Many investors who successfully immigrate to the United States prepare to establish their own companies and make a mark in their careers. So what taxes are required when starting a business in the U.S. after investment immigration? WorldWay Immigration experts provide a brief introduction.
Corporate Income Tax
The U.S. corporate income tax is a tax levied on the domestic and foreign income of U.S. companies and the income of foreign companies sourced from within the United States. It is collected at both the federal and state/local levels and is the third largest tax in the U.S. after individual income tax and payroll tax. The corporate income tax began with the federal corporate income tax law on March 1, 1913, and only became a formal and permanent tax in 1916.
(1) Taxpayers. The corporate income tax applies to U.S. companies and foreign companies as taxpayers. U.S. tax law stipulates that any company established under the laws of any state and registered with the state government, regardless of whether it is located within or outside the United States, and regardless of who owns the shares, is considered a U.S. company. Any company established under foreign laws and registered with a foreign government, regardless of whether it is located within or outside the United States, even if all or part of the shares are owned by Americans, is considered a foreign company.
(2) Taxable Objects and Tax Rates. The taxable objects of U.S. corporate income tax are the income sourced from within and outside the United States (i.e., global income) of U.S. companies and the income sourced from within the United States of foreign companies. The aforementioned income mainly includes: operating income, capital gains, dividends, rents, royalties, service income, and other income.
Bracket Taxable Income (USD) Tax Rate (%)
1 Up to 50,000 15
2 Over 50,000 to 75,000 25
3 Over 75,000 to 100,000 34
4 Over 100,000 to 335,000 39
5 Over 335,000 to 10,000,000 34
6 Over 10,000,000 to 15,000,000 35
7 Over 15,000,000 to 18,333,333 38
8 Over 18,333,333 35
The corporate income tax adopts a progressive tax rate, with an additional 5% tax on taxable income between $100,000 and $335,000; companies with taxable income exceeding $15 million must pay an additional tax of 3% on the amount exceeding $15 million or 3% on $100,000 of taxable income, whichever is smaller. Companies primarily engaged in providing services are taxed at a flat rate of 35%. Income from foreign companies engaged in trade activities in the United States is taxed at the progressive rates of U.S. corporate income tax.
(3) Calculation of Taxable Income and Tax Payable. Taxable income is the total income of the company minus various expenses and losses that are deductible under tax law incurred to generate income. The allowable deductions are those necessary business and non-business expenses incurred by the company in the process of generating total income, as prescribed by tax law in advance.
Taxpayers of corporate income tax can choose their own tax year, i.e., the start and end dates of the tax period, but once determined, it cannot be changed arbitrarily. Taxpayers can choose the accrual basis, cash basis, or other accounting methods as their tax calculation method. Taxpayers must submit estimated tax returns and the previous year's actual tax returns by April 15 each year and pay corporate income tax according to the estimated tax returns by April 15, June 15, September 15, and December 15 of that tax year at a certain percentage. Corporate income tax is collected annually. Taxpayers can file tax returns within two and a half months after the end of their chosen tax year. Losses between years can be offset and carried forward; losses in the current year can be carried back for 3 years and carried forward for 15 years.
Sales Tax
Sales tax is a tax levied by state and local governments in the United States on certain goods and services based on their sales price at a certain percentage. The sales tax in the U.S. evolved from the business tax in the 19th century. In 1921, West Virginia was the first to impose a retail sales tax. At that time, the retail sales tax was levied on all sales revenue of businesses, with a very low tax rate. Currently, 46 states in the U.S. have established sales taxes, which have become a major source of revenue for state governments, accounting for over 40% of state tax revenue. Local governments in the U.S. also levy sales taxes.
Sales tax includes general sales tax and retail sales tax. General sales tax applies to individuals or businesses engaged in commerce as taxpayers, with the sales revenue from goods or service income as the taxable object, using a proportional tax rate. There are significant differences and variations among states that impose general sales tax in the U.S. General sales tax is levied at every stage of the process of goods or services, following the principle of taxing each transfer from production to consumption. The exemptions for general sales tax include seeds, fertilizers, insurance premiums, etc.
Retail sales tax, also known as special sales tax, is a tax levied on the retail sales amount at the retail stage of goods. U.S. tax law stipulates that retailers can indicate the taxable amount in addition to the selling price of goods, as part of the selling price. This indicates that although tax law designates retailers as taxpayers, the tax burden is typically borne by the purchasers. Retail sales tax adopts differential proportional tax rates, with the highest rate reaching 10% as determined by each state.
Editor: WorldWay Immigration
