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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16559
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Question regarding foreign consultant I have following questions

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Question regarding foreign consultant

I have following questions regarding foreign taxes related to consulting

I'm a foreign person who lives in Asia. I'm a engineer and running one man consulting shop from my house. Recently i came across an opportunity from USA for some projects . I would like to know

1. what are the taxes i would have to pay to USA and my Client in USA would have to pay for IRS

2. In future if i thought of hiring another engineer and putting a small company in Asia would the tax situation change with USA since its a company?

3. What documents would i need in order to work on US Clients from Asia as a individual or as a company
Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

If you do not live in the United States, and you do not perform work physically in the United States, then you have no tax liability to the United States.

You only have a tax liability to the United States if you are a US Citizen, US Resident (such as a green card holder), or if you perform work inside the US. You would also have a liability to the US if you had a physical office inside the US.

Your business partner does not have to withhold any taxes from your pay. However, if you were paid to come to the United States for part of the engagement, you would have to pay tax on the earnings you had when you were inside the US. Then, your business partner would have to withhold 30% of your payment and remit it to the IRS.

As far as the IRS goes, there are no required documents for you to be able to work on US clients - provided that you are doing the work while you are in China.

Please let me know if you need further clarification.

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Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16559
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
Megan C and other Tax Specialists are ready to help you
Customer: replied 4 years ago.

so even if i start a small company i wouldn't have to pay taxes to USA? is that what you are saying. About my client in USA who's giving me the project would they have to pay extra taxes to give me consulting work?

 

What about the question 3. what documents would i need to work for USA? is it NONE since taxes doesn't apply??

Hello and thank you for using Just Answer,
What about the question 3. what documents would i need to work for USA?
The company in the US would require you to complete a W8 form for them. The US company keeps this form in their files to show the US taxing authority that you (or your company) is not subject to US taxation and that no withholding is required of them on the payments to you because you are not physically in the US doing any work for them.
As long as you or your company (the company is not registered in the US) are not in the US and you are not a US person (citizen or resident alien or present in the US) then you have no US taxation.