VOICEOVER:
We invite you to attend the January, 2023 Nomad Offshore Summit here in Lisbon, Portugal.
This podcast channel is about you, successful international entrepreneurs, successful expats, successful investors. Sponsored by HTJ.tax
DERREN JOSEPH:
Thank you for joining us on the various platforms. Great to see you this afternoon, this evening, or whatever time zone, this morning, depending what time zone you’re in. So we do this every week and we do live streams every week. So we pick various topics of interest from a tax perspective and we discuss them every week. So we’ve had quite a number of RSVPs and questions.
We think we have around two hundred and if you didn’t get a chance to submit your questions in advance, please feel free to do so. You can just type in the box below. Otherwise, if you’ve already submitted it, we have it and we get to them in the order in which they have been submitted. This is being recorded for those joining on Zoom, you would’ve seen the message that this is being recorded, so you can feel free to access it afterward or either if you just wanna revise what we discussed or review what we discussed or share with your colleagues or friends you can do so.
So it’ll be on our website, HTJ.tax, where you can also see upcoming events. It will also be on YouTube as well as, and wherever it is you get your favorite podcast. So that could be SoundCloud, Spotify, Amazon, or Google Play. Basically, wherever you get your podcast, you can probably find a copy of this afterward. And we publish on those podcasting platforms every day as well. So we always put out fresh content daily.
We, so we’ve been doing this for a couple of years now, but we will return to in-person events come this January. So from January, 2023, we’re gonna have an in-person event in Portugal to talk about the Nomad Offshore Summit, especially for those who may be at the beginning of the journey or would want to perfect their journey. Look at new jurisdictions, look at new opportunities, but working remotely or investing we’re gonna be having an in-person summit in Portugal at the end of January.
Have a look at HTJ.tax/events for more details just for those who may be new i’m seeing some names that we’ve seen before. Welcome back for those who may be new, understand that we are not here to give advice. What we hope to do is equip you with key principles and subjects and issues that you need to take on board when you engage with your preferred advice. That is, could not be advised. There’s no way that we can know someone’s situation inside out, just on a few lines in an email or on a message in a box below Zoom.
So, please keep that in mind. You just need to take the issues, digest them as best as you can, and engage your preferred task professional who’s qualified in jurisdictions in which you would like to be exposed. Remember, this is being recorded. If you would like your image not to be recorded or you need to just keep your camera off, otherwise you will be recorded as well. So would that in mind? Welcome, welcome, welcome. And we’re gonna jump into the questions in the audience, which we’ve received them.
Again, feel free to type your questions below if you haven’t already done so. So someone is asking, and this is a continuation, I guess it’s a popular topic. I find these days on the back of the livestream we did last week on US Portugal Taxes, someone is asking about the treatments of US LLCs in Europe. So an LLC is a unique entity in US. So in that, depending on the elections that you may, or may not have made, and depending on the facts and circumstances, it can be a pastorship.
There are, if it’s just one of you in control of your llc, then it’s a single-member llc and could be treated like a So proprietorship. If there’s more than one member, then potentially could be a partnership. Or if certain elections were made, it can be quote. So it is the treatment of an LLC and how it’s, how it’s taxed, how it’s regarded. It really depends on the facts and circumstances that are unique to it. So when it comes to Europe, of course, if you are in a jurisdiction or just in Europe, but anywhere where there’s a, especially where there’s a double tax agreement or there’s a special tax regime, then the treatment of the llc, the US L c, that jurisdiction is a special point of concern.
Generally speaking, it really, you know, I’m sorry, I can’t give a definitive answer because it really is driven by facts and circumstances. So for example, if there’s real substance, if there’s real economic substance in the US maybe there’s a CEO that employees or you have partners, business partners in the US, then it is possible that when there’s a distribution from the LLC to yourself in another jurisdiction, it can be treated as a dividend. It can be alternatively when if there’s none, if there’s no substance, and for example is the other extreme, it’s a single member LLC, and then you are actually running that LLC from whatever your European country of choice may be, then it can be subject to the full weight of the task rules in that jurisdiction.
