Many friends who have successfully immigrated to the United States or are in the process of applying for U.S. investment immigration have plans to start a business in the United States for overseas investment. So, what taxes should be paid when starting a business in the United States? How are the tax rates related to these taxes calculated? The immigration experts at WorldWay provide a detailed analysis as follows:
1. Corporate Income Tax
The corporate income tax in the United States 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 United States, following individual income tax and payroll tax.
1. How is the taxpayer for corporate income tax identified?
The corporate income tax identifies 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 law 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. What is the taxable object of corporate income tax?
The taxable object of U.S. corporate income tax is the income sourced from both within and outside the United States (i.e., global income) for U.S. companies and the income sourced from within the United States for foreign companies.
3. What types of income are included in the "income" for corporate income tax?
The aforementioned income mainly includes: operating income, capital gains, dividends, rental income, royalties, service income, and other income.
4. What are the specific tax rates for each bracket of corporate income tax?
The detailed tax rates for taxable income (in USD) for each bracket are as follows:
· The portion not exceeding 50,000: 15%
· The portion exceeding 50,000 up to 75,000: 25%
· The portion exceeding 75,000 up to 100,000: 34%
· The portion exceeding 100,000 up to 335,000: 39%
· The portion exceeding 335,000 up to 10,000,000: 34%
· The portion exceeding 10,000,000 up to 15,000,000: 35%
· The portion exceeding 15,000,000 up to 18,333,333: 38%
· The portion exceeding 18,333,333: 35%
5. How is the tax rate for corporate income tax specifically calculated?
The corporate income tax adopts a progressive tax rate. For taxable income between 100,000 and 335,000, an additional tax of 5% is imposed; for companies with taxable income exceeding 15,000,000, the additional tax is 3% of the taxable income exceeding 15,000,000 or 3% of the taxable income of 100,000, whichever is smaller. Companies primarily engaged in providing services are taxed at a flat rate of 35%. Income from foreign trade activities in the United States is taxed according to the progressive tax rates of U.S. corporate income tax.
6. How is taxable income calculated?
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 predetermined by tax law.
7. How is corporate income tax reported and paid?
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 actual tax return for the previous year by April 15 each year and pay corporate income tax according to the estimated tax return 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 report taxes 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.
2. 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.
Currently, 46 states in the United States have implemented sales tax, making it a major source of revenue for state governments, accounting for over 40% of state tax revenue.
1. What specific taxes are included in sales tax?
Local governments in the United States also levy sales tax. Sales tax includes general sales tax and retail sales tax. General sales tax is levied on individuals or businesses engaged in commercial operations, with the sales revenue of goods or service income as the taxable object, using a proportional tax rate.
Retail sales tax, also known as special sales tax, is a tax levied on the retail sales amount at the retail stage of goods.
2. How is general sales tax collected?
There are significant differences and variations in the collection of general sales tax among states in the United States. General sales tax is levied at every stage of the flow 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.
3. How is retail sales tax collected?
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 the goods as the price of the goods.
This indicates that although tax law stipulates that retailers are the taxpayers, the tax burden is usually borne by the purchasers. Retail sales tax adopts differential proportional tax rates, which vary by state, with the highest rate reaching 10%.
