My business partner and I want to open an LLC (50/50), she lives in Spain and I live here in Las Vegas Nevada. Our business is an online Marketplace. My partner wants to avoid double taxation, meaning paying taxes here in the US and Spain.=> A foreign partner is anyone who is not considered a U.S. person; If you have a foreign partner in your llc, then,you may need to pay a withholding tax on that member. An LLC that has income effectively connected with a U.S. trade or business is required to pay a withholding tax on the effectively connected taxable income that is allocable to its foreign partner. The LLC must pay the withholding tax regardless of the foreign partner?s ultimate U.S. tax liability for the year and even if the LLC did not make any distributions during the year. The effectively connected taxable income is income that is effectively connected to a U.S. trade or business. Generally speaking, non effectively connected U.S. source income (fixed, determinable, annual and periodic) should be withheld on a gross basis at 30% unless the treaty provides for a reduction in this amount.
The partnership agreement should be reviewed to determine the allocable amount to each partner. Each foreign partner will have his equity account adjusted to reflect the applicable tax payment remitted on his behalf. These payments are then reported on the foreign partner?s U.S. income tax return and will offset the U.S. tax liability ultimately assessed on him personally.The withholding tax must be paid on a quarterly basis, before the 15thday of the 4th, 6th,9th, and12th months of the partnership?s tax year. Therefore, the LLC should review the allocable foreign partner?s share of taxable income throughout the year and pay the withholding tax accordingly to avoid any penalties at year end.
I would like to know what the US-Spanish treaty has to say and if I can find out if her specific situation will prevent her from being taxed in both countries.Does anybody have experience with this situation?=======>You may contact an intl tax representative at the IRS for more info; However I am not sure if IRS agents are reliable. https://www.irs.gov/pub/irs-trty/spain.pdf