Does a US LLC pay corporate taxes in India?

Does a US LLC pay corporate taxes in India?

Hi Everyone,

I have a complicated question about corporate taxation. What I already know is that if a company incorporated outside India has its complete management based in India then it has to pay corporate taxes to India.

But if a person living in India registers/manages an LLC(Limited Liability Company) in the USA, does that also mean that it has to pay corporate taxes to India?

A few points to note:

1. An LLC is not a corporation according to the American Corporate Law.

2. The process of forming an LLC is called "Formation" or "Registration" NOT "Incorporation".

3. An LLC is not an incorporated body according to the American Corporate Law(its just a registered form of business which has limited liability).

4. An LLC doesn't have a board of directors and issues NO share(s). It also has NO share capital.

5. According to the American Law, an LLC is treated as a sole proprietorship(if owned by 1 person) or a partnership(if owned by more than 1 person) for taxation purposes. Only incorporated bodies (such as Corporations) pay Corporate Taxes.

So does the above type of business qualify as a company in India, in order to pay corporate taxes?

Also plz. don't confuse the term "Company" in LLC, as every type of business(SP, Partnership, LLP,LP, LLC) is called a company in the USA.

Asked 1 year ago in Corporate Tax

Here there is also an issue of overseas direct investment under FEMA as there is no clarity under FEMA regarding investment in LLC.

Depending on the charter documents and specific state rules, one may need to determine if it can be considered as body corporate in India. Whether it is body corporate or not, if it is effectively managed from India, it would be regarded as Indian resident entity and its income would be taxed in India.

For detailed consulation, request you to book telephonic consultation.

Prerna Peshori

CA, Pune

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- LLC with a single member if does not elect to be corporation or partnership, is treated as a disregarded entity (i.e. sole proprietorship) and net earning would be clubbed in the member tax return (i.e. Form 1040-NR). Assuming your residential status to be non-resident alien in USA, you would be liable to pay tax on LLC net earning in USA by filing tax return Form 1040-NR

- Assuming your residential status in India would be ROR. In such case you would be liable to pay tax in India on global income. You can claim benefit of FTC (foreign tax credit) on federal taxes paid in USA on LLC income proportionate to income tax liability in India on such double taxed income while filing tax return in India

For detailed discussion you may opt for phone consultation

Vivek Kumar Arora

CA, Delhi

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Hi please note following

- if you open LLC in USA which is 100% owned by Indian promoter and not having any staff in USA, or any work done in USA than under POEM it shall be subject to tax in India and entire profit will have exposure of tax in India not as corporate tax but in the hands of individual shareholder as per their respective profit sharing since LLC is treated as pass through entity for taxation purpose

However if you are travelling to USA regularly and all major decisions are taken in USA than taxation can be transferred to USA since POEM is not applicable

Vishrut Rajesh Shah

CA, Ahmedabad

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