Because most jurisdictions have a management and control test, and they can view the management and control of this LLC being done from within their borders. So there’ll be corporate tax implications or just general profit taxes. So the point is, if you want for it to be treated in a certain way, you really need to speak with an advisor to get an opinion on the present way in which it may be regarded in ways in which you, you can restructure it to get a more beneficial tax and commercial perspective.
But the point is, do not believe that just by having an llc, you would have the returns or the distribution from that LLC be treated as a dividend in your place of a board or the jurisdiction, which you, you, you have your place of a board. So that, that is, I know that is a perspective that’s being pushed in certain other forums, but if you have a look at our website at issued our tax, you’d see second court cases and certain references where that has been overturned, and that’s not an indeed case.
So again, to US LLC being run or receiving distributions from it in another jurisdiction, please see the advice because it can be pretty tricky. Okay, hope that helps. Next question, right? Yeah. Someone is asking about aggressive tax planning. Well, about tax planning. Okay, let’s, let’s, let’s face pass. The reality is that tax planning or tax structuring, it suddenly has a negative connotation, not just because of the various leaks, you know, paradise papers, Panama papers, Pandora papers or whatever.
So the, it’s not just a media thing, but in the minds of the policymakers as well as the various tax authorities, the whole idea of structuring and some sort of arrangement to benefit for just, just to exploit certain tax benefits or certain treaty benefits, that’s no longer, it’s, it’s, it’s no longer fashionable. You know, if, if we had this conversation maybe 20 years ago, 30 years ago, yeah, absolutely right?
You could set up she companies and you can do this and that, but not in this, you know, not in 2022, as we head into 2023, you know, we, we talking about principle purpose tests. There are so many anti-avoidance directives, especially within the eu economic substance is, you know, it’s that that type of legislation and that requirement is being rolled out across most jurisdictions. And those jurisdictions that are hesitant, they are being put in and hesitant to the extent that they still have like Offshore companies and zero tax, you know, where they may be viewed as tax havens.
They’re being put under pressure. So thing Hong Kong and the United Arab Emirates being on a gray list. So this is real, this is real. And you can see that most jurisdictions are coming on board and heading in that direction. I moving away from zero tax to putting certain measures in place to ensure that there’s this principle, the idea of money should be taxed somewhere. So that’s that, that’s, you asked from my perspective, that is my perspective.
The days of aggressive tax planning is, is over and various jurisdictions are looking at arrangements and they’re putting rules in place and practitioners who still have that old way of thinking, they are, you know, they’re becoming rare than they were previously. And I like to give the example of a Facebook friend of mine who, he was a Canadian passport who is a Canadian passport holder.
He was operating out of the Cayman Islands. And you know, there was, when you are caught by one of the more advanced jurisdictions and you are found to run a file of the tax rules, one of the questions they ask is kinda like in the movies, they ask you like, who helped you? So who are your enablers? So I would imagine that a number of people call this guy’s name as an enabler. So they are, as it sounds like something from a movie, but it’s real.
The IRS put the agent on a plane to the Cayman Islands and this agent who’s wearing a wire, and he was recorded saying, you know, so this person came, well, I have this amount of money I’d like to invest. Could you help me fix it so that I don’t have any, I don’t have to report anything. Basically getting into admit to helping with taxi evasion. So there’s no extradition agreement with the Caymans. So that’s, so it was a sealed indictment.
No one knew that there was an ongoing investigation. And then this person jumped in a plane to Miami and he was arrested on entering, trying to enter the US and there was a plea deal. So he did time and he was released, but he’s no longer on Facebook. So my my point is this, that if you have an arrangement, international structure and there’s no real commercial benefit, be careful, be very, very careful the days of structuring your affairs strictly, especially internationally, strictly for tax benefit.
When there’s no real commercial benefit. I propose that those days are over and those, those people who engage in that activity, they’re gonna find themselves in some pain later on. And bear in mind that when an enabler is caught, so a tax agent, an investment manager, whatever, the first thing in the tax authorities do is go through their books and look at all their other clients because they seem that this is a pattern of behavior. So if it is, you work with advisors, even if you are not doing anything shady, right?
