Taxation

At Juris Magister, we provide advice on the various tax regimes applicable to different types of companies in the United States, with the aim of recommending the most favorable tax treatment and considering the effects that the application of the Double Taxation Treaty between Spain and the United States will have on Corporate and Income Tax matters.

At Juris Magister Abogados, we have extensive experience in advising on and applying the Double Taxation Treaty between Spain and the United States. This allows us to offer comprehensive assistance in selecting a corporate structure in the United States, facilitating the obtaining of an E-2 visa by combining knowledge of international tax law with corporate structures and immigration regulations.

We have professional partnerships with Certified Public Accounting (CPA) firms with whom we have built strong professional relationships over the years and who collaborate with us in providing comprehensive services, as accounting and tax management in the United States is essential for both individuals and businesses due to the complexities of the U.S. tax and accounting system.

There are two types of corporations in the United States. The “C” corporation is equivalent to a traditional corporation, in which the partners that form it are limited in their liability to the capital contributed to the company. The “C” corporation pays federal taxes on its corporate profits, and when it distributes dividends to its partners, they must also pay federal taxes on the profits they receive.

When a corporation has fewer than seventy-five partners, all of whom are individuals and all of whom are residents of the United States, the corporation may apply to qualify as an “S” corporation, the main characteristic of which is its tax treatment: the “S” corporation achieves tax transparency, such that the company’s profits and losses are attributed directly to the partners. In this way, the company does not pay taxes on its corporate profits and only the partners pay taxes on the profits attributed to them individually.

Non-US residents may only incorporate as a “C” corporation. Investments in the United States made by foreign companies that establish subsidiaries in the United States, since the subsidiary has only one partner (parent company) and the parent company is a non-US resident company, must always be incorporated as a “C” corporation. The same applies to incorporating a company when the partners are individuals who are not US residents; in this same case, a “C” corporation must be incorporated.

The LLC grants the foreign investor the benefit of being subject to the tax transparency regime, which allows the foreign investor to pay taxes only on the benefits received as a Member of the company. The Federal Tax Agency (” Internal Revenue The IRS grants LLCs the option of being taxed as either a Corporation or a Look-Through LLC. The company may choose to be taxed as a Look-Through LLC, or if it makes no choice, it would be treated as a Look-Through LLC by default. The election of tax treatment may be changed with the IRS, but only once every five years, unless more than 50% of the LLC’s membership changes, or unless any additional tax treatment changes are approved by the IRS.

Single-member LLCs are not required to file a tax return as a corporation, since under the tax transparency regime, profits or losses are attributable to the member, and the member must file the tax return. If the member is an individual, they must complete Form 1040 ; if it is a legal entity, they must complete Form 1120. LLCs with more than one member, on the other hand, do have a form assigned to them to comply with their tax obligations and, in this regard, must complete Form 1065 to file their tax return.

The general rule is that individuals and corporations, whether domestic or resident in the United States, are taxed in the United States on all their worldwide income, and foreign individuals and corporations, not resident in the United States, are taxed on income derived from conducting business activities in the United States. Taxation in the United States applicable to foreign investments is governed, in addition to domestic regulations in the United States, by rules resulting from the application of Double Taxation Treaties (DTTs) signed by the United States.

TDIs impose exceptions to this general rule, while also granting tax credits for taxes paid by an individual or corporation in a foreign country as a result of income earned in that country. The TDI must have signed a TDI with the United States. Based on the application of this dual rule, the following basic taxation schemes for foreign investments exist in the United States:

