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Dear Ask A Lawyer: I am a U.S. citizen who has a new LLC

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Dear Ask A Lawyer:

I am a U.S. citizen who has a new LLC registered in the United States, and I operate an online English school as my primary business through it. My customers are in mainland China. Where do I need to pay taxes? Only the USA? Or both China and the USA?

Second of all, do I need to register my business in mainland China? I do not have a place of business overseas, but customers from there do purchase my online tutoring services.

Thank you,
Lillian
Hi,

Thank you for your question.

Because your business is online and all the services are provided online, you are not subject to Chinese taxation. You are only subject to US taxation.

Further, because the service is offered online out of the US, you are not required to register your business in China.

Please let me know if you have any further questions. Please also kindly consider rating my answer positively so that I am compensated by the website for my work on your question. Rating positively does not cause an additional charge and does not prevent us from further discussing your questions.

Best Regards,
ZDN
Customer: replied 3 years ago.

Thank you for answering my question so fast. My final question would be, if I wanted to hire Chinese sales people on the ground and give them 5% commission-only (no base salary, and without a business location so that I can find more students, would I need to register my business in China?


 


And how do I calculate these employee commissions as a deduction when it comes times for taxes, since they are Chinese citizens?


 


Lillian

I would recommend against registering your business in China. This would cause you compliance charges to go up substantially.

Instead, what I would recommend is that you hire the Chinese sales people as independent contractors who are paid on commission only. If you do this, you will not have to register in China and can simply deduct off your taxes in the US as a regular business expense.
Customer: replied 3 years ago.

Thank you so much for you excellent service. I agree - I also do not want to register in mainland China. I will follow your advice. I have bookmarked your page for future questions/referrals to friends in need of your expertise. Thanks and take care!

My pleasure. Good luck with your future endeavors.

Please let me know if you have any further questions. Please also kindly consider rating my answer positively so that I am compensated by the website for my work on your question. Rating positively does not cause an additional charge.

Best Regards,
ZDN
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