Seeking Advice on LLC Formation for IT, Zero Taxation, and Bank Account Options

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Hi everybody! We need advice. Here is a brief overview:

Our business in the fields of IT, particularly in computer vision/graphics and Big Data/Cloud technologies.

We are going to register a foreign company (LLC) for commercial activity and we want to reduce taxes down to zero, thus, we are searching for a jurisdiction with the territorial tax system.

Then we want to open a bank account in an on-line bank (or maybe a payment system - we don't know cons/pros yet).

Is it possible? If so, which jurisdictions or services would you recommend?

In next post I will put what I found and thinking
 
This jurisdiction shouldn't be in classical offshore zone (why? I don't know, I think that customer won't pay to that - maybe I'm wrong)

Following list what I found:

1. Hong Kong (+) on paper it should be possible to claim tax exemption but each year (-) some comments says this is not working - I don't know what is true

2. Foreign USA LLC (+) seems very good approach

3. Estonia, Georgia, Slovakia, Costa Rica (-) they have non-zero dividends which can be considered as taxes, I don't know is it way to avoid them?



I though, that Singapore provided territorial tax system and for overseas profits and without repatriation of profit that can be zero taxes and had a call with register, but he said this is not true and your company should pay taxes.
 
UA resident, based on rules, if controlled foreign company has less 2M EUR this not subject to tax. BUT! dividends is still taxable. But I'm sure, I can do something with that - this is next set of questions.

Now I'm thinking how to accumulate amount on corporate's bank account and do not pay corporate taxes (or pay with 0% rate)



If foreign company has non-zero dividends (like Estonia lets say) - this is still problem.

If Hong Kong has zero for dividends and I get tax exception in that year - fine! from that moment I can move amount from company's account and that will be zero and only my current resident may ask to pay something but I will have some time and resources to prepare for that, I hope.
 
MyPrinter said:






UA resident, based on rules, if controlled foreign company has less 2M EUR this not subject to tax.

Click to expand...



If you manage any offshore company from Ukraine CFC rules doesn't matter because you are creating a PE in Ukraine so any income should be taxed at UA CIT rates.



That said if you manage a US LLC from Ukraine, use a US bank account and never transfer any money outside of your US LLC bank account but pay any expeses with US LLC business card you'll essentially be tax free.



Obviously this is not compliant but i guess you are justified given the situation.



If that's not enough money for you then you could register as a private entrepreneur in UA and invoice your US LLC for the amount you need and pay income taxes on that amount.
 
@Marzio maybe a Hong Kong Limited with a director in Malta or something. He can then get the dividends tax-free under the threshold he claims while he just works as freelancer for the company as self-employed for a nominal salary of 100 hryvnia per month?
 
Thank for reply!

I'm not worry to pay taxes when transfer money from US LLC's account to my personal

I'm worry to my US LLC's company should not pay corporate taxes when get amount from customers
 
@daniels27

Yes, with few notes: no reason to have a director in Malta or something. I can do that by myself and thus provide invoices on behalf of my company, I think.



Problem is: once my company provides some services, get payments on company's account, year was done... company should pay taxes. This (corporate) taxes should be zero.
 
You should take into consideration that opening a bank account for a US LLC with a UA passport/residency is going to be hard.
 
@VladKiri

Well, actually I'm considering neobanks, Revolut (or better options?)

Moreover, as I'm going to apply territorial tax system for company's activity.

That means, it will be better for company does not have:

- any local activity

- a local bank account

- local customers

Just papers, reports to gov and rent address - that's all

Company should accumulate amounts and not pay any corporate taxes (1), when moving or transferring money with 0% dividends (2)

Personal or shareholder's residence is changeable while accumulation - that's the point



This is how I imagine Hong Kong LLC, each year they will ask to pay 8.25%-15%-16.5% but LLC will claim to reduce it to 0%.

But some comments says that paper rules sometimes different to practice - please, help me find the truth
 
MyPrinter said:






I can do that by myself and thus provide invoices on behalf of my company, I think

Click to expand...



We all know you can do that but by doing that the company, as i said, will be considered tax resident in UA while with a director in Malta it will not (well at least you'll give a facade of more compliancy than straight tax evasion).











VladKiri said:






You should take into consideration that opening a bank account for a US LLC with a UA passport/residency is going to be hard.

Click to expand...



True, didn't considered that.



For example he will not be able to open a bank account with Mercury
 
MyPrinter said:






Well, actually I'm considering neobanks, Revolut (or better options?)