You’re doing the right thing, you’re abiding by all the rules. If that agent, if that enabler, that tax advisor, that lawyer, that accountant, that that fund manager, whoever it may be, if they get caught, the entire list client list is under investigation. So you may be pulled in inadvertently because you are doing business with someone who’s playing fast and loose to the rules. So keep that in mind. Moving down your list of questions.
Okay, so sorry, someone just sent me a message there. Okay, yes, I’ll deal with that later on. What if you have not been compliant with your US tax obligations, right? Yeah. Could we just limit the messages to questions that are related to the, to to, to, you know, US international TAXES?
Yeah, nothing about TV commercials and stuff like that. Thank you. Right. Okay. So if you have not been compliant with your US tax obligations, the question becomes, well, like what are your options? So generally speaking, of course you should always seek advice, but generally speaking, the two ways of approaching your journey to become compliant, if it is your non-compliance has been non willful, so you did not intentionally seek and you didn’t create structures with a view to avoiding this known legal obligation, then there’s one pathway for you.
If it is that you were willful in your non-compliance, so you and you were intentional in seeking to avoid your US task obligations, that’s, that’s another pathway. So the pathway for those and non willful typically revolves around something, something called the streamline compliance procedure. So under the streamline compliance procedure, you go back three years for tax returns and six years for F bars. And this is driven more or less by the statute of limitations.
So three years. So the last three years for has already passed. So for right now that’ll be 21, 20 and 19 and F bars. For those who not aware under I think the Bank Secrecy Act 19 17, 19 71, everyone who’s us exposed, whether they be citizens, green card holders, or those who have triggered substantial presence, they’re legally obligated to report their foreign financial assets. So your bank accounts, mutual funds, brokerage accounts, whatever it is outside of the US that is subject to US reporting and then potentially taxation as well.
So that is a legal requirement and the reporting of those financial accounts are on the F bars, the foreign bank account report, otherwise known as M one 14. So the look back period and the streamline, if you’ve been non willful and your non-compliance will be three years returns and six years at bars. If your non-compliance has been willful, then you’re looking at a, you know, version of the voluntary disclosure agreement. And that would be the good thing.
I mean, the important thing is the, the incentive relief to come forward into one of these two programs would be that you would potentially get to legally avoid some or all of the criminal and civil penalties. So this is a huge incentive. So you go to the IRS before the IRS has found you and you get an opportunity to avoid some really draconian penalties, which can include jail time. So there’s a serious incentive if it is that you have, your non-compliance has been willful, as we said, you’re looking at voluntary disclosure and you need to reach out to ourselves or whoever you preferred US tax team would be, because then you definitely, definitely, definitely need legal advice.
So you should not really attempt that journey of catching up with your past tax returns without getting legal advice from a qualified US tax professional. So I hope that helps. Okay, moving down the list, the, someone is asking about Bali, Indonesia. So I think we actually do a live stream on Bali because there’s so many remote workers and digital Nomads in, in Bali, in Indonesia.
So we do one that’s special and focuses on us and Indonesia TAXES. So I do that with my colleague who is the head of tax at our, our company system company, Moores Roland in Indonesia. So Moores rulings like the fifth largest accounting firm in Indonesia. So they’re pretty well established. I do that with my colleague Dick. So that may be one for, to tune into there, there are past streams on our website. If you go to the HTJ dot and you just do a search and box, then it’ll pop up.
But anyway, you, if you’re interested in this digital nomad visa, So we don’t normally talk about visa stuff because we really tax, but obviously there’s an intersection between immigration status sometimes and task. So it becomes inevitable that we, we have to explore it. So there has been a lot, it’s in the international media, so I’ll just make this pretty clear within the international media. So people who may not be so clued in and as close to the happenings of Indonesia as, as we are because of our, you know, physical presence in Indonesia, being that there’s multiple offices in Jakarta as well as the satellite office in Bali, the Moores ruling.
