customers, where they just consider all the revenue as local-sourced (and thus taxed).

If the local credit card merchant remitting funds to the Panama company would make it "local" revenue, then I'd still need the US corp (or other) to do all the billing and remit back to the Panamanian corporation.

I once spoke to a Panamanian attorney about it, but I think he was just saying what I wanted to hear to get me to incorporate with him.

You are an EU citizen , might be easier to take a look at Malta or Cyprus. Less residency paperwork and jurisdiction wise, should meet your needs. Plot of land you require might be a deal breaker

Perhaps I'm missing something, but when I google'd I was finding articles saying that Malta has a flat 35% corporate rate, payable on worldwide income. I must be missing something because I've heard of Malta as tax-favorable.

Cyprus would be a good option. Corporate tax is 12.5% plus 2.65% GHS on dividend payments.

It is also likely that your business would fall under the IP Box regime, this would drive the corporate tax down to 2.5%.

Also, it’s quite easy to get a plot of land build a farm etc.

Happy to discuss more.

Thank you for the suggestion. However, to be honest, I think 12.5% (plus the 2.5, so 15%) is still more than I'd like to do. If I'm going through the hassle of redomiciling, I only want to do it once (if possible) and I'd like to get 0% if possible, e.g. Panama for foreign-sourced income. I know that 12.5% is relatively good and competes with Ireland even (my country of Citizenship, actually), but even that small percentage will (hopefully) add up to become significant over the course of 10+ years... and I'd rather than money be in my savings account, since it will make a world of difference in those later years, when I'm old and decrepit and can't count on anyone but my own resources (especially can't count on no damn government).

Maybe I'm dreaming and the 0% is never going to happen because of other costs/problems with Panama.

 

[JustAnotherNomad]

Regarding the foreign income, you really need to talk to Panamanian tax lawyer - or several ones to be on the safe side. Using a credit card merchant from a country usually shouldn't make a difference, but if you run the company from Panama it could be a different story, especially if there also are local customers.

 

[chrisgerth]

You should consider Hungary, you can set up a KFT there (equivalent to a Limited) and have your income classified as Software-License/IP income. That way you pay 4.5% corporate tax. Personal income tax is 15% but you can also tweak that (long term investment accounts which you can not touch for 5 years allow you tax free withdrawal, this setup requires good tax lawyers).

Benefits of Hungary - conservative society, cheap labor (including lawyers and accountants), cheap and plentiful land, rich cultural history, reliable political system and they are going to be first ones to leave the EU once the s**t hits the fan

 

[CyprusLaw]

I have questions about the nuances of this. Maybe you can help...

Say I have 500 subscribers from all over the world, but with 0 in Panama; most in the US but some in Europe, some in Asia, etc. If the Panamanian corporation is billing these foreign customers directly, e.g. using a credit card merchant based in Panama, then does that count as foreign-sourced (untaxed) income because the customers are outside of Panama, or is it local income because the merchant account is in Panama and they are remitting funds to the Panama company?

If considered untaxed income, then at what point would that change if I get some customers in Panama? For example, do I just count the Panama customers separately and pay tax on just that revenue, or is there a threshold or something, e.g. when 20% of revenue comes from Panama customers, where they just consider all the revenue as local-sourced (and thus taxed).

If the local credit card merchant remitting funds to the Panama company would make it "local" revenue, then I'd still need the US corp (or other) to do all the billing and remit back to the Panamanian corporation.

I once spoke to a Panamanian attorney about it, but I think he was just saying what I wanted to hear to get me to incorporate with him.



Perhaps I'm missing something, but when I google'd I was finding articles saying that Malta has a flat 35% corporate rate, payable on worldwide income. I must be missing something because I've heard of Malta as tax-favorable.


