Tax Question about Americans owning a business in Taiwan

Here’s the situation. A friend and I are starting a business, but it turns out you have to pay full US taxes if you own a business abroad. We’re looking for a loophole, and this is the best idea we can come up with: State on official Taiwanese documentation that we own the business with my Taiwanese wife being a co-owner. When time comes to fill out the tax forms, we claim we are employees and then submit the tax information to the US claiming we are merely workers for this company. This way, we avoid paying both the Taiwanese AND the US tax at the same time.
This sounds really risky and a little illegal though. Is there a better way to avoid getting unfairly screwed simply because we’re foreign? Does anyone else know the ins and outs of situations like this? Thanks a lot.

[quote=“dashgalaxy86”]Here’s the situation. A friend and I are starting a business, but it turns out you have to pay full US taxes if you own a business abroad. We’re looking for a loophole, and this is the best idea we can come up with: State on official Taiwanese documentation that we own the business with my Taiwanese wife being a co-owner. When time comes to fill out the tax forms, we claim we are employees and then submit the tax information to the US claiming we are merely workers for this company. This way, we avoid paying both the Taiwanese AND the US tax at the same time.
This sounds really risky and a little illegal though. Is there a better way to avoid getting unfairly screwed simply because we’re foreign? Does anyone else know the ins and outs of situations like this? Thanks a lot.[/quote]

How are you getting screwed? It’s American law, isn’t it? And you are entitled to benefits because of it, no?

Btw, nothing is a little illegal; it either is or it isn’t. :laughing:

I don’t really get that. Most countries have a double-taxation agreement with Taiwan so that only one country actually charges the tax. Since a company is a legal ‘person’, the company is usually taxed in the country in which it is (officially) based. I realise the US is a law all unto itself, but if what you say is true, it would be impossible for any American to start a business anywhere, because their entire income would disappear in double taxation.

Sounds like you need an accountant.

Well what I’ve been told is that you’re immune from taxes if you work here for up to 90,000 USD per year, but if you own a business here, your income will be doubly taxed, and you’ll need Taiwan’s tax slips to demonstrate your earnings. The funny thing about stalls as a business here is that they’re virtually all illegal on some level. Almost no one has a business license for a stall and you can probably count on one hand the people in Shilin Night Market that pay taxes on their stall. We asked around Shida and Shilin about getting the stall registered. The owners all looked at us like we were idiots and said no one registers a stall. There may be a way, but no one does it, and at most you’re fined a few hundred NT or so if a police officer is in a bad mood.
Still, that poses a puzzle for me and my partner. How can we have a normal but unregistered stall here and then still register for American taxes?

[quote=“citizen k”][quote=“dashgalaxy86”]Here’s the situation. A friend and I are starting a business, but it turns out you have to pay full US taxes if you own a business abroad. We’re looking for a loophole, and this is the best idea we can come up with: State on official Taiwanese documentation that we own the business with my Taiwanese wife being a co-owner. When time comes to fill out the tax forms, we claim we are employees and then submit the tax information to the US claiming we are merely workers for this company. This way, we avoid paying both the Taiwanese AND the US tax at the same time.
This sounds really risky and a little illegal though. Is there a better way to avoid getting unfairly screwed simply because we’re foreign? Does anyone else know the ins and outs of situations like this? Thanks a lot.[/quote]

How are you getting screwed? It’s American law, isn’t it? And you are entitled to benefits because of it, no?

Btw, nothing is a little illegal; it either is or it isn’t. :laughing:[/quote]

The reason I consider it “getting screwed” is because Taiwanese don’t bother to pay taxes on their stalls but a foreigner would have to in order to avoid being in trouble for tax evasion when he returns home with oodles of unreported money. The other unfair thing is that not only would we have to pay the American tax; if we try to do things by starting a business and submitting information to the Taiwanese government, we’d be taxed there too… this whole scenario ultimately is very challenging for a foreigner to make a profit in.

Anyway, someone mentioned that double-taxation may not actually be something we have to deal with, but I’ve heard otherwise from a few sources. My friend and I are going to talk to someone at AIT about this soon. If anyone else has any insight though, it’d be appreciated.

If you have a stall and it’s unregistered, especially as it will be a cash business, why even bother to report it to the US govt? How will they ever be able to find out you were selling stinky tofu in a night market? Just declare income as normal and be done with it.

don’t be so anal about this…you are selling shit on the street…who the hell is going to find out. …

Since you are selling at the night market and many stalls there are not registered ( I will assume that you will not register yours either, since you are already asking for “loopholes” to avoid paying for taxes in the States), why not just keep it your earnings in Taiwan. Who will know ( beside the little voices in your head) that you are making money in Taiwan.

I hope you will do the right thing and pay for taxes either in the States or Taiwan. It really sucks that the honest hard working people have to support the shameless tax cheats both in Taiwan and the States.

[quote=“TAIWANMY2NDHOME”]Since you are selling at the night market and many stalls there are not registered ( I will assume that you will not register yours either, since you are already asking for “loopholes” to avoid paying for taxes in the States), why not just keep it your earnings in Taiwan. Who will know ( beside the little voices in your head) that you are making money in Taiwan.

