Need Help About US LLC Related

[CaptK]

I’m pretty sure the corporation would have to pay branch office tax (and submit required reports) - which was introduced precisely for that reason.

Amen brother

 

[Tax Cow]

However Amazon doesn't seem to withhold any taxes on affiliate income. So I guess affiliate income is not taxable in the US.

Good shot but that's off the mark, comrade!

https://affiliate-program.amazon.com/help/node/topic/GYJB2LE2AB473W2L

I am a non-US person, why do I have to provide my tax information?

The US Internal Revenue Service requires Amazon to withhold up to 30% from non-US associates earning referral fees in the US unless the associate can provide a completed W-8BEN with a valid claim of treaty benefits.

I’m pretty sure the corporation would have to pay branch office tax (and submit required reports) - which was introduced precisely for that reason.

In aggregate, the corporation would end up paying the same or more tax than a pass-through LLC, first on corporate income, then probably some more on dividend distributions to a non-U.S. individual. But that election opens up runways to the cowboys who wish to pay zero and not obey the law! The law is just some dry text that can be ignored; the difficult part is getting pre-tax comissions out of Amazon. Simply illustrating what a cowboy could do to not pay any tax which seems to be the ultimate goal.

 

[fshore]

Good shot but that's off the mark, comrade!

Amazon.com Associates Central

I know it says that there, but they don't seem to withhold any tax for affiliates. Maybe some other current affiliates here can confirm.

 

[JustAnotherNomad]

I have heard that they do withhold taxes. But I don’t have any personal experience.

 

[fshore]

They do withhold for royalties, but I don't think affiliate commission is taxable. There are tax treaty rates for dividends, interest and royalties only.

 

[JustAnotherNomad]

Ok. I thought affiliate commission would fall under royalties - but then I guess it should be fine.

 

[CaptK]

Amazon are not gonna want to piss off the IRS. No matter how big they are rules are rules and they wont help a customer to avoid them.
If you are due a rebate then its between you and the IRS.

I personally would not willing leave any money in anything US related. They can shut you down just because they are bored

 

[Tax Cow]

I know it says that there, but they don't seem to withhold any tax for affiliates. Maybe some other current affiliates here can confirm.

In a hypothetical scenario where an Italian affiliate refers an Italian customer who buys a violin on Amazon.it, there's of course no withholding of U.S. tax on commission due. Replace Italy with UK, Brazil, etc. for the same outcome. Delivery address of the referred customer seems to be a key factor.

In what exact scenario did you not tax withheld? Please describe in detail. And just in case, are you a non-U.S. person in the first place?

 

[bnpsu]

In a hypothetical scenario where an Italian affiliate refers an Italian customer who buys a violin on Amazon.it, there's of course no withholding of U.S. tax on commission due. Replace Italy with UK, Brazil, etc. for the same outcome. Delivery address of the referred customer seems to be a key factor.

In what exact scenario did you not tax withheld? Please describe in detail. And just in case, are you a non-U.S. person in the first place?

From what I understand, Amazon makes you go through a tax interview. If you are a non-resident owner of a US LLC, you can fill out a W8 BEN to avoid withholding. Does that make any sense?

 

[Tax Cow]

From what I understand, Amazon makes you go through a tax interview. If you are a non-resident owner of a US LLC, you can fill out a W8 BEN to avoid withholding. Does that make any sense?

Yes. But there's no outcome that leads to no withholding at all, except in a rare scenario. Reduced withholding rates are more realistic due to treaties.

Amazon is allowed to not withhold tax if one of the conditions is met:

1. US LLC is a resident liable for tax in the U.S. Not possible with a foreigner-owned pass-through LLC.
2. Beneficial member of the foreign-owned LLC is a confirmed resident in a treaty country to which 0% withholding rate applies. They send you physical mail to verify that this is the case, and until then, 30% U.S. withholding rate applies.

 

[Alex Fr]

Yes, 30% or treaty rate.

Altough you do not have ECI from the U.S., tax is due because you have income of type "commissions" from the U.S. - one type of passive income (among royalties, interest and dividend) that is taxed even if not ECI.

Are you 100% sure on commisions?
Actually CPA marketer could pass material participation test
if he has dedicated more than 500 hours to a business or activity from which he’s profiting. Traffic is a hard every day work if one want to succeed.

 

[Tax Cow]

Are you 100% sure on commisions?
Actually CPA marketer could pass material participation test
if he has dedicated more than 500 hours to a business or activity from which he’s profiting. Traffic is a hard every day work if one want to succeed.

Moo Moo! 30% Or treaty rate on commissions.

Commissions are FDAP income (read more on IRS webpage) which alongside ECI is taxed on distribution in the US. And Amazon is the withholding agent who gets their buttcheeks red if they fail to comply.

Amazon also states all this in their affiliate FAQ.

