Tax implications for a US based bank account held by an Indian residing in India


2

I am in talks with various international banks in India who're ready to provide us a US based bank account provided we meet their minimum balance requirements in a local bank.

A US based account will help us reducing time it takes to process US checks and maybe save some payment gateway fee if we ask our clients to directly deposit the amount using online baking.

Just wondering, will I be subjected to US income tax if I am getting money in my US bank account? given that I don't reside in US nor am a US citizen. [Some details: I don't have an US SSN. I am an Indian resident who owns a startup.]

Update:
Please note I am NOT looking for info on "How to open a US based bank account"

Tax Bank Account

asked Dec 22 '11 at 23:19
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Ankur Jain
566 points

2 Answers


1

IANAL, but you should consider the relevant state and federal documents to determine whether "financial transactions" would pass the test of "doing business". A good example of a how New York determines how it defines foreign corporation "doing business" is here.

However there are some differences of opinions regarding taxation: from delawarecorp.com (not the state site):

Citizens of countries other than the United States are often concerned
with the tax consequences of owning an entity such as a limited
liability company. A Delaware LLC that (1) carries on no business in
the U.S., (2) derives no income from any sources within the U.S. and
(3) has not elected to be treated for tax purposes as a corporation
does not need to file a U.S. tax return or a Delaware tax return.


Under the current IRS "check-the-box" rules, a Delaware LLC that does
not affirmatively elect to be treated for tax purposes as a
corporation will be treated for federal tax purposes as a partnership.
It will be treated as a partnership for Delaware tax purposes as well.


Under current Treasury Regulations, a partnership that carries on no
business in the U.S. and derives no income from any source within the
U.S. does not need to file a tax return. Delaware law currently
provides that a partnership need file a return only if it has income
from sources within the State of Delaware.


If the LLC has only one member, then for federal tax purposes the LLC
is disregarded, and the sole member is taxed as a sole proprietor.
Current Treasury Regulations provide that a nonresident alien who is
not engaged in a U.S. business and who does not derive any income from
any source within the U.S. does not have to file a tax return.
Similarly, Delaware law currently provides that a nonresident alien
having no income from sources within the State of Delaware does not
have to file a Delaware return.

I don't quite know how one would be able to accept payments in the US from US companies and and assert that the company "derives no income from any sources in the US."

That said, I wouldn't trust anyone's opinion on this matter except your lawyer.

answered May 22 '12 at 13:38
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Jim Galley
9,952 points

-1

This is a burning question for everyone in India relating to technology business. More so because in many mobile platform, you can not market your application without having a bank account in USA.

I have googled this aspect for my own company and the results were not very encouraging. It is difficult to open an account without visiting USA. One bank I found could open account without visit, but the minimum balance requirement was very high.

Any pointer in this regards will be highly appreciated and

answered Dec 23 '11 at 00:36
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Natwar Lath
294 points
  • more than tax impact it can have impact on Foreign Exchange Regulation. – Natwar Lath 7 years ago
  • We're fine with the minimum balance requirements. At this point looking into tax implications. What ForEx regulations are you talking about here? – Ankur Jain 7 years ago
  • Natwar, answers are meant to provide answers, to ask your own question, create a new question. – Krzysztof Kowalczyk 7 years ago
  • I never meant asking question. I regret of jumping to certain conclusion. Being a qualified tax professional, I thought from every aspect of the transaction. So far taxation in India is concerned any income earned by LLC is not taxable in India as the activity is being carried outside India and it is registered outside India. – Natwar Lath 7 years ago
  • I never meant asking question. I regret of jumping to certain conclusion. Being a qualified tax professional, I thought from every aspect of the transaction. I went through the question again. I feel it is not taxable in USA but in India. The bank will need to withhold taxes (TDS in India). This can be overcome by submitting them appropriate declaration and forms. The concerned bank should be able to tell if they are going to withhold tax and what formalities are required to stop such withholding. – Natwar Lath 7 years ago

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