For Digital Nomads, Freelancers, and Remote Business Owners

Non US Citizens only

1. Set Up Your Tax-Free Business Entity

Step 1: Form a US LLC

Why? US LLCs are flexible, low-cost, and avoid corporate tax if structured correctly.

How?

  • Choose a State:
    • Wyoming (no state tax, privacy)
    • Delaware (strong legal framework)
    • New Mexico (cheapest, but less banking flexibility)
  • Hire a Registered Agent: Required for compliance (cost: $50-300/year)
  • Obtain an EIN: Apply for an Employer Identification Number (EIN) via IRS Form SS-4 (free)

Alternative Structures:

  • UAE Free Zone Company: 0% corporate/personal tax, but higher setup costs (~$15k)
  • Estonia e-Residency: 0% corporate tax until profits are distributed

2. Terminate Tax Residency

Step 2: Become a Tax Nomad

Why? Most countries tax residents on worldwide income.

How?

  • Spend <183 days/year in any single country
  • Sever ties to your home country (sell/rent property, close local bank accounts)
  • Establish residency in a tax-free country (e.g., UAE, Georgia, Panama)

Example:

  • Live in Thailand (180 days), UAE (90 days), and Mexico (95 days)

3. Open Business Bank Accounts

Step 3: Set Up Banking for the LLC

Why? To receive payments and avoid mixing personal/business funds.

How?

  • US Business Account: Use Mercury, Wise, or Payoneer (supports non-residents)
  • Non-US Account: Open a USD account in a tax-neutral jurisdiction (e.g., UAE, Singapore)

Tip: Use Wise to hold multiple currencies (USD, EUR, GBP) and avoid FX fees.

4. Invoice Clients & Receive Payments

Step 4: Bill Clients Through the LLC

Why? Income must be routed through the LLC to qualify as non-taxable.

How?

  • Invoice as the LLC: Use tools like FreshBooks or Wave
  • Payment Processors: Stripe, PayPal, or direct bank transfers to the LLC’s account
  • Label Income as Non-ECI: Ensure services are performed outside the US for non-US clients

Example:

  • A German client pays your Wyoming LLC $10,000 via Wise for freelance work done in Bali

5. Withdraw Profits Tax-Free

Step 5: Pay Yourself as the Director/Owner

Why? Owner’s draws are not taxed in the US if income is non-ECI.

How?

  • Owner’s Draws: Transfer profits from the LLC’s account to your personal account
  • No Salary: Avoid payroll taxes (15.3% in the US) by not paying yourself a salary
  • Use a Tax-Free Personal Account: Withdraw funds to a UAE, Georgia, or Seychelles account (0% personal income tax)

Example:

  • Transfer $50,000 from your Wyoming LLC’s Mercury account to your UAE personal account
  • Tax Result: 0% US tax (non-ECI income) + 0% UAE tax (0% personal tax)

6. Compliance & Reporting

US Requirements:

  • File Form 5472 annually (reports LLC transactions, even if $0 tax owed)
  • Avoid creating a US tax nexus (no US office/clients)

Non-US Requirements:

  • Report foreign accounts (e.g., FBAR for US citizens)
  • Declare non-residency in your home country

Tools:

  • Accounting: QuickBooks or Xero
  • Tax Residency Tracker: Nomad Tax or Rovva

7. Advanced Tactics to Avoid Pitfalls

Avoid Taxation Triggers:

  • No US Clients: Work for non-US clients only
  • No Physical Presence: Perform services outside the US and avoid staying >183 days/year in any country
  • No Passive Income: Focus on active income (services, consulting). Passive income (royalties, dividends) may trigger CFC rules

Example of Failure:

  • Working 200 days/year in Spain ā†’ Become a Spanish tax resident (global income taxed at 24-47%)

Alternative Tax-Free Structures

Option 1: UAE Free Zone Company + Residency

  • Set up a Dubai Free Zone Company (0% tax)
  • Invoice clients globally
  • Withdraw profits to your UAE personal account (0% tax)

Option 2: Estonia e-Residency + Cyprus Non-Dom

  • Bill clients through an Estonian OƜ (0% corporate tax on retained earnings)
  • Withdraw dividends as a Cyprus non-dom (0% tax on dividends)

Option 3: Puerto Rico Act 60

  • Move to Puerto Rico (183+ days/year)
  • Pay 4% corporate tax and 0% federal tax on US-source income

Tax-Free Checklist

  • Terminate tax residency in high-tax countries
  • Use a US LLC/UAE company for invoicing
  • Keep income as non-ECI (non-US clients, work done abroad)
  • Withdraw profits via owner’s draws (not salary)
  • File Form 5472 (US) and report non-residency elsewhere

Final Notes

  • Tax Avoidance vs. Evasion: This scheme is legal if you follow residency rules and reporting requirements
  • Consult Professionals: Hire a US tax attorney and international tax advisor to avoid mistakes
  • Adapt as Needed: If your income or lifestyle changes (e.g., US clients), restructure immediately

By following these steps, you can legally retain ~100% of your income while living and working globally.