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I own a company registered in US. Also we have a company…

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I own a company...

I own a company registered in US. Also we have a company registered in India as well with same name. I am currently trying to do business with a US Company. For this work all the work will be done from India, company is asking me to sign W-8BEN, should i go for it? or should i rather sign W-9 with them(i am a US Citizenship). Obviously the goal is to save money and not to pay double taxes. Please advise.

Accountant's Assistant: The Accountant will know how to help. Is there anything else the Accountant should be aware of?

Also we will recieve payment/compensation for work in India directly from the US company. So take that in consideration. Our company in US has abosolutely no role in this, except that company in US and in India both owned by same individual. Do you also recommend registering company in India on a different name in this situation? so there is no confusion/extra taxes

Submitted: 4 months ago.Category: Finance
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12/5/2017
Financial Professional: Lev, Tax Preparer replied 4 months ago
Lev
Lev, Tax Preparer
Category: Finance
Satisfied Customers: 32,709
Experience: Personal Investment, Tax Preparation
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The question who will be a recipient of income ?
If you personally - you will need to use form W9
If that is a US corporation - use form W9

If that is a foreign corporation - use form W8-BEN-E

Form W8-BEN is used by nonresident aliens

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Financial Professional: Lev, Tax Preparer replied 4 months ago

When you say "company registered in US" - we need to be clear how that company is classified - if that is a single member LLC - it is disregarded - and YOU as an owner will be the recipient of income.
You mentions "we have a company" - if that is an LLC with several owners - it will be classified as a partnership.

So we need to be more specific here for proper determination.

Regarding double taxation - that is not an issue - if that is an US entity or as US person and for some reason it pays income taxes in India - a foreign tax credit is claimed on the US tax return - thus effectively will avoid double taxation of the same income.

Questions?

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Customer reply replied 4 months ago
Ok i am just able to see your reply, had technical issues opening the site.
I am the sole owner of the LLC.
I got your point, but what i am trying to ask is, What is the best way to avoid taxes. I have the ability to receive payment in India on someone else name as well.
Now you tell me which would be more beneficial, my margin in this business is very slim. So i want to avoid taxes.
So please tell me a way around, whether i receive compensation from client overseas or in US.
W9 or W-8-BEN-E. or do i have a third choice where 30% tax will NOT be held up by the client (in W-8-BEN they hold 30% as tax amount). If i do W9 i still have to pay some tax before transfering amount to India (employees pay, office expenses etc.)So if i have a third chocie let me know, if not then which one is suitable W9 or W-8-BEN-E (i can do W-8 by recieving amount on someone else name in India.) If there is a third choice with min possible tax let me know.
regards
Nauman
Financial Professional: Lev, Tax Preparer replied 4 months ago

Hi Nauman,

As a solo owner of the LLC - that LLC is treated as disregarded entity and all business activity is reported on YOUR tax return as if there were no LLC.
We may not avoid taxes - that woudl be incorrect approach - but we may seek some ways to reduce taxes legally.

Please be aware that the assignment of income doctrine is a judicial doctrine developed in United States case law by courts trying to limit tax evasion.

There are two basic principles:

-- income from personal services is taxable to the person who performs the services, and

-- income from property is taxable to the person who owns the property.

Thus - if services are performed by YOU - income from such services is taxed for you regardless if the payment is received by another person.

If we try to avoid taxes by assigning that income to another person - that could be classified as tax evasion and you may want to avoid such situations.

Now as you are an US person - you are taxed on all your worldwide income - regardless were services are performed and regardless where your client is located.

Please be aware that W8 or W9 forms are ONLY direct the payer regarding withholding.

Your actual tax liability will be determined on your tax return.

As you are an US person - you need to use form W9 and there will NOT be any withholding.

To minimize tax liability - we need to verify all your deductible expenses - and if all are properly accounted - by claiming all business related expenses - you will reduce your NET business income and will reduce possible tax liability.

Other options are - to make retirement plan contributions - by doing so - you will defer your tax liability and let your money grow tax free for future. Upon distribution - you will pay taxes on that amount in later years.

If your LLC runs business in India - be sure that is properly registered according to local laws - and all expenses in India will be deducted on your US tax return. In additional - if you pay any income tax in India - that amount will be credited against your US income tax liability as a foreign tax credit.

Let me know if you need any further discussion.

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Financial Professional: Lev, Tax Preparer replied 4 months ago

I appreciate if you take a moment to rate the answer.

Experts are ONLY credited when answers are rated positively.

If you still have any doubts, need clarification - please be sure to ask.

I am here to help you with all Social Security / Tax related issues.

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Customer reply replied 4 months ago
Unfortunately, you spent time in explaining the laws/rules that i already know. Answer did no help for me. I never said i am performing services. Services being performed from india remotely. I am the team leader, i am also in india. Its just that i am green card holder and company is based in US who is paying us.
Financial Professional: Lev, Tax Preparer replied 4 months ago

If the answer has no value for you - you may simply ignore it...

That is OK.
If you are willing to continue conversation - please ask clarification questions.

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