Click to expand...

You’ll have problems especially with neobanks. Forget about Revolut as well. If you had residency in countries such as France, Germany, Italy (and a couple more that I can't recall right now), you might have a slightly better chance. Otherwise, forget it. You may look into Puerto Rico banks, such as CBiBank, a Chinese-owned bank. They're maybe more relaxed with a UA Passport/Residents.
 
VladKiri said:






You’ll have problems especially with neobanks. Forget about Revolut as well. If you had residency in countries such as France, Germany, Italy (and a couple more that I can't recall right now), you might have a slightly better chance. Otherwise, forget it. You may look into Puerto Rico banks, such as CBiBank, a Chinese-owned bank. They're maybe more relaxed with a UA Passport/Residents.

Click to expand...

Many thanks for the suggestions regarding Puerto Rico and other options.

Are the challenges mainly related to the on-boarding process, or are there other issues that arise afterward?











daniels27 said:






maybe a Hong Kong Limited with a director in Malta or something

Click to expand...









Marzio said:






will be considered tax resident in UA while with a director in Malta it will not

Click to expand...

Ok, Got it, now I understand.

That will be easy to open and manage bank accounts if the LLC has a director based in Malta, right?

The US or Hong Kong governments won’t be concerned about residence of director, right?



Also, if it will be some difficulties with banks or neo banks, has payment systems can be considered?
 
MyPrinter said:






That will be easy to open and manage bank accounts if the LLC has a director based in Malta, right?

Click to expand...

Yes, it will be much easier if you have a director in a proper jurisdiction as he can open the bank account.











MyPrinter said:






The US or Hong Kong governments won’t be concerned about residence of director, right?

Click to expand...

No, they don't care (unless it is in their own jurisdiction which means you would be liable to taxation).











MyPrinter said:






Also, if it will be some difficulties with banks or neo banks, has payment systems can be considered?

Click to expand...

Certainly more difficult than a normal resident Hong Kong company, but most likely easier than a normal UA company. Normally, it will be possible.



You can check the thread there to find a good jurisdiction for the director of the US LLC or Hong Kong Limited.






J





Thread 'Best management location for US LLC'



Jan 23, 2025





It seems like US LLCs (and similar entities with no clear corporate tax residency) can be problematic.

This can cause problems like:

* The tax authority in the member's residency country could claim there is a PE / it is managed from there

* For payments to such an entity, the tax authority in the payer's country could claim it is transparent and the payment should be treated as a payment to the member (in his country of tax residency), or it could be treated as non-deductible due to unclear tax residency status



I would guess that these issues can be avoided by having a director in a...






  • JustAnotherNomad
  • Replies: 138
  • Forum: Tax, Accounting, Licensing & Legal
 
daniels27 said:






You can check the thread there

Click to expand...

Thanks for reply, I'm in the process of reading through the shared thread and taking notes.



Meantime, I’d like to share and discuss my perspective on how I plan to use the company’s funds:

1. Reinvest in the business – Primarily within the same industry or adjacent fields (but slightly different, including subsidiary company). Such reinvestment can be much easier treated as business expenses and excluded from taxable income, right?

2. Buy-to-let real estate – Likely through a subsidiary company, structured with an appropriate charter and registered in a more favorable jurisdiction for that particular property investment.

3. Personal living expenses – This is currently the lowest priority, but still something to think about. I'm curious about how some companies manage to pay salaries in crypto. Is this legally feasible, or is it only possible if the company already earns income in crypto? I’ve read that Singapore is crypto-friendly, but also that engaging in crypto business activities there can attract stricter regulatory scrutiny.



And probably question for another topic, but I want just slightly touch it here:



Does approach with bought Caribbean Citizenship with PE 0% and dividends 0% allows to establish CFC without any headache regulation and just concentrated on business itself?

Means US LLC foreign with US 0% taxation + Citizen 0% taxation + less and easy reporting

If yes, than it can be considered as good level up in the future (if everything will be fine and still be actual)
 
MyPrinter said:






1. Reinvest in the business – Primarily within the same industry or adjacent fields (but slightly different, including subsidiary company). Such reinvestment can be much easier treated as business expenses and excluded from taxable income, right?

Click to expand...

Investments never are a business expense. It is as you said just a conversion of money into other assets of value. Your profit will still be there.











MyPrinter said:






2. Buy-to-let real estate – Likely through a subsidiary company, structured with an appropriate charter and registered in a more favorable jurisdiction for that particular property investment.

Click to expand...

