Cc: taxman at centa.com; tax at garygauvin.com
Subject: International tax question
Hello,
I have a question which I hope you can answer and then I would proceed
to use your services if required.
I found you through Google, and notice you offer international tax
accounting/help. I was wondering if you could help me with this
question.
1. If I am a resident of Australia, which states all income of that
citizen must be declared worldwide, and I have a US corporation, do I
have to file a tax return in my country and report earnings for the US
corporation or would I only file a tax return based on how much money
I take out and pay myself from the US corporation?
Is it right to assume the following?
1. I would need to file a tax return for my US corporation with the
IRS, but would not require to file a tax return for this US
corporation to my home country, since technically this US corporation
is a US resident and not a resident of Australia.
2. However, I would need to file a PERSONAL tax return if I decide to
pay myself a salary from the US corporation? (e.g. director's wage,
etc)
I have been to various CPAs in Australia and they have no idea about
US policies, I really hope you can give me some insight and would like
to thank you in advance for offering any advice.
Some other details regarding the US corporation:
* All sales/income come from US and worldwide customers via the
Internet, less than 1% from home country Australia.
* Funds/Money is deposited into US bank account under US corporation name
* US corporation has mailing address which then forwards mail to home
country Australia
* Technically US corporation does all business in the USA, only
directors/founder working for corporation are located in Australia.
This is what the Australian taxation site says:
"While some types of income are exempt from tax, and certain
categories of people or entities need not pay tax, in general,
residents of Australia are liable for tax upon their worldwide income.
Others are liable upon their income with an Australian source."
Another CPA in Australia says:
"Many Australian citizens receive income from overseas in the way of
pensions, interest dividends and rental income. The ATO is active in
ensuring this income is declared, as it is assessable in Australia.
All Australian residents for tax purposes are required to declare
their worldwide income in their Australian tax return."
I understand the above talks about "Australian citizen" however a US
corporation cannot be deemed an Australian citizen can it? Only if the
corporation pays salary to one of its Australian citizens, can that be
assumed income which needs to be declared in that citizen's personal
tax return in Australia?? The US corporation does not need to file a
tax return in Australia, does it?
Best Regards,
JXXXXX
Thank you.
============================
david ingram replies:
You would file a US 1120 Corporate Income tax return and pay tax to the US
on any profits.
If you pay money to yourself, there is no US tax on your wages or earnings
because you are not performing ANY services in the USA.
You have to pay attention to US Form 5472 which must be filed when a
foreigner owns 25% or more of a US corporation.
Find the form at http://www.irs.gov/pub/irs-pdf/f5472.pdf
Note that the minimum penalty for failure to file form 5472 is $10,000 US.
You must file an Australian Corporation tax return as well.
Mind AND control of your company is in Australia.
Remember that I am in Canada. However, I have lectured on Canadian / US /
Australian Tax (back in 1981) in Melbourne, Brisbane and Sydney.
David Ingram's US/Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
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North Vancouver, BC, CANADA, V7N 3L7
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