US LLC Reporting Your Income to Home Country via Form 5472?

[joeak]

Hey everyone,

First post here. I almost pulled the trigger on registering a Wyoming LLC. I'm a non-US citizen operating an online digital marketing business, mainly serving US-based clients but residing in the middle east. Wyoming seemed perfect to open a bank account, use stripe, and have some legal presence in the US.

The problem is, right before I pulled the trigger I stumbled upon a thread here discussing IRS form 5472 which is mandatory and asks for a ton of information about your home country, transactions...etc seemingly to serve you on a silver platter to your home country. Now my home country is lax on CFC rules and doesn't care much about foreign-sourced income. HOWEVER, there are some laws they're just not practically applied on the ground according to multiple reputable accountants here. But, if I get served up on a silver platter like that, I'm not sure whether the local tax authorities would pass up the opportunity.

Does the IRS share this information with the home country? What are the risks of not filling that form? Any way around it?

Thanks!

 

[joeak]

Good question but I believe as long as you are resident in the middle east, you should be fine.. let’s wait for the experts feedback here on the forum.

On another note, you mentioned that you mainly serve US clients.. will your LLC profit be taxed a 30% In the US (US clients) or 0% (US clients +services + 0 substance in the US) ?

I don’t think I’ll be taxed in the US as I have no nexus there (as far as I understand). I have no employees, no warehouses, nothing except clients. The service is conducted from my home country.

 

[ih8socialism]

In 5472 you have to declare all transactions you personally made with your LLC, which is pretty simple if you just take a monthly part out of it and transfer it to your personal account. 5472 only asks your for some basic infos, your address, origin country and where you pay tax. If you are living in ME (I assume some 0% tax country) it shouldn't be a big deal.

Also afaik form 5472 right now is only for IRS eyes, but who knows what will change in the future

 

[joeak]

In 5472 you have to declare all transactions you personally made with your LLC, which is pretty simple if you just take a monthly part out of it and transfer it to your personal account. 5472 only asks your for some basic infos, your address, origin country and where you pay tax. If you are living in ME (I assume some 0% tax country) it shouldn't be a big deal.

Also afaik form 5472 right now is only for IRS eyes, but who knows what will change in the future

Thanks for the clarification. If it's only the IRS' eyes, I don't think it's a big deal. The problem is, if they serve you up by sending the data directly to local tax authorities, that won't be very good. There's nothing in the local tax law that clearly and 100% without a shadow of doubt says that you aren't taxed on foreign income. All local accountants kind of agreed that no one bothers going after people at this point but it can change anytime, and they're supposedly cooking up some CFC rules these days too.

 

[ih8socialism]

Thanks for the clarification. If it's only the IRS' eyes, I don't think it's a big deal. The problem is, if they serve you up by sending the data directly to local tax authorities, that won't be very good. There's nothing in the local tax law that clearly and 100% without a shadow of doubt says that you aren't taxed on foreign income. All local accountants kind of agreed that no one bothers going after people at this point but it can change anytime, and they're supposedly cooking up some CFC rules these days too.

May I ask whats your home country and where you are having a residence?

 

[joeak]

May I ask whats your home country and where you are having a residence?

Egypt, residence and home.

 

[ih8socialism]

Egypt, residence and home.

Nice place and interesting in terms of tax. According to the OECD (May 2020) egypt agreed on implementing CRS but there is no date set yet when they still start reporting. I assume for now you are on the safe side but don't take my words for granted.

 

[JustAnotherNomad]

The US doesn’t use CRS. You’d need to check if Egypt receives FATCA data. But I really doubt they do.

 

[joeak]

The US doesn’t use CRS. You’d need to check if Egypt receives FATCA data. But I really doubt they do.

@JustAnotherNomad

In Egypt, if you go to any bank to create an account they always ask if you have US residency/citizenship and they make you fill in extra forms if you do, so I guess they at least SEND data back to the US, but does that mean they also receive it?

 

[joeak]

The US doesn’t use CRS. You’d need to check if Egypt receives FATCA data. But I really doubt they do.

