[negev]

Hello to all

I am new to this forum,

I plan to form an LLC in the state Delaware
I am a French citizen based in Paris
& I will be the only owner of this llc operating from France with internet.
So, physically I am not on the Usa soil.

Questions:

Do I have to pay social secutity taxes as a non us resident ?
Do I have to pay income tax for any revenue received from my llc?

Thank you for your answers

Negev

[MukatA]

How will you be able to register LLC in the U.S. Is it going to be a proprietorship, partnership or a corporation?
Do you plan to work for LLC from remote. An LLC must file tax return and must pay minimum amount of franchise tax.

[negev]

Hello to all,

I am new to this forum but I'll try to be as clear as possible.

I am a french citizen based in Paris, France
I plan to form an llc in the state of Delaware for its many advantages.
I will be A single member LLC, where that sole member is a foreign person for U.S. tax purposes.

My business is conducted purely over the internet with no physical presence in the U.S.

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.

Questions:
1-which forms must I comply as a foreign person ( with no physical presence in the U.S.)
Earning a us source income? If there is any?

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

2- do I have to pay any social security tax?:mad:
Normally a non-resident exempt individual's income is not subject to Social Security and Medicare taxes.

Thank you for your comment and recommendations.:)
Negev[/QUOTE]

[AtlantaTaxExpert]

1) You probably will have to complete a Form W-8BEN for the company that is paying you, assuming that this company is a U.S.-based company. This form, when properly completed, will prevent the U.S.-based company from withholding taxes on their payments to you.

2) Because you are not physically located in the U.S. NO U.S. taxes are due.

[negev]

1) You probably will have to complete a Form W-8BEN for the company that is paying you, assuming that this company is a U.S.-based company. This form, when properly completed, will prevent the U.S.-based company from withholding taxes on their payments to you.

2) Becuase you are not physically located in the U.S., NO U.S. taxes are due.

Thank you for this advice

What about social security taxes?

In general, U.S. social security and Medicare taxes
Apply to payments of wages for services performed as an employee in the United States.

Regards
negev

[AtlantaTaxExpert]

Negev:

When I said "No U.S. taxes", that included Social Security and Medicare taxes.

Only U.S. citizens have to pay taxes on world-wide income. Since you are a French citizen, no U.S. taxes are due unless you earn the income while located within U.S. borders.

[MukatA]

Negev will have a single member LLC:
"i will be A single member LLC, where that sole member is a foreign person for U.S. tax purposes."

How can Negev avoid filing tax returns?

[negev]

My business is conducted purely over the internet with no physical presence in the U.S.

If you work as an employee in the United States,
You must pay social security and Medicare taxes in most cases.

Your payments of these taxes contribute to your coverage under the U.S. social security system.
Social security coverage provides retirement benefits, survivors and disability benefits, and medical insurance
(Medi-care) benefits to individuals who meet certain eligibility requirements.


In general, U.S. social security and Medicare taxes
Apply to payments of wages for services performed as an employee in the United States,
Regardless of the citizenship or residence of
Either the employee or the employer.


More info here : see page 48
http://www.irs.gov/pub/irs-pdf/p519.pdf

[negev]

However, I must comply with these following forms:

Form-W-8BEN Certificate of Foreign Status of Beneficial Owner
Form ss4-Application for Employer Identification Number
Form 1042s Foreign person's US source income

[IntlTax]

MukatA, your question is a good one. It seems clear that as long as negev does not perform any services in the U.S. he/she does not owe any U.S. social security taxes. This would be the case under both U.S. tax law and under the totalization agreement between the U.S. and France.

Whether negev or his LLC owes U.S. "income" taxes is a bit more complicated. For income taxes, if no income tax treaty applied, the question would be whether negev is engaged in a U.S. trade or business (directly or through his US LLC) and if so, does he have U.S. source income. The first part, whether he is engaged in a U.S. trade or business, is a nebulous question and is based on various facts and circumstances. The fact that he/she has formed a U.S. LLC would be a factor leaning towards a U.S. trade or business. Other factors would also need to be looked at. The second part, the source of the income, requires more information as to the type of Internet business he/she engages in. If he/she is performing services, then the income is sourced to where the services are provided (France in his/her case). If sales of goods or other activities are occurring, then different sourcing rules apply.

Because negev is from France, he/she may be able to rely on the U.S.-France Income Tax Treaty to potentially avoid U.S. income taxes. Under the Treaty, business profits of his/her French business can only be taxed in the U.S. if he/she has a "permanent establishment" in the U.S. A permanent establishment is a fixed place of business through which the business of an enterprise is wholly or partly carried on. If he/she has a permanent establishment in the U.S. then the U.S. can tax the profits attributable to that business.

