Question about import/export business and taxes:
 

I know that I should research this properly but just wanted to see if anyone here knows the answers. Say that I had a barn full of early 911s, or vintage Levi jeans or whatever they are clamoring for over in Europe these days. I put them in a shipping container to somewhere in the EU, pay the duty or whatever I have to pay to bring them into Europe and sell them for a big profit.

Do I have to pay income tax in whatever country I sell the cars in? How about the U.S.? What is that law about being able to make a certain amount of $$ outside the U.S.A. tax-free that I've heard about? (Like the defense contractor/private soldiers in the M.E.).

Edjumicate me. :)

I can promise you they will want US and California taxes paid, unless you move to Nevada or something

I think you have to be physically out of the country for more than 181 days ...

OK, assuming that I'm not out of the country long enough for the *181 days* exemption, where would I owe taxes?

It depends. If you are selling them retail in the other country, you will pay all local taxes: Duties to bring them in, VAT and income taxes on the profits. When you bring those net profits after taxes back to the US, you get to pay taxes on them AGAIN.

If you are simply selling to a retailer in Europe, they will take care of thier end, and you pay taxes on your net profit.

The exclusion of income taxes is for WORKING outside the USA. You get to exclude a bit of $100K these days. You also get to deduct the foreign taxes paid. Where you get screwed is AMT!!!

The US is the only country that does this. All other will not tax you on foreign income, IF it is taxed elsewhere.

FWIW, my company sells to companies in Mexico. If you need more info, because there is a lot more to all this, PM me.

Oh, and it is not 180 days, it is 300. You have to physically be outside the USA more than 300 days.

If it was just one container of stuff you were going to sell, then going through a broker in the foreign market would be the best option. You would be responsible for paying income tax only in the U.S., but you wouldn't make as much margin on your goods since the broker has to make his cut as well.

If you were planning on setting up shop in the foreign market then there are several things to consider like which country has the best foriegn investment incentives, tax rates....... If you decide to bring the profits back to the U.S. you will have to pay U.S. taxes as well. I spent a month in Central Europe this summer studying foriegn investment in that region and they have very competitive incentives for investment. Czech, Slovakia and Poland have a flat 19% corporate tax rate which is pretty competitive in the region.

I know this does not directly answer the question, but most exporters have a partner in the country where the goods go. They take care of the local stuff. Duties may be due at the port of entry, but nothing due leaving here that I know of.

Income tax is something else altogether. If you are to avoid income tax, you have to leave the money outside the US and not even use any paltry interest earned here. Cayman Islands is a destination. They typically like to see accounts in the hundreds of 1000's to accommodate. It's really dicey to avoid US income tax. Movement of money in and out of the country is closely monitored.

US residents are supposed to declare any off shore accounts whether tax is due or not. In short, with the existence of rules like the European Union withholding tax act, named the EU Savings Directive, every country is on the lookout.

Make enough and establish residence in Monte Carlo. I don't know what their residency laws are, but US citizens need to be in a a foreign country 330 days out of any 12 month period to be considered living abroad.

Some tax law here.

The ONLY way for you to not pay US taxes is for the corporation that takes the profits to be incorporated in another country. And if this subsidiary wants to move the money to the USA, it will have to pay taxes on the money.

As an unincorporated person, you simply cannot avoid being taxed. Except by renouncing your citizenship.

I believe that. Just ask Helio Castroneves. :)

Re: Castroneves. His deal may have worked if the money didn't originate from the US (Penske). But, it would have taken only a tipster to set the Revenuers off in the direction of the money. Even though HC was acquitted, he still paid the tax.

And the attorney's fees and the interest.

Cliffnotes: Penske sent 5 million with no withholding to the Netherlands which in turn sent the money to a Panamanian corporation supposedly held by HC's father in the form of bearer shares. With HC's sister as business manager and his attorney both knowing the set up, it seemed like a slam dunk. Yet, he got off in a trial by jury.

The power of high profile lawyers and defendants, once again.

yea but...nothing to stop a person from just bringing money in pocket of less than $10,000 and then just stuffing it under bed sheets...

Just wait. 1099's will be a part of the universe soon.

Dennis,

Sometimes what seems like a good no risk way to make a quick buck does not go as planned. ;)

Do your due diligence on this one.

Scott