So for those on the outside looking in, there’s a lot of buzz around this digital nomad visa. But bear in mind that unlike the one, the digital lumad visa, let’s say the welcome stamp in Barbados on the recently passed digital nomad visa for Portugal, there is actually no such thing as a digital nomad visa for Indonesia. It’s being lobbied for by, you know, particularly Bali. But bear in mind that unlike Portugal or let’s say Barbados or you know, somebody of those other jurisdictions, tourism and remote workers are really, really tiny parts of the Indonesian economy, depending on how you measure it, less than five or less than 2%.
So it’s a big deal for Bali, but it’s not a big deal for Indonesia. Indonesia, it’s into natural resources, extractive industries. That’s, that’s their attention really is. So while obviously the, the governor and the politicians and Bali have been doing the right thing on lobbying for their island Bali’s, one of 17,000 islands, which make up the Indonesian pgo. And so there’s, there’s a bigger picture. Understand that Indonesia went through a huge tax reform maybe a couple years ago, I think two or three years ago, the omnibus bill.
So it was huge by Indonesian standards in terms of the changes to the tax regime. So one would speculate that there’s not much of an appetite to undergo any more radical changes to the, the tax regime. On top of that, I think it was earlier this year, they went through a tax amnesty, another tax amnesty they’ve been doing, I think it’s maybe the third or the fourth one, don’t quote me that, but there’s been tax amnesty before. So they’ve just come out of a tax amnesty. So to believe that there’s political will to have a digital nomad visa when remote workers already have a basis for staying in Indonesia long term, if they want their social visit, their businesses, their social visit visas, their business visas and the like to believe that they’re gonna pass something new.
I don’t think so. I don’t think so. When I speak to my colleagues in Jakarta, they’re not seeing it. Of course it could happen, you know, anything could happen but it’s very, very unlikely. So yeah, I wouldn’t hold my breath listening out for any or looking out for any digital nomad visa from, from Indonesia and that it’s a reminder because this thing, this story has been everywhere. So it’s always a reminder to, to look at stories and from influencers including me, you know, look at everything with a critical eye, you know, does this person have expertise to speak on what they’re speaking about?
Do they have boots on the ground? Are they just sitting somewhere reading stuff on the internet and repeating it to you? So just, you know, don’t believe everything you hear on point, okay, somebody’s asking about can I be residents in a country with a treaty with the US and by claiming residency in the US only avoid foreign TAXES.
Yeah, we get this, we get this, I know where you’re coming from. So there are, especially where there’s a double, when there’s a double tax agreement, there are certain provisions within the tax treaty to have you legally avoid tax in one juries that can, because you claim a closer connection or you claim to still be properly resident in domicile than the other one. So it is possible for, for the US you get a certificate of tax residency I think is a form 61, 66 by completing a form 88 or two or something like that, an application for US tax residency certification.
And we’ve seen it, for example, clients with Spain. Spain is a popular one for, for us. So someone will come and say, well I’m living in Spain, but I heard that you can get the certificate of tax residency saying that you’re being taxed in the US and you’ve relieved of the obligation to pay TAXES in Spain (Experience seamless US tax services for Americans in Spain. Contact us to get started). Of course it is possible, but remember these documents done under penalty of perjury. So there must be a genuine closer connection as described by the treaty.
And you must have a place of a board, you must have a place available for you use. I know people come to us and say, well I can use my sister, I can use my brother’s address. That that is, that is kind of legal to misrepresent, to lie to the IRS and to lie if it is your resident in Spain or France or whatever to lie to the tax office in, in that jurisdiction. So be careful, kind of be careful with that. And as I said earlier in response to one of the previous questions, yes, I’m perfectly aware we are not gonna do it.
So unless we are convinced that you really do, you really are still properly resident and you have that closer connection, your place of a board, habitual board, whatever is still in the us we go through all the tests, we go through what the treat requires, we go through the iris rules, we go through the rules of Spain. If it is, we’re comfortable with U chapels boxes, yes we’re gonna do our job. But if we think you’re trying to cut corners and you’re trying to be a bit aggressive in your tax planning, we’re gonna say thank you, but no thank you. And I’m sure I, I know you go online and there are like a million people who do it for you.
