Non-US residents income source rule
Hi Indiehackers,
Non-US residents who are sole proprietors (or have a single member LLC) and use Stripe US, how do you determine the source of your income.
According to IRS (https://www.irs.gov/publications/p519#en_US_2019_publink1000222205)
A nonresident alien usually is subject to U.S. income tax only on U.S. source income.
Does it mean that only the income from your U.S. customers will be taxed if you are doing an international business?
P.S. not living in U.S. and have no office in U.S.
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If your US company is a disregarded entity, then you pay zero taxes except for income from securities, stock shares, rent, royalties, and the likes. Disregarded entities do not pay taxes in the US. You'll pay only personal income tax in your country.
@petartod Thanks so much!
Yes, it is a disregarded entity. So you mean I don't even need to pay tax for the revenue from my U.S. customers?
So I just pay the self employment tax (for single member LLC) in U.S. and my personal income tax in my country. Is that correct?
Just did more research. It seems that non-US residents who own a single member LLC do pay 0 tax in US! Only need to file a 5472 US tax return with the IRS for disclosure purposes.
Wow...
That is correct.
More details here https://www.irs.gov/individuals/international-taxpayers/nonresident-aliens-source-of-income