  • Subsidiaries of foreign corporations are taxed in the United States like any other corporation whose beneficiaries are U.S. citizens.
  • In relation to dividends, interest, rents, royalties and professional services paid to a natural person or legal entity abroad, the rule of Fixed or Annually or Periodically Determined Income , known in English as “FDAP Income”, applies, a principle by which a Gross Withholding of 30% is applied to these mentioned types of income paid from the United States to a natural person or legal entity abroad.
  • Branches of foreign corporations are taxed in the United States like any other U.S. corporation. However, in order to equate the taxation of dividend distributions from a subsidiary to the parent company abroad, to which the 30% gross withholding tax applies, the United States imposes a Branch Tax of 30 % on the income repatriated by the branch abroad.
  • Effectively Connected Income -ECI- to a US source are normally taxed in the United States on a Net Taxation basis whereby income derived from a US source – such as income from sales, services or manufacturing in the United States – is subject to the same rules and tax rates as any other income derived by US taxpayers.
  • Occasional income that is non-recurring and not effectively connected with a U.S. source is generally not taxed in the United States. The most significant exception is income derived from the sale of real estate located in the United States or the sale of shares in a U.S. corporation that owns real estate located in the United States. In these cases, the income generated by these sources is treated as ECI.
  • The above rules may be modified by the legal provisions contained in the DTAs signed by the United States, which generally reduce the tax rates and fees applicable to payments to foreign individuals or legal entities that are residents or nationals of countries with which the United States has signed a DTA. Similarly, based on DTAs and with respect to International Income earned by individuals or legal entities in a country with which the United States has signed these Treaties, a tax credit is generally available in the United States for taxes actually paid in the other source country.

The United States has TDI in terms of Income Tax and Corporate Tax with the following countries: Germany, Armenia, Australia, Austria, Azerbaijan, Bangladesh, Barbados, Belarus, Belgium, Bulgaria, Canada, China, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Philippines, Finland, France, Georgia, Greece, Netherlands, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Jamaica, Japan, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Luxembourg, Malta, Mexico, Moldova, Morocco, New Zealand, Norway, Pakistan, Poland, Portugal, United Kingdom, Romania, Russia, Tajikistan, Thailand, Trinidad, Tunisia, Turkey, Turkmenistan, Ukraine, Uzbekistan and Venezuela.

Do you want to know what the most appropriate tax regime would be for establishing or expanding in the U.S.?

Contact us to analyse the best option

Is a Certified Public Accountant (CPA) required in the US?

Legally, it is only mandatory for companies that must comply with audit requirements, but it is highly recommended, especially given the diversity of state tax systems and the complexity of federal taxation.

The United States Tax Code is not only extensive but also subject to frequent changes, with federal, state, and local regulations varying by jurisdiction.
 
For businesses, a CPA can help structure accounting to facilitate financial decision-making, cost analysis, and strategic planning.
 
For individuals, a CPA can optimize tax planning for investments, inheritances, or retirement.
 
A CPA is essential in the United States because it guarantees accurate accounting, ensures compliance with complex tax regulations, and optimizes tax planning.

The United States Internal Revenue Code is not only extensive, but also subject to frequent change, with federal, state, and local regulations varying by jurisdiction.
 
For businesses, an Accountant/CPA can help structure accounting in a way that facilitates financial decision-making, cost analysis, and strategic planning.
 
For individuals, an Accountant/CPA can optimize tax planning for investments, inheritances, or retirement.
 
An Accountant/CPA is essential in the United States because they ensure accurate accounting, ensure compliance with complex tax regulations, and optimize tax planning.

Legally, it is only mandatory for companies that must comply with audit requirements, but it is highly recommended, especially given the diversity of state tax systems and the complexity of federal taxation.

How do we provide our services in collaboration with Certified Public Accounting Firms?

At Juris Magister Abogados, we implement a consolidated action plan with Certified Public Accounting firms, with whom we have established solid professional relationships for over 30 years. This has guaranteed success for both our firm and our clients, combining professional excellence with proven results.

  • Case analysis: Detailed initial evaluation of each case.
  • Case assignment : Appointment of an Attorney with a specialized support team.
  • Comprehensive consulting: Support from the firm and external partners for comprehensive advice :
    – U.S. Visas : Coordination with our Business and Investment Immigration Department.
    – Accounting and Taxation : Coordination with our associated Certified Public Accountants (CPAs).
  • Efficient procedures : Processing within reasonable timeframes with competitive fees.
  • Continuous support : Direct communication with the responsible lawyer and administrative support from the team
  • Post-service update : Information on corporate legal and tax obligations that may affect the corporate entity.