But remember what we mentioned earlier about enablers. So if one of them gets caught because of another client, then all of their clients are subject to audits an investigation. So even if you do the right thing, by virtue of being with a client of a tax team who plays fast and looser than rules, if one of their clients get caught, you automatically get investigated, you automatically get audited. So can I keep that in mind? I always say when it comes to the tax authorities, you don’t mess with them, you just do things the right way.
No sleepless nights, you, you know, you can just feel comfortable, you know, have to look over your shoulder. Just know that you feel that measure of comfort in doing the right thing. So I hope that helps. Okay, so someone who, this is a long question by by joy, okay, I’ll read it because I wouldn’t try to summarize it because I think it’s important you made certain key points. I’m gonna read it all lot, right? So do you have any suggestions for countries to consider with reasonable overall tax situations for US citizens and with residency available?
So you need to again residency, okay, running a small consulting business that needs to, that you need to operate and manage in the location of re residency that would otherwise be impacted by foreign control restrictions. So I guess what you’re saying here is that you have a, a consulting business and management and control is gonna be exercise from within the borders of the jurisdiction in which you enter. So like your one or two person show and you know, so management and control.
So when you are looking for that place, you need to consider not just personal TAXES but corporate tax implications as well. Okay? I ideally we pay less Taxes world and living in the US and we don’t want to live in Puerto Rico. Okay? Cause you know, everybody’s gonna say hey Puerto Rico, but okay, you’ve made it particularly clear that you don’t wanna live in Puerto Rico. Puerto Rico’s a great place and we’re actually gonna do a live stream with my co with firm, associate firm in Puerto Rico coming soon.
I don’t remember where when exactly. But have a look at HTJ attack follow slash events. We can find out not just about that upcoming Puerto Rico event but the in-person event in Portugal early next year as well. So if it matters, we can stipulate all income is from the business. All clients are outside the country of residencies. I guess all clients are in the us all your clients in the us okay, I gotcha our personal criteria.
You want warm, you want warm winter, you want warm weather, okay? No snow and otherwise stable weather. So no regular hurricanes or typhoons, okay, I got you. Allows for gay marriage by law, okay, that’s important. Excellence, stable internet speed, 25 Maxwell, higher, decent, healthier, moderate cost of living, that is 4K ish. Oil expenses to task for a couple and a three bedroom of bigger business criteria.
If we’re recognizing that the business there, if we are reorganizing the business there, it needs to have reliable banking and it must work with Stripe. Wow, I well enjoy that. That is a pretty comprehensive message. Okay, So, hmm. The thing is sometimes there’s a trade off. So if it is that you want developed infrastructure in terms of reliable banking and stuff like that, basically all things being equal, you’re gonna be in a jurisdiction that’s gonna tax you.
Generally speaking, the jurisdictions that don’t tax, you don’t have all the infrastructure that you’re looking at. The one exception of course is Dubai. So Dubai is at this point a hundred percent tax free, but remember you heard it here first, that that 9% corporate tax that they’ve levied on internal activity is just the beginning. They’re being put under a tremendous pressure to get rid of that free zone system. But we’ll deal with that in another call. We’re gonna do a live stream on the Middle East on the Gulf region later on this year I think.
So stay tuned for that HTJ task file slash events. So Dubai will be exception. The problem with Dubai is that with the banking, it doesn’t really fit into, you won’t get full features on PayPal and Stripe. The banking isn’t like first top tier banking and of course there’s seven Emirates in United Arab Emirates, not just Dubai. Dubai is the most popular, I guess, of all seven. The problem is that you stipulated that gay marriages need to be recognized so that, that, that were a problem because the Gulf era in general is very traditional or you know, no judgment, it’s their culture, it’s their religion, whatever.
So works, you know, Dubai is very tolerant once you don’t talk about it, you keep a low profile. But yeah, it’s, it’s, it’s one of those sensitive issues. So with that being a key factor, you looking at Western Europe, that’s, that’s, that’s it. To check all of those boxes, I would say you’d be looking at Western Europe and of course Western Europe is not normally synonymous with tax efficiency, especially if you’re gonna run a country from a, a company, sorry, from within the jurisdiction.
