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Is it worth having a company in the USA to save taxes?

Despite or because of Donald Trump, entrepreneurs and investors who want to establish a company in the USA can benefit from various tax advantages that even put Switzerland in the shade.

There are various differences to consider, whether an entrepreneur resides in the USA and undertakes his activity from here, or whether the company is resident in the USA while the owner resides elsewhere. In both cases, depending on the type of company, you can benefit from considerable tax advantages. This article is only a small overview of 2 different types of companies and the tax advantages.

Red, White & Blue by Luke Michael

I have been working and living as a broker in Florida for 15 years now and have helped many customers to make interesting investments. I am at your disposal for a personal consultation at any time. The point is not to win you as a customer, but to inform you about the kind and possibilities of cooperations. In any case, please consult an expert in tax matters before making a final decision.

Lower tax for US Corporations

Under the current president, corporation tax for US corporations that make more than $75,000 a year in profits has been reduced from 35 to a flat 21%. If both the company and the owner of the company are in the USA, the taxation will remain the same. 21% of the profit without being able to claim tax allowances in advance. However, if the owner has his registered office outside the USA and receives a dividend, it will be taxed in Germany with additional capital gains tax and, if applicable, Soli.  

Limited Liability Corporations ( LLC ) and Limited Partnership Companies (LP)

Under Trump, a tax-exempt amount of 20% of the profits was decided. According to the double taxation agreement, any profits in excess of this amount will only be taxed in the USA. Each partner must file a private tax return in the USA for his share of the profits and pay tax on the profits in excess of the tax-free allowance. Here, too, the tax rates are lower than in many other European countries.

by Aaron Burden

These are clear advantages which speak for this company form. However, it should be noted that the company is recognized as a partnership in the country of residence of the owner and not as a corporation. Already with the establishment of the company clear formulations must be selected for this, which prove this. The company is bound to the now made choice ( whether persons – or corporation ) for the following 5 years.

Such a tax advantage is very interesting for many entrepreneurs. It has been tried again and again to relocate entire companies ( only on paper ) to the USA, whereby the activity of the company was still carried out at the original place in Europe. To try this today will almost inevitably lead to the tax trap. If, however, you purchase a property in the USA in the name of an LLC or LP and earn profits from rentals, these are subject to the above-mentioned allowances and most favorable taxation. In Germany, there are NO further taxes to be paid on the profit. To stay with real estate: With the current increases in the value of approx. 4.5 – 5% per year, a considerable profit has been generated after approx. 5 years in addition to the already much higher rental income. With the sale of real estate now the advantages of this firm form can be used to the same extent. 

Advantage of Write-offs

Operational investments can be depreciated by the company within the next 5 years. Unfortunately, this regulation explicitly does not apply to the acquisition of real estate. Too bad!

Our conclusion:

Especially in Germany, it is often difficult for companies to grow successfully (further). As a real estate broker and property developer, I have been active since 1985 with the mediation and construction of apartments and houses. It was only when I crossed an invisible threshold and apparently ran the risk of becoming enormously successful and financially independent that my further ascent was massively impeded not only by the tax office. Entrepreneurs who have to deal several times a week with the most insane letters from public offices, do not have the time and at some point no longer have the desire to continue to grow. For me the time had come to deal with emigrating to the USA. Even today, the USA still represents good growth – and chances of success. And believe me, you won’t hear a word from the authorities all year. You can go undisturbed and even under the sun in Florida if you want to deal with the growth of your company.

I have lived in the USA for 20 years. As a real estate agent, I am not allowed to provide legally binding advice in tax matters. I cooperate with various law firms dealing with the establishment and administration of companies in the USA. These law firms are also at your disposal with employees in the German language. If you are interested in our services, we will gladly send you their contact details.

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