Does forming an LLC in the U.S. create a permanent establishment in the U.S. Maybe not. If negev is relying on the treaty, then he/she must file Form 8833 to disclose the treaty-based return position. If he/she is not relying on the treaty and he/she doesn't file a U.S. income tax return, but it turns out that he/she should have filed a U.S. income tax return, the statute of limitations will remain open forever and U.S. source gross income (rather than net income) can be subject to U.S. tax (See Code § 874). It is not uncommon for "protective" U.S. income tax returns to be filed to mitigate these concerns.

[IntlTax]

Another interesting question related to this fact pattern is whether France would consider the US LLC taxable in France. Many countries determine tax residency based on where the company is managed and controlled. If negev is managing the US LLC from France, then France may consider the US LLC to be a resident of France. If this were the case, the LLC may be subject to corporate level tax in France.

[negev]

A tax treaty exists for France and that is to prevent double taxation
The IRS exempts the foreign person a non us resident for his US source income if he has no physical presence on US soil.
However, Negev will be taxable by The French IRS but only for his personal income from the US as individual and the LLC incorporated in Delaware
Will not be subject to any taxation.

[IntlTax]

I am familiar with the treaty you mention. I am not sure how you believe it applies to you other than my description in post #10 above.

The IRS doesn't make U.S. tax laws. Congress and the President do. Thus, the IRS doesn't exempt anyone from U.S. tax. The U.S. tax law in this area is more complex than you imply.

You indicate that the LLC will not be subject to any taxation. You seem to be quite confident of this, even though you were the original poster asking the question.

[negev]

I agree on this point: US tax laws are voted by the congress and the President.
Yes, I am quite confident even though I were the original poster.
As I have done some research on the internet.
However, LLC will not be subject to any taxation for the following reasons:
1- The LLC is incorporated in Delaware
2- Negev is not Physically in this country
3- business is opeated outside us borders ( on the internet )
Any single member LLC, where that 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 U.S. 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.

I also Found this:
http://www.irs.gov/pub/irs-pdf/p519.pdf

Page 48 it says:

SOCIAL SECURITY AND MEDICARE TAXES

If you work as an employee in the United States,
You must pay social security and Medicare taxes in most cases.

Your payments of these taxes contribute to your coverage under the U.S. social security system.
Social security coverage provides retirement benefits, survivors and disability benefits, and medical insurance
(Medi-care) benefits to individuals who meet certain eligibility requirements.


In general, U.S. social security and Medicare taxes
Apply to payments of wages for services performed as an employee in the United States,
Regardless of the citizenship or residence of
Either the employee or the employer.

[IntlTax]

Is your Internet business engaged in selling products or selling services?

[negev]

My Internet business is engaged in selling services eg:digital media such as wav or mp3 files we provide Production music to film, TV, video, multimedia and more

[IntlTax]

If you are providing services, it does seem likely that you are not subject to U.S. tax.

I am not an expert at French tax law. However, the income tax laws of most countries have many similarities. It would seem to me that if an agent or employee of a US LLC (that is treated as a corporation for French tax purposes) is located in France and is providing services in France in the name of the LLC, it would seem very likely that the LLC would have a permanent establishment in France. As a result, it would seem very likely that the LLC would be taxed at the corporate level by France on the income from those services taking place in France.

[IntlTax]

For comparison, if an agent or employee of a US corporation is located in France and is providing services in France in the name of the corporation, it would seem very likely that the corporation would have a permanent establishment in France. As a result, it would seem very likely that the corporation would be taxed at the corporate level by France on the income from those services taking place in France. I see no reason why France would tax a US LLC differently.

[negev]

The LLC incorporated in Delaware USA cannot be taxed By the French tax administration because The LLC is not on French soil
However, the person who is residing in France someone with a physical presence in France is subject to taxes but only on his income.
I presume most countries are acting this way in order to prevent double taxation. That is why treaties were made for :)

[IntlTax]

Above you indicate that "[t]he LLC.. . Cannot be taxed by the French tax administration because the LLC is not on French soil."

Entities such as LLCs and corporations can only act through their agents and employees. An entity formed in one country with agents or employees in another country can be taxed on income generated in the other country. For instance, an entity formed in the U.S. with agents or employees in France can be taxed on income generated in France.

The U.S.-France Income Tax Treaty takes this circumstance into consideration. See Articles 5 and 7 of the Treaty. Of course, the Treaty would not apply to the LLC because it would not be considered a U.S. resident because it is not liable to tax in the U.S. See Article 4, paragraph 1 of the Treaty.

The more I think about this, the more I am convinced that you have a French tax issue. You will be performing services in France as an agent or employee of the LLC. The LLC will generate income sourced only in France. Thus, France will tax the income of the LLC.

Further, if you take the money out of the LLC and use it for personal expenses or otherwise, France will tax the income to you at the individual level (unless you can claim a credit for the French taxes already paid by the LLC [seems unlikely]).

I recommend that you speak with a French tax advisor that deals with cross-border transactions, and show him these discussions.