Cc: taxman at centa.com; tax at garygauvin.com Subject: International tax question Hello, I have a question which I hope you can answer and then I would proceed to use your services if required. I found you through Google, and notice you offer international tax accounting/help. I was wondering if you could help me with this question. 1. If I am a resident of Australia, which states all income of that citizen must be declared worldwide, and I have a US corporation, do I have to file a tax return in my country and report earnings for the US corporation or would I only file a tax return based on how much money I take out and pay myself from the US corporation? Is it right to assume the following? 1. I would need to file a tax return for my US corporation with the IRS, but would not require to file a tax return for this US corporation to my home country, since technically this US corporation is a US resident and not a resident of Australia. 2. However, I would need to file a PERSONAL tax return if I decide to pay myself a salary from the US corporation? (e.g. director's wage, etc) I have been to various CPAs in Australia and they have no idea about US policies, I really hope you can give me some insight and would like to thank you in advance for offering any advice. Some other details regarding the US corporation: * All sales/income come from US and worldwide customers via the Internet, less than 1% from home country Australia. * Funds/Money is deposited into US bank account under US corporation name * US corporation has mailing address which then forwards mail to home country Australia * Technically US corporation does all business in the USA, only directors/founder working for corporation are located in Australia. This is what the Australian taxation site says: "While some types of income are exempt from tax, and certain categories of people or entities need not pay tax, in general, residents of Australia are liable for tax upon their worldwide income. Others are liable upon their income with an Australian source." Another CPA in Australia says: "Many Australian citizens receive income from overseas in the way of pensions, interest dividends and rental income. The ATO is active in ensuring this income is declared, as it is assessable in Australia. All Australian residents for tax purposes are required to declare their worldwide income in their Australian tax return." I understand the above talks about "Australian citizen" however a US corporation cannot be deemed an Australian citizen can it? Only if the corporation pays salary to one of its Australian citizens, can that be assumed income which needs to be declared in that citizen's personal tax return in Australia?? The US corporation does not need to file a tax return in Australia, does it? Best Regards, JXXXXX Thank you. ============================ david ingram replies: You would file a US 1120 Corporate Income tax return and pay tax to the US on any profits. If you pay money to yourself, there is no US tax on your wages or earnings because you are not performing ANY services in the USA. You have to pay attention to US Form 5472 which must be filed when a foreigner owns 25% or more of a US corporation. Find the form at http://www.irs.gov/pub/irs-pdf/f5472.pdf Note that the minimum penalty for failure to file form 5472 is $10,000 US. You must file an Australian Corporation tax return as well. Mind AND control of your company is in Australia. Remember that I am in Canada. However, I have lectured on Canadian / US / Australian Tax (back in 1981) in Melbourne, Brisbane and Sydney. David Ingram's US/Canada Services US / Canada / Mexico tax, Immigration and working Visa Specialists US / Canada Real Estate Specialists 4466 Prospect Road North Vancouver, BC, CANADA, V7N 3L7 Res (604) 980-3578 Cell (604) 657-8451 (604) 980-0321 New email to davidingram at shaw.ca <mailto:davidingram at shaw.ca> www.centa.com <http://www.centa.com/> www.david-ingram.com <http://www.david-ingram.com/> Disclaimer: This question has been answered without detailed information or consultation and is to be regarded only as general comment. Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist in connection with personal or business affairs such as at www.centa.com <http://www.centa.com> . If you forward this message, this disclaimer must be included." Be ALERT, the world needs more "lerts" Answers to this and other similar questions can be obtained free on Air every Sunday morning. Every Sunday at 9:00 AM on 600AM in Vancouver, I, david ingram am a permanent guest on Fred Snyder of Dundee Wealth Managers' LIVE talk show called "ITS YOUR MONEY" Those outside of the Lower Mainland will be able to listen on the internet at www.600AM.com <http://www.600am.com/> Call (604) 280-0600 to have your question answered. BC listeners can also call 1-866-778-0600. Callers to the show and questioners on this board can also attend the Thursday Night seminars on finance and making your Canadian Mortgage Interest deductible. This from "ask an income tax and immigration expert" from www.centa.com <http://www.centa.com/> or www.jurock.com <http://www.jurock.com/> or www.featureweb.com <http://www.featureweb.com/> . 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