# Starting a business - basic ?'s before I start going down rabbit holes



## Big Swifty (Jan 16, 2021)

Greetings,

I'll try to make this as brief as possible while including the most relevant information.

I'm a US citizen, currently a resident of Perú where I've been living for 9 years. My wife is Peruana, but currently living in Argentina with her brothers, parents, and nephews; with status ranging from citizens to residents to in the process of obtaining residence. I'm hoping to be able to join them in the next few months.

I had a small photography business here in Perú, but I want to pursue something related, yet different once I get to Argentina. Work as something of a digital nomad (but more in place) performing a service which can be done entirely online. All of my clients would be in the US (mostly), Europe, or Australia. I wouldn't be earning a single peso in Argentina. At first I wouldn't even consider hiring anyone in Argentina, and if/when that time came I might prefer to use the services of an independent contractor. I'm not talking about a large company or a great amount of revenue, since I'd be outsourcing my services to people who expect to pay less than they would normally in the US. I'm estimating mid-five figures ($US) per year. Not much for the states, but certainly adequate for Argentina.

The business goals relevant to this post are to minimize tax obligations and look to keep things as simple as possible re: paperwork, minimizing beurocratic headaches, etc.

My intitial thought is that the best way to accomplish this would be to register an LLC in the US, have my US clients deposit funds into my US business bank account, with the only Argentine variable being that I as the owner/sole employee would be living and working online from my dwelling in Argentina. There are Argentine specifics/headaches for receiving and using dollars in Argentina that I won't go into much now, but members of my family, who also earn from the US, have that figured. They suggest changing $US to crypto and then changing that into Argentine pesos in order to cover living expenses, while keeping savings outside of the country - a very common thing there.

I'm assuming, and basic research backs up, that registering and operating a business in the US is easier than in Argentina. Of course nothing is ever as easy as it seems.

Where I'm most confused is how to structure this in a way that makes the most sense, esp. as far as tax liabilities are concerned. I'm aware the US taxes foreign earnings of citizens, but since my earnings will be US based and reported I'm assuming that won't be an issue. Where I'm more fuzzy is how Argentina will want to tax me and/or the LLCs income/revenue. I'm also assuming that should both countries want to tax me that there is some best way to arrange things in order to minimize this exposure, write off or take credits for the amount of tax I already pay one country, and other potetial accounting/tax maneuvers.

Generally speaking, I'm of the mind that if I'm already going to be taxed in one country I feel I shouldn't have to get taxed with the same taxes in another. In this case it seems fair to tax my income in the US and tax my consumption in the country where I'd be living and spending (at 21%). But I doubt my version of fair exactly matches either countrie's version, so this is why I ask how to best go about this.

Of course, there are any number of variables, such as including my wife as an owner, or having her as an employee (she may actually actively contribute, tbd). I am very flexible and may be doing some occasional side work in the US. Border hops for visa renewal is an option if it's preferable to obtaining residency. For now I'm trying to get a general idea of where to structure this LLC so that I know where to focus my further research efforts.

Should the suggested course of action be something somewhat complicated or more difficult to arrange I am curious about the many, many services online for expat tax services, many of whom also include extra services that go beyond tax return filing and may be beneficial to help facilitate what I'm looking to do. With so many, it's impossible for me to know which of these are the better ones, which ones may just try to upsell to services not needed, etc. Also just curious for general tax filing purposes.

I appreciate any thoughts, suggestions, observations, whether it's something I asked about directly or something I don't appear to have taken into account.


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## Moulard (Feb 3, 2017)

You are right in that you don't actually get to choose which country you pay tax to and so your version of fair is of no consequence.

I cannot speak to Argentinian tax law, but I can speak on general principles on international taxation.

Ordinarily a tax resident of a country is taxed on their global income regardless of where it is sourced. 
Ordinarily a nonresident for tax purposes is only taxed on income sourced within the country.
As you rightly say as a US person the US reserves the right to tax you by virtue of your citizenship.

Lets assume that you end up being based in Argentina and thus are treated as a tax resident...

Unfortunately there is no current tax treaty between Argentina and the US which would help reduce the double taxation that may result. 
This simply means that you would have to rely on whatever exists in the internal tax codes of each country.

Additionally, there is no totalisation agreement in place between the two countries which means from a US perspective you might be considered self employed for the purposes SE taxes.

Regardless of the fact that you set up an LLC in the US, personal income is generally treated as sourced where the work is done, not where the payment is made, where the clients are located or where the company is based. So any wages you pay yourself, or directors fees etc coming from the LLC would be taxable by Argentina. What I cannot tell you, for lack of knowledge, is whether or not the income of the LLC would be considered personal income for Argentine tax purposes. Many countries around the world treat, or provide the option to treat the income of wholy owned private companies as personal income.

On the US side at least, US Domestic tax law would allow you to claim a tax credit for any Argentinian income taxes paid or accrued for Argentinian sourced income that would reduce your US income tax liability but not SE tax liability. 

Oh.. and if your clients are around the world, you might well have VAT/GST obligations for the tax agencies in the countries you are doing business because you are effectively importing services

These sorts of mini-multinational have a host of tax complications... and you probably want to get good paid advice rather than rely on random responses from strangers..