In Egypt, if you go to any bank to create an account they always ask if you have US residency/citizenship and they make you fill in extra forms if you do, so I guess they at least SEND data back to the US, but does that mean they also receive it? Is it a two-way street by default?

 

[JustAnotherNomad]

Yes, that is about FATCA. No, it’s not necessarily a two-way street. It can be a one-way street. That information should be available somewhere.
Of course it can change in the future though and they may report retrospectively.

But I believe that business accounts generally aren’t reported under FATCA anyway. At least at the moment.
And they don’t send a copy of your tax forms, they send a list of your personal bank accounts and balances at the end of the year. But I’m sure somebody else will have more information here.

 

[joeak]

Yes, that is about FATCA. No, it’s not necessarily a two-way street. It can be a one-way street. That information should be available somewhere.
Of course it can change in the future though and they may report retrospectively.

Interesting. Well my banking rep said that even if I'm not a US person, once I show up with US LLC papers as income proof at my local bank, that automatically triggers form W9 and other FATCA related ones I guess. Would filling those forms lead to any tax exposure in the US if I'm not a US person and have nothing to do with the US except the LLC and clients there?

Should I even be asked to fill FATCA forms in my local bank just because I have a US LLC even if I'm not a US person?

 

[JustAnotherNomad]

Your US LLC counts as a US person in terms of all this FATCA stuff. You will have to fill all those papers. The US wants all information, but only a small part is shared. They want all that money.

But that doesn’t mean you have to pay taxes.

 

[joeak]

Your US LLC counts as a US person in terms of all this FATCA stuff. You will have to fill all those papers. The US wants all information, but only a small part is shared. They want all that money.

But that doesn’t mean you have to pay taxes.

I think that clears it up a little better. Thanks!

 

[JustAnotherNomad]

I’m not a lawyer, but that’s what I have found out making my own research at least.

 

[joeak]

May I ask why would you show up with your LLC US in your local Egyptian bank ?

How. are you planning to get that cash ? Wire from your US LLC to your local Egyptian bank and pay taxes in Egypt? Transfer pricing ?

Because sometimes the local banks would ask for proof of income. Since I'm not registered in Egypt, I'd then have to share the US LLC details. As I currently understand it, the local banks ask for proof of income for anti-money laundering purposes and not for tax purposes. Egyptian banks are prohibited by law to voluntarily share customer data with tax authorities. They only execute court orders obtained by tax authorities should the tax authorities have reason to believe the individual/entity is engaging in tax evasion. The beginning of their investigation cannot start by requesting bank account data about a customer though. That is currently prohibited by the Central Bank.

 

[ffbkdavid]

I don’t think I’ll be taxed in the US as I have no nexus there (as far as I understand). I have no employees, no warehouses, nothing except clients. The service is conducted from my home country.

- are you a citizen/resident of the usa? - propably NOT
- do you have assets within the usa? - propably NOT
- are you doing business within due usa? - YES, YOU DO AS YOU "SERVEW US-BASED CLIENTS

one "YES" is enought... you will be taxed... take care, IRS is not a carnival club!

good luck

 

[JustAnotherNomad]

- are you a citizen/resident of the usa? - propably NOT
- do you have assets within the usa? - propably NOT
- are you doing business within due usa? - YES, YOU DO AS YOU "SERVEW US-BASED CLIENTS

one "YES" is enought... you will be taxed... take care, IRS is not a carnival club!

good luck

Wrong.

 

[John Andrews]

- are you a citizen/resident of the usa? - propably NOT
- do you have assets within the usa? - propably NOT
- are you doing business within due usa? - YES, YOU DO AS YOU "SERVEW US-BASED CLIENTS

one "YES" is enought... you will be taxed... take care, IRS is not a carnival club!

good luck

Can you please clarify? Are you speaking from personal experience?

 

[Perry8]

In Egypt, if you go to any bank to create an account they always ask if you have US residency/citizenship and they make you fill in extra forms if you do, so I guess they at least SEND data back to the US, but does that mean they also receive it?

Yes, this is because of FATCA.

Egypt has not signed FATCA on a national level. Hence, they do not exchange information state to state. But, nearly all Egyptian banks have signed FATCA and these report directly to the US government. As for now, there are no reporting "the other way".