Same as above, it is not an expense and rental income further increases profits.











MyPrinter said:






3. Personal living expenses – This is currently the lowest priority, but still something to think about. I'm curious about how some companies manage to pay salaries in crypto. Is this legally feasible, or is it only possible if the company already earns income in crypto? I’ve read that Singapore is crypto-friendly, but also that engaging in crypto business activities there can attract stricter regulatory scrutiny.

Click to expand...

Personal expenses are not business expenses.











MyPrinter said:






Does approach with bought Caribbean Citizenship with PE 0% and dividends 0% allows to establish CFC without any headache regulation and just concentrated on business itself?

Means US LLC foreign with US 0% taxation + Citizen 0% taxation + less and easy reporting

Click to expand...

Taxation is not on citizenship but on residence. You need to leave your home country and go somewhere else where you pay less taxes. No need to buy citizenships. (Not talking about US citizenship here, which is a different story.)



US LLC has minimal reporting in the US. You will need to ensure you have your company managed from somewhere it neither triggers PE nor taxation. Then, you will need to live in a country wihtout CFC rules (at least on active income).
 
Assuming that enforcement in Ukraine is weak and information exchange very limited:



Set up a US LLC (disregarded entity). It will not pay tax in the US if you don't physically work in the US.

Invoice the US LLC as a freelancer (or use something like Upwork in between for better anonymity) - as far as I know, you only pay 5% tax as a freelancer in Ukraine.

Keep the money in the company or move it to offshore accounts in your own name.
 
MyPrinter said:






Many thanks for the suggestions regarding Puerto Rico and other options.

Click to expand...

Do you consider this not to be offshore as you mentioned it should not be offshore because of your customers?
 
JustAnotherNomad said:






Assuming that enforcement in Ukraine is weak and information exchange very limited:



Set up a US LLC (disregarded entity). It will not pay tax in the US if you don't physically work in the US.

Click to expand...

What problem can be even if the information is exchanged? I can setup a USA LLC disregarded company and accumulating money on LLC's account legally, as I understand, with 0% tax on corporate active income, right?









JustAnotherNomad said:






Invoice the US LLC as a freelancer (or use something like Upwork in between for better anonymity) - as far as I know, you only pay 5% tax as a freelancer in Ukraine.

Click to expand...

Almost right, 5% + 1% + social secure? 1% + cash-in ~1% and you can't easily transfer money outside.

This approach can be used in case if you want to buy something locally and prove your income









JustAnotherNomad said:






Keep the money in the company or move it to offshore accounts in your own name.

Click to expand...

Yes, that's what I'm going to do - keep the money on company's account. Then I will take a look how to use it (have some vision and answer in next answer to daniels27)
 
brianK said:






Do you consider this not to be offshore as you mentioned it should not be offshore because of your customers?

Click to expand...

Right, thanks, somehow I missed that Puerto Rico could be considered offshore



Meanwhile, what I figured out, please guys correct me if I’m wrong:



When a company is newly formed, it’s essentially a shell company, which is considered high-risk



However, if I set up the company, open an account with a payment system, conduct regular business activities, and submit an annual report, the company will have a proven track record, legitimate operations, and verified field. This, in turn, should significantly reduce the challenges of registering with banks, right?
 
daniels27 said:






Same as above, it is not an expense and rental income further increases profits

Click to expand...

The idea here is to avoid paying dividends (and the corresponding taxes) by purchasing property directly on the company.

Yes, rental income still belongs to the company, and rental income is usually subject to local taxes. However, at least the "body" itself shouldn't be taxable.









daniels27 said:






Personal expenses are not business expenses

Click to expand...

Then it way to pull them as dividends, within appropriate residence, of course
 
MyPrinter said:






The idea here is to avoid paying dividends (and the corresponding taxes) by purchasing property directly on the company.

Yes, rental income still belongs to the company, and rental income is usually subject to local taxes. However, at least the "body" itself shouldn't be taxable.

Click to expand...

Yes, this could fly under the radar in the Ukraine. Probably not completely legal but probably save enough for some time. Better not invest in real estate in the Ukraine, I would suggest.











MyPrinter said:






Then it way to pull them as dividends, within appropriate residence, of course

Click to expand...

Yes. Depending on the country, they may be dividends or personal income. Just chose properly.
 
Just discussed following scheme:



1. UK LTD, cheap service, easy to open account payment system, respectable jurisdiction (for US customers especially), US-income is not taxable in USA, 19% taxes on net income - no problems with UA reports as its higher.

