Literally makes no sense. You say "this interpretation is correct" and then affirm the exact contrary? Weren't you banned for this sort of crap?
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How To Actually Avoid EU Tax With US LLC? (without changing residency)
- Thread starter szneka
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Fulton Abraham Sanchez
Fulton Abraham Sanchez, CPA
I don't think so. Incomes is not taxable in the us if the solo member LLC is foreign and the profits are not US sourced. The IRS says the same.
Just to be 100% sure of what you're saying.
OP said all (or most) of his income is US-sourced (coaching/consulting), if he creates a US LLC that's going to receive all that US-sourced income, is he going to pay taxes in the US or will they pass to his income tax (in the country he's a tax resident of)?
Income from services provided OUTSIDE the United States by someone who is not a US person is NOT considered US sourced income. Not even if the customers are located in the US.
Sigh. If you choose for the LLC to be disregarded for tax purposes, then it becomes transparent.
It will still be the LLC providing the services (in terms of liability etc.), but the IRS will "look through" the LLC and look at the member as a natural person to decide how much he/she owes in taxes.
It will still be the LLC providing the services (in terms of liability etc.), but the IRS will "look through" the LLC and look at the member as a natural person to decide how much he/she owes in taxes.
You may be right and you have a point, but I stick to my initial thought where I doubt that a US company, with only US customers and that is engaged in considerable (+20k as OP said), continuous and regular business just the US will not be taxed at all in the US.
But as I said, you may be right.
The company simply isn't engaged in a business in the US.
Imagine a guy in India doing graphics design for US customers. He is registered as a sole proprietor in India, pays his taxes in India. But since US clients pay better than Indian clients, he focuses all his efforts on the US market and all his clients are in the US.
Do you think the Indian graphics designer pays US taxes because of this? No, because his services are provided from India. He has never even set foot in the US.
This is not changed in any way by having a US LLC that is treated as a disregarded entity. The IRS only looks at the member behind the LLC.
If this guy had an employee or an office in the US, or if he was spending time in the US, it would be completely different story, though.
But that's just the general idea and one should ALWAYS consult with an accountant.
Imagine a guy in India doing graphics design for US customers. He is registered as a sole proprietor in India, pays his taxes in India. But since US clients pay better than Indian clients, he focuses all his efforts on the US market and all his clients are in the US.
Do you think the Indian graphics designer pays US taxes because of this? No, because his services are provided from India. He has never even set foot in the US.
This is not changed in any way by having a US LLC that is treated as a disregarded entity. The IRS only looks at the member behind the LLC.
If this guy had an employee or an office in the US, or if he was spending time in the US, it would be completely different story, though.
But that's just the general idea and one should ALWAYS consult with an accountant.
Fulton Abraham Sanchez
Fulton Abraham Sanchez, CPA
As far as I can see, in your case you can distribute from the LLC to yourself and then you have to declare this with your income taxes.
However, if you use the LLC credit card I think it will be virtually impossible that your tax authority knows about it
However, if you use the LLC credit card I think it will be virtually impossible that your tax authority knows about it
JustAnotherNomad is correct, although I would like to point out that although the SMLLC or Partnership is a disregarded entity, the IRS will see if the Disregarded entity is engaging in USTB and have ECI, it is a bit nuance, but generally, it is correct.
As an NRA, having a pass-through entity in the US itself will not make you liable to a higher standard of tax treatment. The way to see this is you could see it as if you do not have any entity in the US, and you are selling services directly to US customers continuously FROM your local country entity. According to the Internal Revenue Code, personal services provided outside of USA are definitely foreign-source income, thus not subject to tax. Your US customer will just request you to fill in the W8 form and just transfer you your money with no issues at all.
As an NRA, having a pass-through entity in the US itself will not make you liable to a higher standard of tax treatment. The way to see this is you could see it as if you do not have any entity in the US, and you are selling services directly to US customers continuously FROM your local country entity. According to the Internal Revenue Code, personal services provided outside of USA are definitely foreign-source income, thus not subject to tax. Your US customer will just request you to fill in the W8 form and just transfer you your money with no issues at all.
This can all be completely different if the US LLC is owned by a company. Then there is a risk of branch profit tax in the US.
Furthermore, even if the LLC is taxed as a disregarded entity in the US, owned by an individual, and all services are provided from abroad, there is still a risk that the country where the services are provided may tax it as a corporation. They are in no way bound to the US rules.
So it's extremely important to get good guidance in all countries involved.
Furthermore, even if the LLC is taxed as a disregarded entity in the US, owned by an individual, and all services are provided from abroad, there is still a risk that the country where the services are provided may tax it as a corporation. They are in no way bound to the US rules.
So it's extremely important to get good guidance in all countries involved.
Branch Profit Tax are only applicable when the US LLC is engaging in USTB and has ECI. As for the taxation from the home country for services rendered overseas, 90% of the cases are that these will be taxable, so that is why taxation consultation on both sides is needed.
Great info! One quick question:
If the LLC owned by a foreigner pay taxes in their home country. Would they still need to file a form with the IRS every year?
An entity can't be a subsidiary and a branch at the same time ...
A foreign-owned single-member LLC that doesn't elect to be taxed as a corporation is a disregarded entity, it doesn't matter if it's owned by a physical or legal person.
If an LLC is considered non-ETBUS, it's not taxed in the US at all, period, because it doesn't derive it's profit from the US. It's place of business, it's permanent establishment, and place of effective management are elsewhere. It only has a registered address in the US, that's all. It is most likely taxable in the place where you actually do the work, or do the management.
The Polish IP box is a good idea. Also good idea is a Romanian micro-company. Revenue tax is only 3% or 1% if you hire someone (min wage in Romania is 466 EUR). Social charges and healthcare are absolutely minimal and capped. As a single person, an US LLC is in fact not a good idea, because if you run it from some other country it'll be considered there as a branch of the LLC, taxed with a full CIT, losing rights to any preferential treatment as a domestic company would, like in case of Romania the LLC wouldn't be eligible for the 3% / 1% tax rate, it'd pay the full 16%.
In the worst case it'd be recognized as tax-transparent and you'd have it all taxed as your personal income.
With a Romanian company you can take advantage of the relaxation of CFC rules within the EU. If you create an economic substance in Romania for the company (rent office, hire someone ...), you can live anywhere in the EU and the local tax authorities can't appropriate it for taxation, it will remain Romanian with the 3% / 1% tax rate.
Moreover if you need to provide somewhere a company registration record from a public register, or board meeting minutes, anything that a normal limited company has, for example for opening a branch office, with an US LLC you cannot, because none of this exists.
You cannot hide with it anymore because foreign ownership is being reported to the IRS, and the IRS passes it on to your local tax authorities, along with the LLCs financial information for taxation.
I own an US LLC and after learning about all these legal rules, it seems a bit pointless to have, even disadvantageous sometimes.
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