You might find this guide to Argentinian tax a helpful primer/



https://www.pwc.com/gx/en/services/people-organisation/global-employee-mobility/global-mobility-country-guides/assets/pwc-gm-folio-argentina.pdf


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## Big Swifty (Jan 16, 2021)

Thank you for that informative response. Greatly appreciated. And thanks for that link. I'll give it a read.

You bought up some interesting points. Some I anticipated, some I didn't.

I asked pretty much the same thing at an Argentinian focused expats forum and have received a couple of responses:

_Unless your clients are Argies and needing to pay pesos to an arg bank account with a transfer or arg debit/credit card, I do not recommend you pursue incorporating here. You would be a monotributista and have strict limits on deposit and withdrawal justification. You or your wife, i believe, would need a DNI to obtain a CUIT or CUIL to be able to register as a monotributista. If you are doing remote digital nomad business, I would incorporate in the US instead. 

As long as there is no movement of big sums of money and you are are paying taxes somewhere, where the majority of you business activities is, you'd be fine. Now this is just my totally unprofessional opinion and the AFIP might think otherwise. But I have plenty of friends digital nomads who work here and some are even citizens and they do not file taxes here because their income source is based outside of Argentina._

Which I guess are more of the 'how things actually are' compared to the 'this is what the law says' response. Having lived and kicked around Latin America long enough to understand certain cultural, business, and governmental norms, I do know that things are more often than not disorganized, inefficient, and there're no real efforts to change that. The informal economy is not only large, but accepted. There are no cyber tax police divisions searching for people working online from home. As one of the above people also said, "_Assuming you will seek residence in Argentina, if whatever business activity you plan to pursue has no Argentine-source income you maybe be able to avoid taxes in Argentina by not declaring it and fly under the radar especially if we are talking 50k/year (this can become borderline tax evasion if you are not careful)." _That 50k is just about exactly what I was basing things on, and I would not be trying to transfer that amount, prefering to keep the balance in the US as savings or bring it on my person via airplane should I want to purchase a car in Argentina. However, I did take note of their parenthetical warning.

I'm not sure if it at all matters, but money would flow from clients to the business account of the LLC, from that account to my personal account, and from there would either be withdrawn using my Charles Schwab, no fee anywhere in the world, debit card, or since the Argentine govt. really tries to discourage use of US$ through limitations and high fees, first through a crypto exchange before finally being exchanged for Argentine pesos. Nothing directly from the LLC to me in Argentina. In all my years of travelling and living abroad never once have I been questioned by anyone about a withdrawl made from my personal account. Granted, I never took out large sums, but don't really have any plans to do so now either.

I'll admit as well that I'm considering aspects of this with some moral relativity. I figure the US is getting everything they're owed from the beginning as far as SE and income taxes. The state I register the LLC with collects their annual fees. The only thing being missed out on is my contribution to the local economy and consumption tax, but they wouldn't have gotten that anyway, my being an expat. Local merchants, landlord, etc. get my disposable income. The Argentine govt. gets the benefit of my spending adding to the local economy as well as their 21% VAT. And to further feel morally okay with it all, I think I could make an argument that I'd be distributing my funds more completely in the local economy than the notoriously corrupt and incompetent government would - but I'd still have no problem paying their consumption tax, even if a part of it goes to line someone's pocket. I figure I'm making direct payments into the local economy, the govt. isn't really helping me with anything that I'm not paying for (e.g. fibre optic connection), I'm not the immigrant who is "stealing someone's job" or other opportunity, the only labor I'm exploting is my own, and I don't find it makes much of a difference where exactly a digital nomad bangs keys and moves their mouse in the global economy. In a sense, my work takes place in cyberspace and the cloud where the programs I use are and the files I work on reside. Of course I'm just opinionating. I'll get off my soapbox now. Pardon any digression.

_On the US side at least, US Domestic tax law would allow you to claim a tax credit for any Argentinian income taxes paid or accrued for Argentinian sourced income that would reduce your US income tax liability but not SE tax liability.

Oh.. and if your clients are around the world, you might well have VAT/GST obligations for the tax agencies in the countries you are doing business because you are effectively importing services_

These two points were interesting. I was aware the first could likely be a possibility and how you described it, but the second was something I hadn't really considered. Being a fan of simplicity over complexity, at least in initial stages, perhaps I should just focus on the US market for now in order to minimize any obligations.

Thank you again for your response and expertise on international taxation. For now I'm happy to hear opinions and get a more general understanding of things, but realize the time will come when I'll need to consult a professional.


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## Bevdeforges (Nov 16, 2007)

Have moved you over to the Expat Tax section where you should be able to get more response to your query. I will remind you, however, of the ever-popular "butt principle" which basically says that you are generally considered to be working in whatever country you are physically located in while doing the work. (I.e. where you park your butt). It doesn't matter where your customers are, what currency you are paid in nor where your "employer" is incorporated. If you are in Argentina, you will first and foremost have to satisfy the legal requirements of Argentina regarding taxes, social insurances and business registrations. Also, don't forget any visa and residence permit requirements for Argentina.


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## Big Swifty (Jan 16, 2021)

Thanks. I'm still trying to get into the country, but will eventually cross that residency bridge. Argentina's put a temporary hold on the 'family reunification' program that would unite me with my wife but which supposedly goes back to normal in about a week. And of course everything is up in the air depending on what's going on with the pandemic. Patience and calm have always served me well as an expat. I feel fortunate having family who have lived there for several years to help me navigate.


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