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Subject Author Date
Avoid paying corporation and INCOME tax Vfereira81 05-28-2008
Posted by Vfereira81 on May 28, 2008, 11:37 pm
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 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?

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Posted by Paul Thomas, CPA on May 29, 2008, 8:35 am
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>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,



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.





> Delaware has no sale tax and because online business
> services are tax free (we have an online business).



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.





> 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..



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





> I only need to pay income tax for the country that i am working in



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.




> ( 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 ...


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.









--
Paul A. Thomas, CPA
Athens, Georgia

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Dick Adams on May 29, 2008, 11:19 pm
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> 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
> hem form Portugal.. i guess I don't have to pay income
> tax to the uk .. Is that correct?

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

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

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