USA

The US businesses, unlike its European counterparts, are not required to file their returns with the state registration authorities, save for the listed companies.

There are three types of taxes in the USA: federal taxes, state taxes and local taxes (municipal, county etc.). Local taxes are charged only to the companies that effectively transact business on the territory of that State. The law makes no difference as regards the state of incorporation: a corporation that is incorporated in one state and with its principal place of business in another one, for example, in San Francisco (it owns an operating store there), must register as a foreign corporation in San Francisco, and if it has a chain of stores in different states across the US then it should register as foreign entity in all those states and pay taxes there. Same rule applies to most of the states: with exception of New York, New Jersey and California, the company’s income is assessed and the company pays the state taxes if it is not just incorporated there but does business there. Some of the states (like Washington, Texas, and Nevada) do not have state income tax. In any case, a company must pay local taxes and state taxes only in cases when it actually operates in the state of domiciliation. The primary reason for requiring foreign corporations to register is to ensure that they pay state taxes on income derived from in-state activity. This being said, most attention should be paid to federal taxes providing for no exceptions, irrespective of their state of incorporation and a place of business..

Filing for registration with US Tax Authorities

Contrary to the popular belief, ALL US corporations must be registered with Internal Revenue Service, and be assigned with the Employer’s Identification Number (EIN), and pay federal income tax regardless of place of business.

However, there is a flip side to it: if a company does not transact a business in the US, and it is not going to open accounts with US banks, such an entity can “by-pass” this “obligation”. Since companies are formed in each particular state, and it is that state that maintains the register of its domestic companies, the details of the newly formed companies are not submitted to the federal authorities automatically.  Consequently, a company sends an application for tax registration at its own discretion, however, if an application is not made, IRS will not claim tax payments due to the fact that it is not aware of the company existence. Though the above course of events is essentially illegal, however, as a rule of thumb chances are slim that it can be tracked down. In this case it is only accidentally that IRS could learn of the company existence (for example upon inspecting any of the US-resident partners of such company).

The disadvantages for a company not registered with IRS are that such a company is not assigned a Tax Identification Number (TIN) and, consequently, it would not obtain a certificate for tax registration in Russia; additionally it would not be able to open an account with a US bank. A company not registered with IRS should better avoid operating in the USA and contacting with other US companies.

Corporations

Once the business has been filed with US Tax Authorities, such corporations should file their tax returns in US (Form 1120). Returns in US are normally exempted from audit, however, for listed businesses it is mandatory to have their returns audited.

There is no obligation to get the returns audited prior to filing; however, a company must keep all the documents supporting data stated in the return for a period of three years for the purposes of potential tax inspection and overview.

The tax return and payment are due by 15 day of the third month following the end of the corporation financial year. Thus, for example, in case financial year ends on December 31, the tax is due by March 15 of the year to follow. The tax return due date may be postponed by three months; however, the tax must be paid by the initial due date.

In case a Corporation expects the amount of its tax to exceed USD 500.00 per year, it must make advance payments on quarterly basis; the amounts of such advance payments are reconciled at filing the annual tax declaration. Failing to make advance payments may entail huge penalties.

Federal income tax rates:

Partnerships and Sole Proprietorships

Partnerships and Sole Proprietorships are not deemed as separate tax payers as any income received by such entities is deemed to be received by owners thereof who must pay corresponding taxes at the rates applicable to them. This being said actual payment (non-payment) of income to owners has no impact on taxation.

In case such entities are owned by non-residents, the owners, as a matter of fact, are not subject to taxes within the USA. In case a company’s activities are deemed “effectively connected with the USA” (IRS however does not provide a clear definition of the term “effectively connected”; for example income generated from sources within the USA or its actual presence in the USA can be named), such a company is subject to withholding tax at the rate of 35% for corporate owners and 39.6% for the rest of the cases. In case a company does not carry on any activities “effectively connected with the USA”, it is not subject to any taxes in the USA. This being said, a partnership must submit declaration anyway.

Limited Liability Companies (LLCs)

Upon applying to IRS for tax registration a Limited Liability Company must choose its taxation scheme at the company own discretion; this may be same as for corporations, partnerships (having two and more owners) or sole proprietorships. Further taxation will be applied accordingly.

The best option is a Limited Liability Company having sole member, non-US resident and not carrying on any activities “effectively connected with the USA”. In this case a company is not subject to any taxes and it does not have to file any reports.