I hope you will do the right thing and pay for taxes either in the States or Taiwan. It really sucks that the honest hard working people have to support the shameless tax cheats both in Taiwan and the States.[/quote]
I want to do it legally, but I want to avoid double-taxation. If I can find a way to do it legally, I will pay taxes, but a lawyer friend also told me that if I want to make it an official business in Taiwan, I need to hand out receipts which will be quite 麻煩.

Since when does the US demand “proof” of how much money you made (and are thus going to pay them taxes on?) Yes, they would like 1099s on your Schedule C when that’s applicable, but there are always boxes for “additional” or “miscellaneous” income. They’re happy to accept your word on gross receipts. They certainly would like to get taxes paid on stuff like waitress’ tips (which is mostly a losing proposition here in the States since they’re mostly cash) which is not documented.

I assume that the reason you want to pay US taxes is to get Social Security quarters in for possible retirement benefits later on. I can’t think of any other compelling reason to put yourself in that position, except maybe immigration rights for your wife or something later on, based on income? If so, I’ve “imported” a spouse before (bad idea, but that is neither here nor there) based on Taiwanese source income alone. I didn’t need to show any income from the US to do so.

Receipts at a night market stall; that would be a first in TW. That’s my chuckle for the day, brother. :bravo:

Exactly. No one would even bother. It’d be too much hassle for the night market atmosphere.

Well, you are apparently married to a Taiwanese woman. Presumably, you will take her back to the US with you whenever you go back. I think you can figure out the big chunk of money problem in that regard if you put your mind to it.

On a somewhat related note, I came across this story yesterday that reminded me of your question:
blogs.wsj.com/law/2011/04/08/aft … od=WSJBlog

[quote=“citizen k”]Well, you are apparently married to a Taiwanese woman. Presumably, you will take her back to the US with you whenever you go back. I think you can figure out the big chunk of money problem in that regard if you put your mind to it.

On a somewhat related note, I came across this story yesterday that reminded me of your question:
blogs.wsj.com/law/2011/04/08/aft … od=WSJBlog[/quote]

Yeah I can just say the money is hers, I thought of that. But it wouldn’t work for my unmarried partner.
And why does that article remind you of my question?

Both about tax evasion, aren’t they? :wink:

[quote=“dashgalaxy86”]Here’s the situation. A friend and I are starting a business, but it turns out you have to pay full US taxes if you own a business abroad. We’re looking for a loophole, and this is the best idea we can come up with: State on official Taiwanese documentation that we own the business with my Taiwanese wife being a co-owner. When time comes to fill out the tax forms, we claim we are employees and then submit the tax information to the US claiming we are merely workers for this company. This way, we avoid paying both the Taiwanese AND the US tax at the same time.
This sounds really risky and a little illegal though. Is there a better way to avoid getting unfairly screwed simply because we’re foreign? Does anyone else know the ins and outs of situations like this? Thanks a lot.[/quote]

You need to just stop.

You are in way way waaaayyy to deep.

You have no idea of what you are talking about.

Read the appropriate tax laws or get an expert to do it for you and pay them their fee.

Otherwise you are flirting with disaster.

On a positive note, US Tax Law is very very generous to Corporations and you can make and spend a HUGE amount of money before even owing taxes. Take your time and set things up correctly. It might turn out you actually have a Taiwanese company and the US doesn’t give a rats ass about the company only your earning as a stockholder or employee etc. etc. etc.

Yes, as evidenced by General Electric last year. :laughing:

[quote=“ironlady”]

I assume that the reason you want to pay US taxes is to get Social Security quarters in for possible retirement benefits later on. [/quote]

Unfortunately, you can’t pay into the Social Security system from abroad unless (from http://www.irs.gov/businesses/small/international/article/0,,id=97160,00.html):

You are working for an American employer which includes:
-The U.S. Government or any of its instrumentalities
-An individual who is a resident of the United States
-A partnership of which at least two-thirds of the partners are U.S. residents
-A trust of which all the trustees are U.S. residents
-A corporation organized under the laws of the United States, any U.S. state, or the District of Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, or the Commonwealth of the Northern Mariana Islands (with respect to the CNMI, refer to Revenue Ruling 80-167).

You perform the services on or in connection with an American vessel or aircraft and either:
-You entered into your employment contract within the United States, or
-The vessel or aircraft touches at a U.S. port while you are employed on it

You are working in one of the countries with which the United States has entered into a binational social security agreement (also known as Totalization Agreements), and the agreement provides that your foreign employment is subject to U.S. social security and Medicare taxes.

You are working for a foreign affiliate of an American employer under a voluntary agreement entered into between the American employer and the U.S. Treasury Department.

I just sold my house in Taiwan, gonna wire the money back to US and wonder if I need to pay taxes on that…for tax questions what are they called here? CPO? tax consultant? thanks guys

Can someone suggest an accountant that can help a foreigner who owns a local business file his US tax returns. Must be able to read Chinese records since no one really understands who the business structured. The business doesn’t even make much money. Foreigner pays taxes for each student he teaches and on his income. It appears that if a foreigner works for himself, no matter how much taxes he pays, he must pay the us government full income of 15%. Makes no sense.