1. Home
  2. Taxes General Forum
  3. Avoid paying corporation and INCOME tax

Avoid paying corporation and INCOME tax

I live and work in the U.K and i have an LLC in Delaware

The reason for creating the LLC in the U.K is to avoid paying corporation tax, Delaware has no sale tax and because online business services are tax free (we have an online business).

Now that doesn?t mean that i avoid income tax ..hmm our business bank accounts is in Germany

we have personal bank accounts in the U.K and Portugal..

As I understand it and correct me if i am wrong.

I only need to pay income tax for the country that i am working in( i already do for my full time job in the uk) .. so if i transfer money from my business bank account in Germany to my personal uk account i have to declare this money and pay income tax for them ...

What happens if i deposit this money to my account in Portugal (not resident of this country) and then withdraw them form Portugal.. i guess I don't have to pay income tax to the uk .. Is that correct?

Reply to
Vfereira81
Loading thread data ...

wrote

Let's be clear here. You created a Deleware LLC in the United States, which is either taxed as a US sole-proprietorship entity, or if you elected, a US corporate entity. In any case, US tax laws apply to the business activity of that US entity called an LLC.

So? You did this to avoid sales tax? That's not the same as avoiding US income tax.

Your LLC entity, either a sole-proprietorship or a corporation, is liable for all US taxes on ALL income from that entity on it's worldwide profits regardless of how those profits are earned.

Irrelevent. Where you bank is meaningless to where the profits are taxed.

Not true. The LLC is a US entity, and US income taxes are due on all profits from the US based LLC on it's worldwide profits, regardless of WHERE the profit is earned the US gets to tax the income.

If you are "self-employed" based on your LLC structure, then the UK will most likely also tax you on those profits, giving you a credit for the taxes paid to the US on the same income (called a foreign tax credit here).

If the LLC is a corporate entity in the US, the corporate structure would owe tax on it's worldwide profits. Any dividends you earn (paid out to you) from the LLC are taxed by the UK just like any other dividend you receive would be taxed. You gain nothing. In addition, it's likely that those dividends would be subject to some form of backup withholding in the US and Deleware for payments to shareholders outside of the US.

Your proposed shell game is not going to save you any taxes, seems to cause more work and costs than necessary, and looks like you are conducting some illegal activities.

Seek out and pay for qualified legal and tax advise prior to proceeding farther down this path.

Reply to
Paul Thomas, CPA

If you paid for this advice, you should get your money back.

If you're dealing with off-shore bank accounts, why bother incorporating at all.

I fully understand what you are trying to accomplish. It is the time honored UK off-shore income scheme. Under that scheme, the UK did not tax your off-shore income until you brought it into the UK. One major abuse of that scheme was to have an off-shore credit card to use for purchases in the UK and to have an off-shore bank pay the credit card bills. The abuse was so rampant 20 years ago that I'm surprised the Inland Revenue hasn't closed it by now.

Dick

Reply to
Dick Adams

BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.