Wyoming LLC holding bonds and stocks - taxable?

[mavelar]

Hi guys.
I have done quite a deep research here on this forum and over the internet but found no precise answer to this.
As a non-US person and not living in the US, and being the owner of a Wyoming LLC, should I pay taxes in the US when this company receives dividends or coupons? I am aware most of these LLCs are used for comercial activities and that they’re exempt from US taxes when it doesnt have income from US customers. But what happens when the LLC is just a holder of liquid financial assets?

Here in Brazil people are used to form BVI or Cayman offshores for this purpose, as the money that flows inside the firm is not taxable, ie you can trade as many as you like you just pay income taxes when/if money is returned to Brazil. But if Wyoming LLCs work the same way it’d be an easier setup than the caribbean alternatives (more expensive and usually more prone to dilligences from banks).

I am aware there is an ordinary 30% tax on dividend income in the US, the thing is I don’t know if a foreign-owned LLC also pays this tax.

I hope this is the right part of the forum for this subject.

Thank you all.

 

[OffshorePhantom]

Hello, you have to check if the broker already withholds this 30% tax before sending you dividends, if not you have to manually pay taxes on them in the form 1040 that you have to compile and send to IRS if you are the sole member of the US LLC.

If the broker already withhold taxes (in the case of a BVI entity for example Interactive Brokers already does this) you do not need to pay any taxes.

Dividends from US companies are considered FDAP and US sourced income, thus taxable if no taxes is withheld during dividend distributions.

 

[fshore]

A US LLC is disregarded, the broker will disregard the LLC for taxes and use your personal name/address/tax situation to file the tax forms.

 

[Cryptohodler]

Unless your broker deducts at source you have to pay tax on dividend.not on capital gains which for you are considered foreign source income

 

[OffshorePhantom]

A US LLC is disregarded, the broker will disregard the LLC for taxes and use your personal name/address/tax situation to file the tax forms.

It really depends on the broker and if he presented the LLC as a disregarded entity, some brokers do not deduct at source and so you have to handle the tax payment manually.
Also a US LLC is not automatically a disregarded entity, it can be elected as an S CORP, C CORP and also if have multiple members taxed as a partnership so it really depends on the information OP has given to the broker and the king of broker.

 

[CyprusLawyer101]

The double tax treaty between the US and your country of residence becomes relevant here

 

[MarkusM]

Say you are from Bulgaria and have an LLC in Wyoming that hold dividents paying stocks with InteractiveBroker (or other brokerage firm) . What withholding divident rate will be applied ? ..30 %?.. , or the percentage which is stated in the double tax treaty with the US?

 

[CyprusLawyer101]

Say you are from Bulgaria and have an LLC in Wyoming that hold dividents paying stocks with InteractiveBroker (or other brokerage firm) . What withholding divident rate will be applied ? ..30 %?.. , or the percentage which is stated in the double tax treaty with the US?

The treatment of the LLC is important for tax purposes. Most probably transparent , but you should check if it quialifies the definition in the Treaty.
The default wht is 30%, but if it can be satisfied that the DTT applies, then it can be reduced to the % mention in the treaty. Somebody needs to study to give you a correct answer. Maybe look for a Bulgarian tax advisor

 

[JimBeam]

Say you are from Bulgaria and have an LLC in Wyoming that hold dividents paying stocks with InteractiveBroker (or other brokerage firm) . What withholding divident rate will be applied ? ..30 %?.. , or the percentage which is stated in the double tax treaty with the US?

Just to make it clear, your US LLC from Wyoming holds stocks on it's corporate IB account and dividends go back to US LLC?

 

[WorldCitizen99]

Hi guys.
I have done quite a deep research here on this forum and over the internet but found no precise answer to this.
As a non-US person and not living in the US, and being the owner of a Wyoming LLC, should I pay taxes in the US when this company receives dividends or coupons? I am aware most of these LLCs are used for comercial activities and that they’re exempt from US taxes when it doesnt have income from US customers. But what happens when the LLC is just a holder of liquid financial assets?

Here in Brazil people are used to form BVI or Cayman offshores for this purpose, as the money that flows inside the firm is not taxable, ie you can trade as many as you like you just pay income taxes when/if money is returned to Brazil. But if Wyoming LLCs work the same way it’d be an easier setup than the caribbean alternatives (more expensive and usually more prone to dilligences from banks).

I am aware there is an ordinary 30% tax on dividend income in the US, the thing is I don’t know if a foreign-owned LLC also pays this tax.

I hope this is the right part of the forum for this subject.

Thank you all.

I just looked into this myself
*Assuming that your foreign-owned, single-member LLC is considered a disregarded entity*
i.e. FDAP income that is not effectively connected with a US trade or business

Fixed, Determinable, Annual, Periodical (FDAP) Income | Internal Revenue Service

This section defines FDAP income and discusses its tax treatment.

www.irs.gov

then
for dividends, the baseline withholding rate is 30%.
According to this table, the US does NOT have a tax treaty with Brazil, so you would NOT get a reduction in this

https://www.irs.gov/pub/irs-utl/Tax_Treaty_Table_1_2019_Feb.pdf

For interest from US gov bonds, it should be 0% as it qualifies as portfolio interest (according to a US CPA I spoke to)
as long as you fill form W8

*This is NOT legal or professional advice - just the results of my own research*

Say you are from Bulgaria and have an LLC in Wyoming that hold dividents paying stocks with InteractiveBroker (or other brokerage firm) . What withholding divident rate will be applied ? ..30 %?.. , or the percentage which is stated in the double tax treaty with the US?

Assuming the withholding agent has all the correct information, and assuming the foreign-owned, single-member LLC is considered a disregarded entity, then you will qualify for the tax treaty rate, which for Bulgaria is 10%

Fixed, Determinable, Annual, Periodical (FDAP) Income | Internal Revenue Service

This section defines FDAP income and discusses its tax treatment.

www.irs.gov

https://www.irs.gov/pub/irs-utl/Tax_Treaty_Table_1_2019_Feb.pdf

*This is NOT legal or professional advice - just the results of my own research*

 

[ddddaaaa335]

Hi, how hard was to get the bank account with your LLC, did register for an ITIN?

Im thinking on doing something similar, I do mostly options, right now Im doing everything under my personal account.

Why did you prefer to do it with an LLC over using a personal account on IBKR or TD Ameritrade ?