FAQ (Frequently Asked Questions)
of Taxation

In the US, federal (IRS), state (depending on the state), and local (county/municipal) taxes are paid, with incentives in certain areas to attract investment.

You must pay taxes in the U.S. if you reside in the country for more than 183 days and/or receive income from a U.S. source of income.

The Social Security number (SSN) or ITIN (Individual Taxpayer Identification Number) are essential for filing taxes.

Deductions for mortgages, donations, and medical expenses are important topics for optimizing the tax burden.

An LLC to which tax transparency is applied (pass-through taxation) allocates profits or losses to partner/s.

The double taxation of C Corps versus the direct taxation of S Corps is a common point of comparison.

Entrepreneurs want to know about deductions for wages, equipment, travel, or marketing to reduce their tax burden.

It is the sales tax, which varies by State and County.

The Estimated Tax is a quarterly tax payment for those without automatic withholding, such as self-employed individuals or business owners. It is calculated based on expected income and paid to the IRS and the state, if applicable.

Qualified dividends are taxed at preferential rates (0%, 15% or 20%, depending on income), while non-qualified dividends are taxed as income.

Training and Experience in International Law:

The training and experience in international law of a lawyer specializing in international commercial law is essential. It is important to remember that many legal and tax issues regarding corporate structures are regulated by international regulations derived from bilateral or multilateral treaties.

Knowledge of the Corporate Law of the Parent Company:

Knowledge of the corporate law of the parent company, owned by the company in the United States, is essential to determining the type of corporation in the United States and to be able to undertake the safest and most successful business in the interests of the client.
  
Knowledge of the Tax Legislation of the Parent Company’s Country:

Knowledge of the tax legislation of the parent company’s country is crucial to assess the tax treatment of the venture both at source and destination, and especially, as an essential part of any venture, to determine the tax treatment of the venture’s return on investment.
  
Knowledge of the Regulatory Regulations of the E-1 Trader/Services Visa and the E-2 Investor Visa:

Foreign Affairs Manual The “Family Affairs Manual” (FAM) regulates the E-1 Trader/Services Visa and the E-2 Investor Visa. It is actually only a four-page publication. Our attorneys specializing in the subject matter have extensively developed, in their own articles and publications, not only the regulatory content of the FAM, but also the framework and scope of binding judicial and administrative decisions on this matter.
 
 
Experience in the E-1 Visa and E-2 Visa Processing Procedure:
 
Practical experience in processing E-1 Trader/Services Visas or E-2 Investor Visas is possibly as important as, or more important than, regulatory knowledge itself, since while the Department of State establishes general procedures and guidelines for processing these visas, many Consular Sections of United States Embassies establish their own procedures that adapt to specific circumstances that involve legal and tax issues of both the United States and the country in which the consular mission is located.
 
 
Knowledge of US Corporate and Tax Regulations:

Knowledge of US corporate and tax regulations is essential to determine the type of US company best suited to the client’s interests and to be able to undertake a business with absolute confidence and successfully navigate it. Corporate regulations in the United States are state-based, and the tax regulations affecting any investment are federal and state-based. Since there are 50 states, it is important to consider hiring attorneys and tax specialists specialized in the corporate and tax regulations of the state in question. Specifically, the attorney must be authorized to practice law by the Bar Association in the state in question.

A firm like Juris Magister Abogados, which has a significant team of specialized attorneys and tax specialists, both within our firm and through professional collaborations developed continuously over the years and strongly consolidated in the United States, undoubtedly represents a safe and experienced bet.

**Legal Warning**

The information provided above is of a general nature and is for informational purposes only. It does not constitute legal advice or
replace consultation with a specialized attorney. Each case is unique and requires a personalized analysis tailored to the
applicant’s specific circumstances.

When selecting an attorney, do not be guided solely by advertisements. Be sure to verify the
attorney’s academic qualifications, professional experience, and track record to ensure adequate and reliable representation.