Doing business across international lines can be lucrative but confusing. When you operate a business in or from a foreign country, there are tax implications that you need to be aware of. If you have questions like, “How are taxes paid on a foreign-owned LLC?” we can help. At Accountants Without Borders, we’re a San Diego-based company that specializes in international tax laws. Keep reading for the answer to this question as we answer five other questions you might have along the lines of international tax laws.
Does a foreign-owned LLC pay US taxes?
Any organization that does business in or with the United States is required to pay US taxes. This is because this business is considered to be engaging in US trade. Any company that engages in trade or conducts business with a company in the US is beholden to national tax laws.
What tax forms are required?
To properly file your taxes as a foreign-owned LLC, you’ll need to make sure that you have two forms for submission. File Form 5472 and File Pro-forma Form 1120 are both required when filing taxes. A 5472 is required when there are any reportable transactions, which include:
- Listed transactions
- Confidential transactions
- Transactions with contractual protection
- Loss transactions
- Transactions of interest
Part of filing your File Form 5472 includes a File Pro-forma 1120. This is a requirement when filing any US Corporate Income Tax Return. Our team can help you to make sure you have all the necessary forms when it comes to filing your taxes.
How does the owner get an EIN?
Before filing your taxes, the foreign owner of an LLC must obtain an Employer Identification Number, or EIN. This is a nine-digit tax ID number that identifies your business and as well as the business owner. If the owner has a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN), that will be attached to the EIN. If they don’t have either, a form must be filed with a special IRS unit that will issue an EIN within 30 days.
How much should I be withholding for taxes?
Taxes paid by foreign-owned LLCs are based on a flat-rate percentage of profits. Withholding 35% of profits for taxes is required by US tax law. This percentage is a flat rate and there is no minimum or maximum amount of profit necessary to reach a qualification threshold. Even small businesses that make minimal profits are required to report to the IRS using Form 5472.
Do I wait to pay my taxes yearly with everyone else?
Rather than paying your taxes yearly on April 15, foreign-owned LLCs must pay their taxes quarterly. Any businesses that fail to report and pay their taxes to the US government are subjected to a $25,000 fine. If taxes aren’t paid, another $25,000 fine will be assessed. This is one area where Accountants Without Borders come in handy, we can help you file your taxes to avoid such fines.
Get expert advice
Feel free to reach out to our team at Accountants Without Borders today to get expert advice on taxes. We can help by answering questions you have about how taxes are paid on a foreign-owned LLC and much more. Send us an email directly at firstname.lastname@example.org or use our online contact form. Our team will promptly get back to you so we can provide you with expert tax advice.