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We are a LLC company established in Delaware since April 2013.

We do Marketing/branding/shipping handling for...
We are a LLC company established in Delaware since April 2013.
We do Marketing/branding/shipping handling for crowd funding project in USA for one client (a Hong Kong company) based in Hong Kong and China. Our LLC company applies the crowd funding website to do the crowd funding on behalf of our client. After the crowd funding is successfully achieved, we get certain percentage of the revenue and the rest of money, we transfer to our client. Our client will issue invoices to all those buyers from their country (for example: from China or Hong Kong). My questions are:
1). Does our LLC company need to obtain any documents (should not be invoice because that’s the fund we collect on behalf of them) from the Hong Kong clients for transferring the money back to them? We do sign an agreement about the job contents and percentage of our fee.
2). Refer to question 1), do we need to reserve any withholding tax on behalf of our client (Hong Kong company) to pay to tax office in Delaware? Or that’s their obligation to report their income from USA to USA tax office?
3). Does our LLC company need to issue invoice to our Hong Kong client for the percentage we charge them? if yes, do we need to charge with gross receipts tax?
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Answered in 31 minutes by:
11/1/2013
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,689
Experience: Taxes, Immigration, Labor Relations
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Lev :

Hi and welcome to our site!
Several issues...
1.
You are a withholding agent if you are a US or foreign person that has control, receipt, custody, disposal, or payment of any item of income of a foreign person that is subject to withholding. A withholding agent may be an individual, corporation, partnership, trust, association, nominee, or any other entities.
As a withholding agent, you are personally liable for any tax required to be withheld. This liability is independent of the tax liability of the foreign person to whom the payment is made. If you fail to withhold and the foreign payee fails to satisfy its U.S. tax liability, then both you and the foreign person are liable for tax, as well as interest and any applicable penalties.
You are required to report payments subject to NRA withholding on Form 1042-S and to file a tax return on Form 1042.
2.
Nonresident alien (NRA) withholding applies only to payments made to a payee that is a foreign person. In most cases, the payee is the person to whom you make the payment, regardless of whether that person is the beneficial owner of the income. However, there are situations in which the payee is a person other than the one to whom you actually make a payment. Usually, you determine the payee's status as a U.S. or foreign person based on the documentation that person provides.
3.
Withholding requirements from payments to nonresident aliens (NRA) is a very complex area.
For your own determination - you may refer to this publication -


www.irs.gov/pub/irs-pdf/p515.pdf‎
4.
Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding. This form is used by a foreign person to:
--Establish foreign status;


--Claim that such person is the beneficial owner of the income for which the form is being furnished or a partner in a partnership subject to section 1446 withholding; and


--If applicable, claim a reduced rate of, or exemption from, withholding under an income tax treaty.


 


Form W-8BEN also may be used to claim that the foreign person is exempt from Form 1099 reporting and backup withholding for income that is not subject to NRA withholding.


5.
The tax law doesn't required to issue invoices - but the tax law requires to keep documentary evidences related to transactions - and invoices are widely accepted as supporting documents for tax purposes. So it is recommended to issue invoices.

Customer:

Thanks for your reply.

Customer:

refer to your

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,689
Experience: Taxes, Immigration, Labor Relations
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