Offshore Jurisdiction Review: Is Wyoming A Tax Haven?

Why Choose Wyoming as an Offshore Tax Haven?

The classic vision of a tax haven is that of a far-off tropical Island somewhere in the Caribbean or Central Americas, where one secretly goes and stashes their money to avoid paying taxes. Not many people envision the rocky mountain cowboy land of Wyoming as your typical tax haven. However, Wyoming offers the ideal tax refuge for foreigner nationals and even U.S. citizens. Although there are some additional considerations depending on which category you fall into. 

Both Wyoming’s corporate and personal state income tax rates are set at a nice round 0%. That means whether you live and work in Wyoming as an individual taxpayer, or run a business in Wyoming, you will not be liable to pay any income tax to the state.

This is especially advantageous to foreign nationals who are not liable for U.S. federal income tax. However, U.S. citizens will still be liable to pay federal income tax on all personal income earned in Wyoming, including distributions of profits from their business. This makes it more difficult for U.S. citizens to use Wyoming as a tax haven, but with the right structure and planning, they will still be able to benefit from setting up a tax-free business in the jurisdiction. 

The fact that Wyoming is a U.S. state is in fact a major advantage, as it makes it a more affordable, accessible, and reputable choice. 

Go here for more info on setting a Wyoming offshore LLC.

Table of Contents:

• Why Choose Wyoming As An Offshore Tax Haven?
• Benefits Of Setting Up An Offshore Business In Wyoming
• Background Information About Wyoming
• Location
• Political Structure
• Economy And Infrastructure
• Population, Language And Culture
• Exchange Control
• Type Of Law
• Principle Corporate Legislation
• Taxation
• Corporate Tax
• Personal Income Tax
• Sales Tax
• Property Tax
• Estate And Inheritance Taxes
• Conclusion

The Benefits

Wyoming is an excellent tax haven for offshore company incorporation. Advantages of setting up an offshore business in Wyoming include:

• Tax benefits: An offshore LLC in Wyoming is defined as one which does not conduct its business within the state nor earn an income in the US. These companies are subject to a 0% corporate income tax. Members are, however, still taxed directly for the profits of the LLC as part of their personal tax, in accordance with the rules of their tax residence. This is especially pertinent for US citizens and will be discussed in more detail. The LLC is not liable for US federal income tax if it is owned by non-resident members who do not have any income source from inside the US.
• Privacy and confidentiality: Financial privacy is upheld in Wyoming with their strict privacy laws. Information about members is not publicly reported, nor are company information and accounting records.
• Fast and easy incorporation process: A Wyoming LLC can be incorporated in as little as 1 week. The incorporation process can be completed remotely.
• Only one member is required, who can be of any nationality. Corporate members are permitted.
• No minimum capital requirements
• No requirement to file accounts and no audit requirements
• Stable and reputable jurisdiction: being a US state, Wyoming is a highly reputable jurisdiction with a stable political and economic environment. Business owners do not need to be concerned about excessive scrutiny for owning an offshore company in Wyoming, as they might with other more traditional offshore tax havens.
• Low setup and maintenance fees
• Flexible structure: The LLC can be member managed or non-member managed.
• Limited liability protection for members

Background Information about Wyoming

Location

Wyoming is a U.S. state located in the Mountain West subregion of the Western United States. It shares borders with Montana, South Dakota, Nebraska, Idaho, Utah, and Colorado. Wyoming is the 10th largest state by area but has the lowest population of only 576,851 according to the 2020 United States census.

More than 90% of Wyoming is made up of rural land.  

Political Structure

As a U.S. state, Wyoming is part of the constitutional federal republic and presidential system of the U.S. Under this system, each of the 50 individual state governments have the authority to make laws within their jurisdictions that are not in conflict with the U.S. Constitution. 

Wyoming has three branches of government: the executive, legislature, and judicial. The executive branch is headed by the governor, who is currently Mark Gordon. Due to their low population, Wyoming is allocated only one at-large seat in the U.S. House of Representatives and therefore only three votes in the Electoral College. 

Economy and Infrastructure

Wyoming is a developed US state with good infrastructure and a strong economy. It’s small population size helps to keep the state unburdened, and so majority of its residents have access to good education, healthcare, and other services.

