4 ms·

One thing to be aware of is that registering a company in the US (or anywhere else) does NOT mean that it's not taxable where the founders or management are res

One thing to be aware of is that registering a company in the US (or anywhere else) does NOT mean that it's not taxable where the founders or management are resident. For example, in Australia, a foreign company is taxable if i) Australian tax residents control the company’s voting power; or ii) Its “central management and control” is in Australia. Other jurisdictions have similar laws.

Lordarminius 7y ago
> One thing to be aware of is that registering a company in the US (or anywhere else) does NOT mean that it's not taxable where the founders or management are resident. I always wondered about this and how it affects startups. In particular, YC requires that all the companies it funds be registered as US entities. How do these companies manage double taxation ?
- rmah 7y ago
  By filing taxes in every jurisdiction they are legally required to file. Let's use the grandparent post's example: australian founders, company registered in deleware, USA. They need to file at least the following: 1) US federal corporate income tax 2) Deleware state franchise tax 3) Australian income tax Probably more. If you want to stay fully legal and compliant, it's just what you have to do.
  - estebarb 7y ago
    And if this is extended to sales taxes: how companies actually pay taxes worldwide? I mean, a SaaS would require the company to be registered anywhere it gets a new customer? In real life how it is handled? Also, I have read that some services like 2checkout offer "name of record" where they seems to pay taxes on behalf of a company globally. But I haven't seen any other company offering that, so I'm not sure if it it's standard or not...
    - gamblor956 7y ago
      Sales taxes are a US-centric concept. Most of the world uses VAT, though Australia uses a variant known as the GST. (And not to be outdone, Hawaii has a variant of VAT based on gross income.) That being said, for SaaS, it is still currently generally the prevailing rule that sales/VAT/GST/whatever compliance isn't required in the customer's country unless you have a physical nexus to that country (i.e., office, employee, etc.) However, the US tech dominance has resulted in many countries proposing or even adopting rules that would subject SaaS transactions to VAT/GST/whatever compliance regardless of the location of the vendor. Most intl tax experts agree that this will become the standard within a decade, though there is substantial disagreement as to how soon within the next decade the transition will occur.
- vageli 7y ago
  I believe there exist treaties between countries that limit the taxed amounts, similar to how many states will account for income tax on income earned in a place other than your resident state (in the United States, that is).
nabla9 7y ago
For individuals tax residence (residence for tax purposes) is usually the physical presence in a jurisdiction. You have to check tax treaties between the US and the other country to see how it goes. Usually when there is tax treaty, there is no double taxation. For corporations fixed place of business is important legal concept in OECD couturiers. Significant digital presence is a new emerging concept.
- gamblor956 7y ago
  Nearly all US tax treaties carve out exceptions for management activities, meaning for example that if a US-incorporated company is managed in Australia, then it is subject to tax in Australia and also in the US, though they would get foreign tax credits in the US to offset the Australian taxes paid. See the permanent establishment article of...nearly every tax treaty based on the US or OECD model tax treaties.

Lordarminius 7y ago

> One thing to be aware of is that registering a company in the US (or anywhere else) does NOT mean that it's not taxable where the founders or management are resident. I always wondered about this and how it affects startups. In particular, YC requires that all the companies it funds be registered as US entities. How do these companies manage double taxation ?

rmah 7y ago
By filing taxes in every jurisdiction they are legally required to file. Let's use the grandparent post's example: australian founders, company registered in deleware, USA. They need to file at least the following: 1) US federal corporate income tax 2) Deleware state franchise tax 3) Australian income tax Probably more. If you want to stay fully legal and compliant, it's just what you have to do.
- estebarb 7y ago
  And if this is extended to sales taxes: how companies actually pay taxes worldwide? I mean, a SaaS would require the company to be registered anywhere it gets a new customer? In real life how it is handled? Also, I have read that some services like 2checkout offer "name of record" where they seems to pay taxes on behalf of a company globally. But I haven't seen any other company offering that, so I'm not sure if it it's standard or not...
  - gamblor956 7y ago
    Sales taxes are a US-centric concept. Most of the world uses VAT, though Australia uses a variant known as the GST. (And not to be outdone, Hawaii has a variant of VAT based on gross income.) That being said, for SaaS, it is still currently generally the prevailing rule that sales/VAT/GST/whatever compliance isn't required in the customer's country unless you have a physical nexus to that country (i.e., office, employee, etc.) However, the US tech dominance has resulted in many countries proposing or even adopting rules that would subject SaaS transactions to VAT/GST/whatever compliance regardless of the location of the vendor. Most intl tax experts agree that this will become the standard within a decade, though there is substantial disagreement as to how soon within the next decade the transition will occur.
vageli 7y ago
I believe there exist treaties between countries that limit the taxed amounts, similar to how many states will account for income tax on income earned in a place other than your resident state (in the United States, that is).

nabla9 7y ago

For individuals tax residence (residence for tax purposes) is usually the physical presence in a jurisdiction. You have to check tax treaties between the US and the other country to see how it goes. Usually when there is tax treaty, there is no double taxation. For corporations fixed place of business is important legal concept in OECD couturiers. Significant digital presence is a new emerging concept.

gamblor956 7y ago
Nearly all US tax treaties carve out exceptions for management activities, meaning for example that if a US-incorporated company is managed in Australia, then it is subject to tax in Australia and also in the US, though they would get foreign tax credits in the US to offset the Australian taxes paid. See the permanent establishment article of...nearly every tax treaty based on the US or OECD model tax treaties.