US LLC taxation & bookeeping as german resident

[Hydrox]

Hey Guys,
Thrilled to get your input on this topic.

I´m a german resident with an e-commerce business here (sole proprietorship). I figured out how to do my accounting for germany so thats not the problem.
Now I opened a new US LLC structure in Delware with stripe atlas.

So the US LLC will likely be classified as a pass-through entity meaning i have to pay income tax in germany on it still.

Questions:
1. Can i pay myself a salary/dividends or would i legally have to tax always the whole US LLC income in germany?
2. Can i invoice the US LLC from germany to get the profits out and does that count as valid bookkeeping if i write "myself" invoices?
3. Do i need to include all my US LLC revenue (not profit) In the german Umsatzsteuererklärung (Sales tax return)? Or does it not matter because its not profit/income
4. Does anyone have the same structure and could describe how they handle the US LLC moneyflow in their german accounting/bookkeeping?

Thanks if anyone has a take on this, i appreciate it.

Kind Regards
Hydrox

 

[CyprusLawyer101]

Are your sales in the LLC done to customers out of Germany?

 

[Hydrox]

Are your sales in the LLC done to customers out of Germany?

Hello, they will be done only outside Europe, to avoid VAT so also no german customers. The main customer base (90%) will be from the USA

 

[CyprusLawyer101]

Hello, they will be done only outside Europe, to avoid VAT so also no german customers. The main customer base (90%) will be from the USA

This would generally mean that you could become subject to US taxation. If this would be the case you should look to avoid double taxation either by utilizing any unilateral rules of Germany or utilzing the US -German double tax treaty. In the latter case you could also attempt to recognize a permanent establishment in the US which ahould provide opportunities for further planning. In essence you should examine first US tax rules for any local taxable implications, followed by the Tax treaty and German rules for any unilateral exemptions. If your serious about getting an optimize result you should engage an international tax professional.

 

[Hydrox]

This would generally mean that you could become subject to US taxation. If this would be the case you should look to avoid double taxation either by utilizing any unilateral rules of Germany or utilzing the US -German double tax treaty. In the latter case you could also attempt to recognize a permanent establishment in the US which ahould provide opportunities for further planning. In essence you should examine first US tax rules for any local taxable implications, followed by the Tax treaty and German rules for any unilateral exemptions. If your serious about getting an optimize result you should engage an international tax professional.

I should mention that i dropship, meaning my warehouse is outside us, and my location as well as my residency will also be in germany. This would usually mean that i'm not subject to us taxation right?

If i think right, how would i bookkeep my US llc income for german tax authorities to accept it in an audit? Like just a normal P/L sheet would be enough with bank statements maybe?

 

[CyprusLawyer101]

I should mention that i dropship, meaning my warehouse is outside us, and my location as well as my residency will also be in germany. This would usually mean that i'm not subject to us taxation right?

If i think right, how would i bookkeep my US llc income for german tax authorities to accept it in an audit? Like just a normal P/L sheet would be enough with bank statements maybe?

Most probably you are not. Why though are you opening an LLC in the US?

Note that you can elect to have the LLC as an opaque entity and have it subject to US federal taxes. In this case you could be recieving the income as dividends instead. It may be worth considering if it will end up providing a tax saving.

For your practical reporting requirements in Germany you should consult a local professional, unless there is someone here on the forum that know by 1st hand experience.

 

[Hydrox]

Most probably you are not. Why though are you opening an LLC in the US?

Note that you can elect to have the LLC as an opaque entity and have it subject to US federal taxes. In this case you could be recieving the income as dividends instead. It may be worth considering if it will end up providing a tax saving.

For your practical reporting requirements in Germany you should consult a local professional, unless there is someone here on the forum that know by 1st hand experience.

I have my german setup for my store but it's not perfect as i'm paying a lot of conversion fees on paypal and credit card to convert the USD i receive to EUR. That's why i opened the USA setup and for some other reasons, mainly currency and payment processor related.

Interesting i didn't know that i could choose to have it as an opaque entity, is this possible even after i already bought the llc setup?

I would like to know from someone in this forum how to handle the bookkeeping for german tax authorities with my new US LLC because my accountant also is no expert in this. I can't be the only one with this setup as it's pretty common i thought.

Generally the bookkeeping of the LLC money i do by the US laws not german laws right? Even though i would tax it here

 

[daniels27]

You can use a US LLC but not sure how much the admin overhead will cost you. Probably quite a lot with lawyers and accountants unless you do all on your own.

But I can give you the details quickly

• Your US LLC is disregarded in the US, i.e. no tax there.
• Your US LLC is either like a GmbH or like a KG in Germany. You can check BMF-Schreiben vom 19. März 2004, BStBl. I 2004, 411 for how they classify it.
• Apart from that, your UC LLC acts like a German company, you need to file all as if it was in Germany only, USt, tax, etc.
• You cannot invoice your US LLC as you are the US LLC.

