If your operations are outside of the United States — this may apply to you.
Photo by Pablo Arroyo on Unsplash
It sounds too good to be true, but a business that is based in the United States but is tax-free actually makes sense. If you are not using U.S. infrastructure and you are only using the banking system and a physical address for documentation purposes, why should you have to pay any taxes? Taxes are for government services like roads, safety, and education, and if you aren’t using those services, it’s fair to not have to pay.
But, why would the U.S. allow you to be established in the United States without paying taxes or doing business there?
It doesn’t cost the U.S. government much to allow your business to be registered in the U.S., and maybe one day — you will bring your business there and start creating jobs, paying taxes, and growing the domestic economy. Until then, by all means, establish your business in the United States, thrive, and multiply!
Does this situation apply to you? Let’s check.
- For income taxes to not apply to you, according to the Internal Revenue Code of the United States, you must be a non-resident alien, or an NRA. An NRA means you don’t have a green card and you don’t live in the U.S. If you travel to the U.S., that is okay, you just can’t live there (generally, anything over 1/2 of a single year could constitute residence for tax purposes).
- According the Internal Revenue Code, your business shouldn’t have a fixed place in the United States, like a store or an office. Your business should not have employees that work from the U.S. Like I said, you can have an address for filing purposes, but this address can’t actually conduct sales and operations.
- Next, you can’t keep inventory in the U.S. Using Amazon FBA for a dropshipping business is a grey area that will depend on the economic relationship between the seller and the distributor, this is set up while establishing your Amazon FBA account.
You can, however, sell to U.S. citizens if your inventory and employees are not held in the U.S. just like any other global merchant — except you are an official U.S. business.
Photo by medino marketing on Unsplash
One of the most popular businesses with many of our clients at MyUSAservice.com, is real estate investment in the U.S. market. If your business is in U.S. real estate sales or even property management, this zero-tax situation would not apply to you.
But if you are manufacturing, shipping, selling, from outside of the United States, this situation might be a perfect fit.
If your U.S. based business is already set up this way — consult a tax professional to make sure you are not trying to pay more than you need to. To keep yourself in good standing you can always file a protective return — form 1040-NR, this is for non-resident aliens without any effectively connected income. This form is like telling the U.S. government: “see, my business has filed, but I have no effectively connected income. I’m maintaining my good standing with the IRS.”
What if you don’t have a U.S. based business, yet?
Make one. If you have a business idea, or your business is already successful in your home country but you’re looking for gain access to United States based financial institutions, or perhaps want to expand to the U.S. market later, you can go ahead and get started and pay only the modest registration fees and upfront costs.
You will want to consider:
- if you will be establishing an LLC
- who your partners will be
- what your business name will be
- which U.S. state you will register with (each state has different fees and regulations)
MyUSA Service can help you through this process at every step, and you can take advantage of U.S. banking efficiency, potentially save on taxes in your home country, and gain access to new markets. Our on-staff attorneys and CPAs at MyUSA Service can help you make sure your business and investments are sound.