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USTaxAdvising
USTaxAdvising, CPA
Category: Tax
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Experience:  US Taxation specialist.
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I am an American living in Germany married to a German citizen

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I am an American living in Germany married to a German citizen (no Green card or US permanent residency) about to start a business in the US. I am currently planning on incorporating in Wyoming as a C-Corp. According to my German tax advisor, I will pay corporate taxes in both the US and Germany, but US tax paid will count toward my German tax liability. Is a Wyoming C-Corp the best choice to minimize my tax burden?

Hello,

 

A Wyoming C-corp is a good choice much like Delaware where are there are no corporate taxes, other than annual filings fees.

 

I am wondering if you have considered a S-Corporation or LLC/passthrough entity in the US. I would not think the C-corp would give you the optimal tax structure in the US. You would want to take advantage of the foreign earned income exclusion or foreign tax credit from an individual standpoint as well.

 

I am not familiar with German taxes but from a US perspective using the C-corp will give rise to double taxation to you in the US, which is really not necessary in my opinion. If you need the company to pay income tax in order to qualify for German foreign tax credits then it might be beneficial. But using a C-corp will expose the C-corp to federal tax and then you will also be exposed at an individual level when you receive dividends from the C-corp. (unless of course you take all the cash out of the company via wages)

 

But to answer your initial question, Wyoming is an excellent choice as is Delaware.

 

Let me know if you have any other questions on this.

 

Best regards,

Customer: replied 3 years ago.

I had elected to go with a C-Corp for a few reasons. The first is that in the US I currently have to file and am taxed as though I were single due to my wife's immigration status.


 


The combination of all US taxes is actually higher than my equivalent tax burden would be in Germany according to my advisor here, as I pay at the married rate in Germany. They also consider me liable for the corporate earnings of a US-based corporation if the CEO maintain s German residency.


 


Your point about the foreign income tax credit seems well taken, but I'm not sure it would apply given that Germany would charge tax on top regardless. At least that's my current understanding.


 


What taxes would apply were I to choose an S-Corp or an LLC? Would I potentially have to pay for health insurance I won't/can't use? Social Security that won't exist when I retire anyway?


 


The other point is that the tax credit is not a given in the years ahead. The ease of raising taxes on expats makes for an easy fix for Uncle Sam. There's no guarantee that it will be there in the future.


 


Thanks for the answer, but I had hoped someone with experience in both tax systems would be able to address my individual situation.

What taxes would apply were I to choose an S-Corp or an LLC? - basically just what you would pay as a self employed US citizen, federal, SS, MHI. Would I potentially have to pay for health insurance I won't/can't use? - no you would not have to pay for health insurance. Social Security that won't exist when I retire anyway? - That's an assumption really, not a fact. But well said. :)

 

The other point is that the tax credit is not a given in the years ahead. The ease of raising taxes on expats makes for an easy fix for Uncle Sam. There's no guarantee that it will be there in the future. - Correct, there is no guarantee but it has been around for decades. Taking this away would make the U.S. tax structure similar to that of North Korea.

 

Let me know if this does not answer your question about the location of your US incorporated company or if you would like to see if another expert has experience with both tax systems. (I don't think it is likely but not impossible) I would then opt out and you could wait to see if another expert takes your question. You would then be working with a different expert.

 

If you have any other questions please feel free to post them and I will get back to you as soon as I can.

 

Best regards,

 

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