So yeah, there are attractive regimes. So for example, Ireland, so we did a livestream in Ireland with colleagues from Dublin, an accounting firm as well as an immigration firm. You can have a look at our website for that one. So there are, you know, when you’re running a business, Ireland is very business friendly. I’m sure you’d be able if you want to, to relocate your business there.
There’s, there’s of course Portugal, which is, is pretty popular right now. And the good thing about Europe as opposed to let’s say the Middle East is that you put yourself in a pathway to citizenship. Cuz I, you said residency is important, but the point is you’re not gonna be zero tax. You can definitely be relative to the US low tax, but you’re not gonna be zero tax by by coming to certain countries in western Europe.
So I’d say have a look at Ireland, maybe even have a look at the uk, but from an immigration point of view, UK is very, very difficult right now post Brexit to get into it is possible, anything is possible, but it’s gonna be difficult. But quite popular right now would be I think Portugal, Spain, Ireland, there are certain tax regimes. So there’s the non dame regime in Ireland and the UK there flat tax regimes like Italy, Switzerland, other parts of the eu, Spain as a black and law n HR and Portugal.
What you may want to consider as well is restructuring your business before you enter Western Europe. If it is that you, you do decide on Western Europe. And one of the ways we advise our clients, you know, if your business is doing well, things are scaling. So maybe it’s time to point a CEO and if you have a CEO in the US so some people already have a, a network of independent contractors. If you make, you know, whoever you’re number two person, if that number two person becomes the CEO and you incorporate in their jurisdiction, if it is that they are in the US or they might be in the Philippines or they might, you know, somewhere that it can be an interesting jurisdiction from a tax point of view, it may be worth running the numbers.
So in short, to answer your question, given all the criteria you’re looking for, you know, fast wifi, maybe one of the other things that I don’t like about Dubai as well is the whole VPN situation because I, I met so many of my clients, I do calls with them on WhatsApp and you know, so many of my apps are kind of, it kind of gets annoying having to toggle and play with those VPNs, but I would’ve said Dubai was not for your relationship situation, your relationship situation plus, yeah, your relationship situation kind of would make Dubai not a primary option.
I think you are looking at Western Europe, but you would need to compromise on the tax situation. So, you can probably work with your preferred advisor, you can reach out to us on a way of bringing your tax bill down because you can enjoy the foreign earned income exclusion section nine 11. You, you know, you can, there are certain benefits that can bring you depending on how you structure your US LLC. So you know, it can come down but down to zero, probably not unless you know.
Yeah, okay. Hope that helps get advice, have a conversation, but you’re probably looking at Western Europe, particularly Portugal, Ireland. Okay, moving on. This one is, Hi Hannah, see the question below. Hannah is my colleague. So it’s Hannah’s who emailed you guys to remind you from event right of this event. Okay? So please see the question below for the webcast, US Taxes for international Entrepreneurs and Expats.
The question below was not answered during last webcast. Okay, so I guess this person attended they live stream that we did last week on US Portugal, so, okay, so they didn’t get that question answered. We got so many the ones for Portugal in Spain, they’re like our top live streams. We get hundreds of people logging in and they’re sending us dozens of questions and we rarely get through all of them. So I, I apologize for that, but yeah, Spain and Portugal are just so popular right now. So the question was not answered last week.
The question is not about Nexus in the us so assume that all work is performed outside of the US sales tax, assume that work performed is consulting, so somebody’s doing some consulting, okay? They wanna be compliant with the non-US or the local and international laws. They wanna legally avoid US income tax. The question is about avoiding US payroll, TAXES vi, social security, Medicare, self-employment, TAXES, et cetera, the last, last week address all of the questions above without answering the question below.
Okay, so, okay, I’m not too sure what you’re asking exactly. So if it is that you, you haven’t identified whether you are a US person or not. So whether are you a US citizen, a green card local permanent resident, or someone who’s triggered substantial presence and so you have US tax filing responsibilities, right? But if it is, let’s say that you’re not right, then you can set up, yes, you’re free to set up a, a company in your jurisdiction of choice.