Thank you for the suggestion. However, to be honest, I think 12.5% (plus the 2.5, so 15%) is still more than I'd like to do. If I'm going through the hassle of redomiciling, I only want to do it once (if possible) and I'd like to get 0% if possible, e.g. Panama for foreign-sourced income. I know that 12.5% is relatively good and competes with Ireland even (my country of Citizenship, actually), but even that small percentage will (hopefully) add up to become significant over the course of 10+ years... and I'd rather than money be in my savings account, since it will make a world of difference in those later years, when I'm old and decrepit and can't count on anyone but my own resources (especially can't count on no damn government).

Maybe I'm dreaming and the 0% is never going to happen because of other costs/problems with Panama.

Please note that as I have mentioned it is likely your business line would fall under the IP Box regime and therefore the corporate tax would be 2.5% instead of 12.5%

 

[giggitty]

Well... Panama is on the OECD list of 130 countries that are going to agree to a 15% minimum corporate tax. So... I think I'm going bury what money I have somewhere and close down the business instead. These headaches are just not worth it and all these regulations make me want to become a less productive person, not more! Who needs the stress? I can shoot wild boar for food and live in a tent somewhere in the mountains, if things get rough.

https://www.oecd.org/tax/beps/oecd-g20-inclusive-framework-members-joining-statement-on-two-pillar-solution-to-address-tax-challenges-arising-from-digitalisation-july-2021.pdf

 

[JustAnotherNomad]

@giggitty Does that matter? It seems like that tax only applies to companies with a revenue of at least $750M. Also the Panamanian corporate income tax rate is already 25% today. As long as the tax doesn't apply to your business, who cares?

 

[giggitty]

@giggitty Does that matter? It seems like that tax only applies to companies with a revenue of at least $750M. Also the Panamanian corporate income tax rate is already 25% today. As long as the tax doesn't apply to your business, who cares?

You're right. After reading more, once I found the actual statement itself, it seems that the "scope" is for much larger companies. My original assumption was that this screwed the ability to have 0% on foreign-sourced income in Panama, since it would be taxed in one location or another regardless of where the revenue is realized. It appears that assumption was wrong.

That said, for sure this will eventually apply to everyone, regardless of size.

Panama was/is my first choice because I speak Spanish (much easier to communicate), and I liked some of the rural / mountainous regions there in terms of land to buy. I'm still trying to poke holes in this to figure out what I'm missing.

 

[JustAnotherNomad]

The corporate tax rate is already 25% in Panama. I don't see how this would matter.

 

[giggitty]

The corporate tax rate is already 25% in Panama. I don't see how this would matter.

25% on Panama-sourced revenue, but 0% on foreign-sourced income. As I mentioned, my (incorrect) assumption was that it would have changed the foreign-sourced income rule to be a minimum of 15%, which of course would have been a big change. from 0%. But that assumption appears to have been wrong.

 

[JustAnotherNomad]

No, there is no 0% tax in Panama. The corporate tax rate is 25%. No tax is charged on foreign-sourced income. That's a big difference.

 

[giggitty]

No, there is no 0% tax in Panama. The corporate tax rate is 25%. No tax is charged on foreign-sourced income. That's a big difference.

Can you please help me understand that a bit better?

Assuming I have a Panama corporation and all of my customers are outside of Panama (0 Panama customers), i.e. the "source" of the revenue is coming from customers outside of Panama... what taxes should I expect to pay to Panama?

For example, say I have a US "pass-through" or "disregarded entity" LLC which does all customer billing, and 100% of the profits are then sent back to the Panama corporation at the end of each month or quarterly. My expectation here is that there is 0% tax to pay in Panama on these funds, since they are "foreign sourced". Is this incorrect?

 

[JustAnotherNomad]

I cannot advise you on that, you should talk to a good Panamanian tax lawyer. You can check Legal500 for the best lawyers in a country. Or just talk to one of the BIG4 companies.
What I meant was that, Panama simply exempts certain kinds of income from taxation. So they could raise their corporate tax rate to 40% and it still wouldn't make a difference, as long as your income falls into the exempted categories (foreign-sourced).