 

[JustAnotherNomad]

Not if you use a LLC that is taxed as a disregarded entity. You’d have to use a corporation. Then you could bill your corporation to reduce its profits. But transfer pricing restrictions would probably apply.
It would probably be a better idea to use something like a Cyprus company instead of a US LLC. There shouldn’t be any US WHT on royalties paid to a CY company, and there also wouldn’t be any WHT in Cyprus. But I don’t know how low you can push the CIT there. Maybe a Dutch, Maltese or Irish company would work as well.
At least that’s how I would imagine it should work. But you should really talk to a US CPA, ideally someone who is specialized in this kind of companies.

 

[Davis123]

Hello guys,


I’m in the same situation. I do affiliate marketing and generate (non US) leads but the monthly payment (commission) is made from a US based affiliate network (Delaware).

if I start invoicing via An LLC, will my income be taxed ?

the idea is to get the money In the US LLC bank account, then repatriate a part of it (Via an invoice) to Morocco where I’m fiscally resident (15% dividend tax)

Thanks in advance for your thoughts

Hello guys,


I’m in the same situation. I do affiliate marketing and generate (non US) leads but the monthly payment (commission) is made from a US based affiliate network (Delaware).

if I start invoicing via An LLC, will my income be taxed ?

the idea is to get the money In the US LLC bank account, then repatriate a part of it (Via an invoice) to Morocco where I’m fiscally resident (15% dividend tax)

Thanks in advance for your thoughts

This info is from a simple google search
As a non-US resident, your Delaware LLC will only be taxed in the US on income from US sources, meaning that income from other countries will not be taxed by the US. If you choose to form an LLC, any profits US-sourced income will be taxed by 30%. This 30% goes to the IRS.
I think you still need to talk to a good US cpa like others suggested. I have dealt with a US cpa who is superb in international taxation matters for both US and non us persons. His name is Vincenzo Villamena just google him up with his name and US cpa keyword. He is recommended by all offshore service providers including Andrew Henderson from YouTube.

 

[JustAnotherNomad]

You’ll need a company that is tax resident, otherwise you can’t use treaty benefits (lower US withholding tax).

 

[JustAnotherNomad]

Why do you need two companies?
Can’t you use your Moroccan company directly for this? There is a treaty with the US:
https://www.irs.gov/pub/irs-utl/Tax_Treaty_Table_1_2019_Feb.pdfThat would be the simplest option - I thought there was no treaty.
If that doesn’t work, talk to a US CPA if you should use a LLC taxed as a disregarded entity or a corporation, and if you or rather one of your companies should be the member. And if you need to send an invoice or if that’s not necessary.

 

[JustAnotherNomad]

You should talk to a US CPA and ideally also a local accountant. If you deal with US clients, a US LLC will probably be better than a UK Ltd.
When you speak to the CPA, you should emphasize that there is a tax treaty (but he will probably see that as well).

 

[Tax Cow]

@Moulaga

as mentioned above, US is bit tricky as my clients are US based so the LLC will be taxed.
Would a non resident UK LTD created by my French passeport work fine in my case ?

You've got FDAP income from affiliate business (commissions) and this will be subject to U.S. withholding of 30% unless a tax treaty reduces it to zero or a lower rate. Regardless of where you incorporate.

With this in mind, where you incorporate does not matter unless the company is substantiated to a point that it no longer qualifies as a Moroccan resident corporation under PoEM rules.

2. Keep the USD/EUR in the offshore to pay suppliers (hard to pay in EUR/USD from Morocco + they take 11% tax for each foreign payment)

Wow. Moo! That's a lot of tax for an international payment. Are you sure it's Moroccan tax and not a bank fee for wire + FX conversion? That could be a world record.

 

[Tax Cow]

@Moulaga

Here's a possible "fix" for until you're ready to move to a fully compliant solution:

a. Stick with the Moroccan company for simplicity.

b. Open up an offshore business account in a country which does not have active CRS AEOI relationship nor TIEA treaty with Morocco. Use that account to poop a cow pie on that 10% tax. Do not remit to/from Morocco from/to that account.

c. Monitor this page for active CRS relationships Exchange relationships - Organisation for Economic Co-operation and Development

c.1. Pay attention to relationships where Morocco is the recieving end ("To" dropdown menu) and avoid banking in the "from" state. Note that Morocco signed CRS multilateral agreement as of 2020 May and is not yet engaging in any CRS relationships. This means that any country is "safe" for banking, for the time being. First exchange relationships will probably be with the EU27. Puerto Rico is probably the most future-proof banking country which lets you send and recieve USD internationally free of hassle and heavy costs.

d. Still recieve at least 50% of what you've been recieving so far in Morocco to keep the cattle boys at bay. If all income suddenly dissapears, there's a substantial risk for audit. Morocco could be a lax place in terms of tax enforcement, but better not give them a nipple to chew on.

 

[JustAnotherNomad]

Whether you bill directly or as a transparent LLC shouldn’t matter. Talk to a CPA.