So for example, I guess you, you were on the call last week, so maybe you in Portugal. So yes, you can absolutely, you can set up something in Portugal and you can run it from Portugal because you are the place in management and control of your chosen company or whether you’re self-employed or whatever. You won’t, as long as you stay out to the US you should have no US tax responsibilities as a consultant. So all your, your sole source of income from the US is consulting and you’re sitting in Portugal, you should have no US tax responsibilities.
However, if it is that you are US tax payer by breaching being a citizen, a law for permanent resident or someone who’s triggered substantial presence, then obviously you tax wide income regardless of where you are. So you will have US tax responsibilities at a personal level, but your company, if you are one person, show your company’s being run from Portugal. So from a corporate point of view, it’ll be all about Portugal. So you can, you can do self-employed in Portugal, you can set up a a, an lda, they a one person company in Portugal, but your corporate responsibilities will be in Portugal.
And in terms of social security then because your residents in Portugal, then your social charges will be payable to Portugal, not to the us. So you should have no self-employment tax, you should, you should have none of the social charges in vi social security, nothing to the us Everything goes to Portugal based on the income that you pull out. So it’s gonna be a little bit higher though. So self-employment TAXES in the US are 15.3% and for looking at around 21, 20 2%.
So that’s, that’s something to, to keep in mind, which your social charges will be to Portugal, not to the us Your only US tax responsibility would be personal if you are still a US taxpayer. Okay, I hope that helps. Okay, so again, yes, I’m not gonna answer anything about TV and if okay, not, not gonna talk about that. So I’m just scrolling down list of questions.
So someone is asking, there is asking, I’d like to find out about incorporating in Delaware while doing business outside of the US So absolutely the US is one of the most liberal economies on planet. So you absolutely, I you didn’t say whether US person or not, but regardless of whether US person or you’re not, you are, you are free to incorporate a company in Delaware. You, you can absolutely do so the choice of of you know, like state within the union because an LLC is something that’s formed at a state level.
So you first have to go to a state, for example Delaware informant, and then once you’ve done that, then you go to the federal government and say how you would like it to be taxed because the federal government doesn’t exactly know how to treat an llc. So you need to tell them, if you don’t say anything and it’s a one person, it’s a single member llc, then it’s treated as a disregarded entity, right? So if it is a multiple, there’s more than one member, then it’ll be treated as the default would be a partnership.
But you can elect to have it treated as a C corp on S corp, a c corp as a non-US person. But an S corp is limited to as persons. Okay, so you just wrote below that you are a US person. Okay, fine. So you are asking whether using a Delaware company while of Delaware LLC, while living and working outside of the us, is it better than being self-employed? Okay, so here’s, here’s the deal from, there’s no tax benefit to forming an LLC to forming a single member LLC as opposed to just having you have invoicing your clients in your name, being self-employed, there’s no tax benefit, absolutely none.
So those who kind of pedal that idea, they kind of might be misleading, Oh, maybe they refer to facts and circumstances that are unique to that situation, but generally speaking, there’s no tax benefit to be had from being a single member llc. It’s not about TAXES, it is actually about liability because I think it was Bill Gates. Bill Gates was an in, in some sort of interview and he was asked like, what’s the best invention of the 20th century? And you had expected him to speak about some sort of technology, but he actually said no, a limited liability company because before that, when someone wanted to go into business, chances are they had to go into business in their own name and then if things went wrong, they would be fully liable for the debt, the debt or the losses that that business endeavor occurred.
So, you know, their homes, their vehicles, their horses or whatever it is, right? They can be fully liable. But then suddenly we saw the proliferation and promotion of limited liability companies and then it does what it says, it limits the liability. So suddenly people could be more entrepreneurial because if things then go right the first time and as an entrepreneur, you know, most people fail and succeed. That’s just the way it is. Then suddenly your losses will be limited to what you invested in that company.
