Note: Running most Fridays in FromGregsHead.com, is a continuing series of tips brought to you by Greg Price. These run Saturday mornings during the BusinessMaker’s Radio Show on KPRC 950AM. Audio files can be found on the Entrepreneur’s Playbook page of the PKF Texas website.
Houston is a booming international marketplace. Even small and medium-sized businesses are willing to look to foreign markets for customers and business opportunities. Any business expansion has pitfalls. International expansions can be particularly tricky. This is the first in a series of some common tax and business surprises.
If I earn the money outside the US, I do not have to pay US tax on my income.
Wrong. The US is unique among nations in that we tax our citizens and companies based upon their worldwide income. The US will tax your foreign-earned income sooner or later. Either when it is earned, or when you bring it back home.
Tax systems around the world are pretty much the same, except that they have different tax rates – so I want to find the country with the lowest tax rate.
Maybe – maybe not. Many other countries use a territorial tax system. Under this system profits will only be taxed to the extent that they are earned in the country where the corporation is located. The amount of your income that gets taxed is just as important as the rate of tax.