The main contributors to Wyoming’s economy are its mineral extraction industry and tourism sector. Millions travel to Wyoming each year to visit its national parks. Agriculture has also played an important role in the economy in the past, although it now makes up a minority share. 

Population, Language and Culture

Wyoming has a small population size of approximately 580,000. The racial composition is predominantly white (about 93%), with several other native races and African American composing the remaining the remaining 7%. Wyoming is the only state where the median income of African Americans is higher than that of white workers. 

93% of the population over the age of 5 speak English as their first language. Christianity is the primary religion (55% of the population) while 40% identify themselves as non-religious. Wyoming shares many of the common cultural characteristics that one would expect to find in a U.S. state.

Exchange Control

Wyoming does not impose any exchange controls. 

Type of Law

Wyoming follows the common law system of the U.S. 

 

Principle Corporate Legislation

The primary legislation governing corporate entities in Wyoming is The Wyoming Limited Liability Company Act sections 17-15-101 to 17-15-144 of the Wyoming State Code.

Taxation

Wyoming is regarded as a tax haven because it levies zero corporate income tax and zero personal income tax at the state level. One of the reasons it can afford this is due to the revenues it collects from mineral and oil rights. In addition to these zero tax categories, Wyoming has generally low tax rates on most other categories of taxation, such as real estate, sales tax, and estate taxes (which are also set at zero).  This makes it one of the overall least tax burdened states in the US. 

It is important to note that foreign nationals are in a better position to utilise Wyoming’s favourable corporate tax rates as they are not liable for U.S. federal taxes. On the other hand, U.S. citizens are still liable for federal taxes if they own a business and/or earn a personal income in Wyoming. This reduces the benefit they can get out of using Wyoming as a tax haven but does not altogether negate them. 

Corporate Tax

There is a zero corporate tax rate in Wyoming. However, this does not mean you can altogether avoid paying taxes on the profits your company generates. Instead, LLCs are taxed on a “pass through” basis, whereby all profits/losses and capital gains are passed through to the member/s who are then liable for taxes at the personal level. These taxes would take the form of personal income tax or capital gains tax. 

This tax structure is most beneficial if you reside in a tax haven or a jurisdiction with a territorial tax system which does not tax its residence on offshore income, as you could then effectively eliminate taxes entirely through a Wyoming Offshore LLC. If you are a U.S. citizen or reside in a country with high personal tax rates, the benefits are more limited. 

To maximize the tax benefits of a Wyoming Offshore LLC and avoid being liable for US federal taxes, the following criteria should be met:

• Members should not be residents or citizens of the US.
• The company should not engage in trade or business activities within the US.
• The company should not earn an income inside the US.

Personal Income Tax

Wyoming is one of only nine U.S. states with zero state income tax. Once again, residents need to be aware that this does not exempt them from paying U.S. federal taxes but does serve to reduce their overall personal tax burden.  

Sales Tax

Wyoming has a flat state sales tax of 4%, and municipalities have the right to add up to 2% to that, making the maximum allowable sales tax 6%. This is below the U.S. average of 6.35%. Prescription drugs and certain groceries are exempt from sales tax. 

Property Tax

Wyoming also has one of the lowest property tax rates in the U.S., with an average effective rate of 0.57%. The median annual property tax is payment is $1,352 which is well below the national median of around $2,500. 

Estate and Inheritance Taxes

Wyoming does not levy any estate or inheritance taxes. However, U.S. citizens are still liable to pay federal estate taxes. 

Conclusion

It is clear that Wyoming ticks many of the boxes of a good tax haven. It has low or zero taxes across the board and is easily accessible and friendly as an offshore jurisdiction for company formation. Wyoming has its limitations as a tax haven for U.S. citizens, as it does not allow them to avoid paying high federal taxes to the U.S. government.

There are very few options out there which solve this though, other than renouncing your U.S. citizenship and relocating to a low-tax country. For those who are not ready to take such a leap, Wyoming is still an ideal state to base yourself or incorporate a company, so as to minimise excess taxes which you would otherwise need to pay in other U.S. states. 

Wyoming is especially well-suited as an offshore tax haven for foreign nationals, who can realistically bring down their tax liabilities to close to zero with the correct structuring and expert guidance. 

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