You won’t be exposed to, you know, unlimited liability where people can come and take your personal assets for your failed business endeavor. So, so that was amazing. That’s absolutely great. So to answer your question, the LLC is really about protecting yourself from lawsuits. So protecting yourself from the activity of, of the business. And especially with the US obviously the US is a very litigious place. A client or customer might get upset and they sue you.
So you really wanna have analysis and it’s not just about forming analysis, you need to be conscious of where you’re gonna form it because that might be informed by where you are, where the customers are, where you may have nexus, et cetera, etcetera. And you need to run it in a, a formal way. So you need to keep, you need to segregate the funds from your personal funds. You need to treat it in the way in which one can say that it is a separate legal entity from you. So in the event of some sort of legal dispute, the veil of incorporation cannot be so the person that’s suing you can’t go through the company and come after you personally.
So it’s really important to treat the LLC in a way that it is a separate business from you. Okay? But generally speaking, there is no tax benefit. If it is you, as you mentioned, you’re running it from outside of the US you’d probably wanna have a talk with an advisor as to whether the LLC is the best structure for you because most many jurisdictions that freelancers or remote workers go to, they have rules around management and control. So if it is that you’re running the company, even though it’s a US company, but you’re running it from within their borders, then you know, there may be corporate tax implications to that.
So you probably want to get advice before you go forward with it. I hope that helps. Okay. Yeah, you’re one more question that I didn’t, sorry, but let me do a quick look on Facebook to see if there are any questions on Facebook.
Okay. Nope, I’m seeing nothing there. Okay, so, okay, great. Okay, so last question. Somebody’s asking about influences and YouTubers personally on TikTok, I really like DukelovesTaxes, you know, I’ve met Duke and you know, he is a really, really good guy.
He knows his stuff, he’s genuine and he’s, you know, he doesn’t exaggerate in terms, you know, some people kind of like overplay certain tax benefits or certain planning opportunities because, you know, they, they want to attract views. He’s very factual, he’s entertaining but factual and honest. So on TikTok, my favorite is DukeLovesTaxes. And I also follow him, he has 3.4 million followers on TikTok and he’s also popular on Instagram.
So I follow him on both on YouTube every day I watch Nomad capitalist, I know that he’s probably the most popular in this space, the international tax and immigration space. So, everyone, I know kind of watches him. Nomad Capitalist. He was the first and he’s done an amazing job, absolutely brilliant guy. As he said last week, there are two other guys in the space who kind of follow him. They kind of like pat themselves after him. This will be an Offshore Citizen and a Wealthy Expat.
I watch them as well, you know, those are great guys as well. But Nomad Capitalist, he’s surrounded himself with some really clever advisors, so he knows where to go and where not to go in terms of what he’s putting forward in terms of information. I think the other two may not be as sophisticated as him. So they sometimes stumble and they get into spaces where they get it wrong or may intentionally violate certain rules that they may not be aware of because they don’t have as much experience as Nomads.
But all three are great and I watch all three all the time. Yeah, they’re all great content. They’re all great content, but in, in the international space, yeah, I think, yeah, I think that that, that, that’s, that’s what I look for. So I hope that helps. And they, oh, I forgot to mention in the, in the summit that we’re having in Portugal next year, I, Dukelovestaxes, so Duke, he’s gonna be there to share some of his wizard from a US tax planning perspective.
And this guy, check him out, Dukelovestaxes. He’s really, really good. Just do a search with DukeLovestaxes. Ok. All right, so I think that’s it. If there are no further questions, thank you so much for joining us today. Again, we do this every week. I think next week we’re doing Australia. So if you have any exposure, any interest in cross-border issues, or international tax issues with Australia, in US, Australia, or Australia anywhere, please feel free to join us and submit your questions in advance and we’ll go through them in the order, which we’ll receive.
So again, great to see you guys. Thank you for joining us. This is available wherever you get your favorite podcast. Have a look at HTJ.tax/events if you wanna log in for future ones. And more importantly, we wanna see you in person. So next January, end of January for Nomad Offshore Summit in sunny Portugal. Have a good evening, morning, and day, depending on where you are. And we see you next time. Bye-bye now.
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