Discussion:Brazil business owned by US Citizen/filing requirements?
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Mtmckeecpa (talk|edits) said: | 30 July 2007 |
| A US citizen living in Brazil owns and operates a small manufacturing company in Brazil....this company exports its products to the USA.
US customers order products, they send payment to a US bank account and the order is then shipped to the US customer. The owner of the business then wires money deposited in US banks to their Brazil bank account to pay for business operating costs, etc.... What are the USA tax filing requirements for the Brazil company and/or the US citizen living in Brazil? Should there be a US corporation set up to handle the deposits and transfer to the Brazil business? I do next to nothing in the int'l tax area...I am trying to get some general info for a client's son. Thanks. | |
| 30 July 2007 | |
| The U. S. citizen must file Form 926 to report the existence of the foreign business. In addition, he must complete Form 5471 as part of his personal tax return that asks for a lot of detail pertaining to the foreign activity. Both of these are annual forms, with a duplicate of Form 926 being sent to the IRS international operation in Philadelphia.
To determine the tax liability to U. S. for the corporation, I suggest you read up on the U. S. tax treaty with Brazil. I guess that since the income is derived from the U. S. there would be corporate tax due to the U.S. | |
| 30 July 2007 | |
| He would also have to report the foreign bank accounts of the business as well as personal acct to the treasury dept. | |
| 30 July 2007 | |
| He would also have to report the foreign bank accounts of the business as well as personal acct to the treasury dept. | |
| 30 July 2007 | |
| Sounds like the Brazil company has some nexus in the US, but to what extent remains to be seen. Depending on where the title to the goods passes and any warehousing of the goods, etc. Simply having a US bank account does not create nexus however. It really depends on how they are obtaining the orders, etc.
A US citizen also has the requirement to file a TD90-22.1 to report foreign bank account activity. There are exceptions to filing the Form 926 if the income was taxable in the US, but due to the treaty, some of this if not all of this income might be exempt by a treaty stance. The Brazilian company may have to file 1120F, sales tax returns, state tax returns, etc. if they have nexus in the US. Check out the states in which they are doing business (where the citizen may be a resident of and where his bank is located as well as if he has any warehousing or has any tangible property in that state) and go from there. Good luck :) | |
Mtmckeecpa (talk|edits) said: | 30 July 2007 |
| Thank you for this information. | |
