There are multiple benefits to opening a US Bank Account for foreign and ex-pat entrepreneurs, but there’s one question on every business person’s mind:
If I open a US Bank Account, do I have to pay US Taxes?
After all, it hardly seems worth opening a US bank account and going through the trouble if you’re only going to lose a lot of money to the IRS.
Fortunately, opening a US Bank Account does not automatically mean that you have to pay US Tax.
In fact there are limited circumstances where you will have to pay said tax.
Read below for my full guide to owning a US Bank Account and how to navigate whether or not you will owe tax.
If you have any questions about starting your US business, email me at sam@mollaeilaw.com
Do I Have to Pay Tax on Interest Earned in US Bank Account?
You do not have to pay tax on interest earned in a US Bank Account.
The US wants you use a Bank in the US so much that it has a special exemption on interest received on bank deposits.
After all the US would like you to keep money in your US banks and wouldn’t discourage that through taxation of interest on those deposits made into a US Bank account.
While the interest rate is not so high as to make this particularly tempting, it is a relief for any business owner to know that they won’t have to deal with paying complicated taxes on something as simple as a basic bank deposit.
Do I Pay US Taxes on a US Bank Account if I’m not from the US?
Whether you have to pay US Taxes depends on what kind of business you do.
If your business has people inside the US running this business, then you are subject to paying US Taxes on profits from that business.
However, if your employees are all outside the US, you wont owe US tax on income from that business.
Passive income works a little differently, with a flat 30% tax on things like bonds and dividends. The one exception is the interest earned on regular bank deposits as outlined above.
Do I Have to Pay US Taxes on a US Bank Account if I’m an Ex-Pat?
If a US Citizen has a business bank account in the US, they are subject to US tax on all income.
There are certain rules like the foreign earned income exclusion, but for the most part you will need to pay US Tax on income earned as a condition of being an American citizen.
Your corporation is a different story, however. Your non-US corporation will only have to pay US Tax on its US Bank Account if it depends on people and activities that take place in the US.
To avoid this, don’t have employees in the US doing essential work for your business.
Essentially, whether or not you have to pay tax on money kept in a US Bank Account depends on whether you or your company owns it and not on whether it’s housed in US Bank Accounts or not.
Do I Have to Pay Income Tax on Items Sold to the US?
Just because an item, product, or service is sold to the US and the money is in a US Bank Account does not mean you have to pay US Tax.
There are a lot of things that you could imagine would make you have to pay US tax like having an LLC or a US address which actually do not.
It’s important to keep in mind that the only important factor is where your employees and key business personnel are who operate your business.
As long as all the people who run your company are not based in the US then you can safely use a US Bank Account without having to pay US Tax.
How to Set Up a US Bank Account
If you are outside the US, you should consider hiring someone to help you open a US Bank account.
One of the most important reasons to hire a professional to help you open a US Bank Account is the issue of having to provide ID. Many people from outside the US run into trouble proving their identity with major banks and a qualified professional can help you get around this issue.
Another consideration is being scammed by a fake online bank who wants to prey on entrepreneurs trying to make an honest living.
If you are giving sensitive financial, business, and identifying information it is always better to do so when there’s someone helping you that will be looking out for your best interests.
I’ve helped hundreds of business owners like you open bank accounts, set up structures, and run their businesses. Contact me at sam@mollaeilaw.com today if you need help setting up a US Bank Account.
Benefits of Banking in the US
There are some great benefits to setting up a US Bank Account other than not necessarily having to pay US Tax.
To start, setting up a US Bank Account allows you to operate through either a non-US entity or a US LLC.
Having a US LLC gives you a legitimacy and a trust with American customers that a foreign company simply cannot match.
Additionally, having an American LLC lets you access US Credit and shield your liability.
While avoiding paying US Tax is an important factor in how to structure your business, by no means should it be the only consideration.
Conclusion
Being a business owner operating outside of the US can be complicated, but banking with a US Bank doesn’t have to be.
The US wants to attract and keep business to its US Bank Accounts, and makes its tax laws relatively easy to understand.
Still, when you’re setting up a US Bank Account and wonder whether you’re going to have to pay US Tax, you should consult a qualified business lawyer who can answer any question you have.
Contact me today at sam@mollaeilaw.com so I can help solve all your US Banking and Tax issues today.