It is prone to a number of tax traps and uncertainity

Steuerfallen der US-amerikanischen Limited Liability Company...

In den USA ist die Rechtsform der Limited Liability Company (LLC) sehr beliebt. Im Bereich Steuern müssen bei einer LLC allerdings einige Aspekte beachtet werden

www.roedl.de

Besteuerung der US LLC

Übersicht zur Besteuerung der LLC Gewinne in den USA. Egal ob Delaware LLC, Florida LLC oder Wyoming LLC: Hier erfahren Sie, wie die LLC besteuert wird, welche Steuersätze gelten und wann die Gewinne der LLC steuerfrei sind.

uskanzlei.com

DREYENBERG â Besteuerung einer US LLC

Ihre Spezialisten mit Fokus auf Steuerrecht, Gemeinnützigkeitsrecht und Steuer- und Wirtschaftsstrafrecht in Frankfurt. â 069 2474690-90

dreyenberg.com

That's why normally nobody in Germany does this in your case. They only time they do it is when they have emplopyees in the US and are subject to US (and German) taxation. I cannot recommend doing this.

What you are trying to do is actually saving money on payment processing fees from credit cards and paypal. I would recommend looking into how to solve this problem.

 

[Hydrox]

You can use a US LLC but not sure how much the admin overhead will cost you. Probably quite a lot with lawyers and accountants unless you do all on your own.

But I can give you the details quickly

• Your US LLC is disregarded in the US, i.e. no tax there.
• Your US LLC is either like a GmbH or like a KG in Germany. You can check BMF-Schreiben vom 19. März 2004, BStBl. I 2004, 411 for how they classify it.
• Apart from that, your UC LLC acts like a German company, you need to file all as if it was in Germany only, USt, tax, etc.
• You cannot invoice your US LLC as you are the US LLC.

It is prone to a number of tax traps and uncertainity

Steuerfallen der US-amerikanischen Limited Liability Company...

In den USA ist die Rechtsform der Limited Liability Company (LLC) sehr beliebt. Im Bereich Steuern müssen bei einer LLC allerdings einige Aspekte beachtet werden

www.roedl.de

Besteuerung der US LLC

Übersicht zur Besteuerung der LLC Gewinne in den USA. Egal ob Delaware LLC, Florida LLC oder Wyoming LLC: Hier erfahren Sie, wie die LLC besteuert wird, welche Steuersätze gelten und wann die Gewinne der LLC steuerfrei sind.

uskanzlei.com

DREYENBERG â Besteuerung einer US LLC

Ihre Spezialisten mit Fokus auf Steuerrecht, Gemeinnützigkeitsrecht und Steuer- und Wirtschaftsstrafrecht in Frankfurt. â 069 2474690-90

dreyenberg.com

That's why normally nobody in Germany does this in your case. They only time they do it is when they have emplopyees in the US and are subject to US (and German) taxation. I cannot recommend doing this.

What you are trying to do is actually saving money on payment processing fees from credit cards and paypal. I would recommend looking into how to solve this problem.

Firstly, thank you very much for the resources, they gave me a good picture of what i need to check.

So i will classify my LLC as a Personengesellschaft (disregarded Entity), meaning i just tax the income in germany.

To make sure this is accepted by german authorities too i would need to make some changes in my operations aggreement, do you know if this is still possible after i incorporated the LLC?

Are you sure i have to file UsT (sales tax report germany) for the LLC extra? It doesnt usually even have a german tax number right, i thought i would just declare the income as foreign income in my income tax?

As far as i´ve read now, once i have the operations aggreement in place and im the only member / representative of the LLC, there are not really any traps i can fall into. If you got tipps of what i should put in the operations aggreement those would also be appreciated.

I also dont have a warehouse or employees in the us, just a virtual address.

Kind Regards

 

[daniels27]

Firstly, thank you very much for the resources, they gave me a good picture of what i need to check.

So i will classify my LLC as a Personengesellschaft (disregarded Entity), meaning i just tax the income in germany.

To make sure this is accepted by german authorities too i would need to make some changes in my operations aggreement, do you know if this is still possible after i incorporated the LLC?

Are you sure i have to file UsT (sales tax report germany) for the LLC extra? It doesnt usually even have a german tax number right, i thought i would just declare the income as foreign income in my income tax?

As far as i´ve read now, once i have the operations aggreement in place and im the only member / representative of the LLC, there are not really any traps i can fall into. If you got tipps of what i should put in the operations aggreement those would also be appreciated.

I also dont have a warehouse or employees in the us, just a virtual address.

Kind Regards

You will need to register your US LLC with the German government. If you fall under the VAT Registration Threshold, you won't have to register for VAT. If you sell in Germany, you would have to. Most Germans register as you can claim back VAT on all your purchases. I recommend checking with the German tax authorities in order to avoid issues later. This is not a common setup in Germany and I do not recommend it.