2. How to reduce taxes? He suggested to ask EU companies to convert income into USDT, that companies just sign invoice for non-existing service and do the conversion. Said, that micro companies (<1M$) which is not contact with local UK customers/employees etc. are not subject of interest for UK gov.

3. Money will be anonymous and in crypto, thus, can't be legally used to buy real-estate. However, for the first time, that’s okay for me.



Is it real or still some risky problems?
 
MyPrinter said:






1. UK LTD, cheap service, easy to open account payment system, respectable jurisdiction (for US customers especially), US-income is not taxable in USA, 19% taxes on net income - no problems with UA reports as its higher.

Click to expand...

Not exactly legal, but from UA perspective not too risky if you state so.











MyPrinter said:






2. How to reduce taxes? He suggested to ask EU companies to convert income into USDT, that companies just sign invoice for non-existing service and do the conversion. Said, that micro companies (<1M$) which is not contact with local UK customers/employees etc. are not subject of interest for UK gov.

Click to expand...

You mean, you pay out money from UK to EU that way? Of course no EU company wants to be included in this scam. Especially not for free.
 
daniels27 said:






Not exactly legal, but from UA perspective not too risky if you state so.

Click to expand...

Why first item is not legal? Everything is clear and reported, for UK as well as UA









daniels27 said:






You mean, you pay out money from UK to EU that way? Of course no EU company wants to be included in this scam. Especially not for free.

Click to expand...

The company makes transfer to some EU company (not mine) as "advert" or "service", that EU company pays USDT to any wallet. Fees, as they said, about 2-3%
 
MyPrinter said:






Why first item is not legal? Everything is clear and reported, for UK as well as UA

Click to expand...

Where you pay profit tax?











MyPrinter said:






The company makes transfer to some EU company (not mine) as "advert" or "service", that EU company pays USDT to any wallet. Fees, as they said, about 2-3%

Click to expand...

If you find a EU company that does this for such low fee, you can do this. Completely illegal but of course possible.
 
daniels27 said:






Where you pay profit tax?

Click to expand...

In this case profit should be taxable under UK, 19% corporate tax









daniels27 said:






Completely illegal but of course possible

Click to expand...

Someone I spoke about this scheme said: the UK gov tends to overlook companies under 1M$, especially if they have not local UK owners, customers, employees, or other stakeholders.

Ahh, probably you are right, thanks, seems not so legal way.

Meanwhile, I should say, during this discussion I'm almost believed in this way and was mind-blind. Of course, that was just a pre-consultation and no decisions are made.



So, better to keep Hong Kong with legal 8.25% and claim 0% for US-based customers and US LLC disregarded entity for others, right?
 
MyPrinter said:






In this case profit should be taxable under UK, 19% corporate tax

Click to expand...

But you manage it from UA. That's why I said not exactly legal, but UA won't care.











MyPrinter said:






Ahh, probably you are right, thanks, seems not so legal way.

Meanwhile, I should say, during this discussion I'm almost believed in this way and was mind-blind. Of course, that was just a pre-consultation and no decisions are made.

Click to expand...

Yes, but you will need somebody in the EU etc.











MyPrinter said:






So, better to keep Hong Kong with legal 8.25% and claim 0% for US-based customers and US LLC disregarded entity for others, right?

Click to expand...

Well, you don't care at all about UA? Then why not just a US LLC / Hong Kong Limited with off-shore at 0% / Singapore Pty Ltd at 0%?
 
daniels27 said:






Well, you don't care at all about UA?

Click to expand...

Not at all, obviously, better to prepare at least:

- buy something for the company (not in ukraine or HG)

- made real payments to anybody else (not in ukraine or HG)

- probably use nominee director (don't want to use it as it takes some amounts)

And yes, be ready for defend one's interests in court









daniels27 said:






Singapore Pty Ltd at 0%?

Click to expand...

I've tried with Singapore and it seems that active companies income is taxable in any case. For micro-companies - some tax deductions. But still not 0%. And slightly more expendable due to local Nominee

Or I missed something?
 
daniels27 said:






Yes, but you will need somebody in the EU

Click to expand...

Yesterdays person can suggest some king of companies



You know what? Thought about that dialog and got following point: described case with UK is completely illegal, money will be in USDT, why to use my docs, better to search for someone. But this is not legal and this is not way should I do, as I'm not lawyer, I'm scientist and developer. I can do some tax optimizations, but keep in mind every financial step takes time away from my main business
 
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