Tax haven in Delaware with a single-member LLC formed by a non-resident alien?


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While I'm researching what I need to pay in taxes for my LLC formed in Delaware (I'm a non-resident alien from China), I found this page which is very interesting: http://www.webhostingtalk.com/archive/index.php/t-331329.html Take this post for example,

I was about to apply for an LLC, but after I red this thread I
contaced an accountant to make sure that I will not be paying Taxes.
Here is the naswer of the accountant:


Question: Do I have to pay Taxes if I established an LLC in Delaware
although I will not be doing business in the USA, as my business is
located in Saudi Arabia. Some US clients do buy from us at our web
site, but I send them their orders from here via the post office.


Answer:


Basic tax rules:


Any single member LLC, where the sole member is a foreign person for
U.S. tax purposes (meaning he or she is not a US citizen, does not
have a U.S. green card or who does not reside in the US. for more than
a month or so each year) - the LLC is ignored for U.S. and most states
income tax purposes. Accordingly, any income earned is treated as
earned directly by the foreign person. Such income is not subject to
U.S. taxation so long as the foreign person did not perform his
services or sales activity in the U.S. himself or thru an employee or
agent. This means someone (the foreign person, employee of the foreign
person or agent thereof) must be physically present in the U.S. while
earning the income. It is apparent that many, if not most of the
single member LLCs are conducted purely over the internet with no
physical presence in the U.S.


For example: If a French citizen, the owner of Internet business that
sells goods over the internet receives an order from a U.S. citizen.
The order is received, goods shipped and invoice sent by the French
sole member of a U.S. LLC. The Sole member never sets foot on U.S.
soil - nor did he have any employees or agents conducting his business
on U.S. soil.


Would the income earned be taxable in the U.S. or require a return to
be filed in the U.S.?


The answer is NO...no reporting of the income nor are payments of any
taxes required. I hope this is clearer. This rule only applies to the
Single Member LLC

It sounds too good to be true.

Considering this thread was 8 years old, my question is if this was true and if it was, does it still hold true today?

LLC Tax Delaware

asked Nov 22 '12 at 20:02
Blank
Kavoir.Com
129 points
  • NOT taxable in U.S.; taxable in France – Jberger 6 years ago

2 Answers


1

You misunderstood the term "tax haven". The US doesn't tax income of foreigners who are not US persons for tax purposes, unless the income is "effectively connected" to the US activities or earned in the US. When I told you that tax-wise you'd be better of with an LLC rather than a corp - that was one of the things I had in mind.

But it doesn't make it a tax haven, you will still pay taxes in your own country. The LLC is a disregarded entity, so all the income (tax-wise) is in fact yours, not the company's. You're subject to your (Chinese, I guess) tax laws, and will have to pay taxes on the money accordingly.

"Tax Haven " is a place that has legal infrastructure to "hide" the income from your home country taxes. The US is in no way a tax haven.

Keep in mind that, as mentioned in the quote, the rule only applies to SMLLC (if you have multiple members, you're taxed as a partnership, and the rules change), and only if you have no income from the US. If your payments are done to your US-based PayPal account, especially if your customers are also Americans, it can be argued that this would be US income, and thus taxable for you.

Bottom line, as I told you already, trying to get "free" advices here will cost you significantly more than do proper planning with a professional. You're reading bits and pieces of information, but the tax law in the US is extremely complicated, especially with regards to foreign transactions. Do yourself a favor, and pay a good CPA for a proper consultation.

answered Nov 22 '12 at 20:08
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Littleadv
5,090 points
  • Also, in the other answer I mentioned withholdings on payments to you from your US bank account - this is still true in this scenario. – Littleadv 7 years ago
  • Thank you! I contacted a CPA yesterday and he still hasn't got back to me. I'm now looking for an CPA on ifreelance.com. Can you recommend me a CPA? – Kavoir.Com 7 years ago

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It's tax HAVEN, not tax Heaven.

My tax lawyer tells me that any non-US citizen who is a member of an LLC runs the risk of being taxed at US earned-income tax rates on amounts earned through the LLC, so beware.

answered Feb 21 '13 at 11:51
Blank
User6492
1,747 points

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