New York (USA) tax system: audit, reporting and optimization of taxation of American companies and individuals: VAT, income tax and capital gains
Basic taxes (briefly)
|Corporate tax (in detail)|
|Capital gains tax. Details|
International tax agreement
Federal tax regulations allow an LLC to elect to be taxed as a corporation or partnership for income tax purposes. LLCs are subject to New York Personal Income Tax and Corporate Franchise Tax. Depending on the type of taxation you opted for your LLC, the tax responsibilities are as follows:
- An LLC treated as a limited liability partnership. These LLCs are required to file the Form IT-204, or Partnership Return Form with the New York City Department of Finance. An LLC treated as a corporation for federal tax purposes. These LLCs are required to file a New York State Corporation Franchise Tax Return. An LLC treated as a sole proprietorship. These LLCs must report all business income and expenses via the sole proprietor’s personal income tax returns.
Personal Income Tax
All US citizens and residents, including resident aliens and citizens who reside outside the US, pay federal tax on their worldwide income. Nonresident aliens are taxed only on ECI and US-source non-ECI. The 50 states and the District of Columbia also collect income tax from nonresidents and individuals who reside in their territory. Individuals generally must include nearly all gross income from whatever source derived in their taxable income (including their compensation for services (including all forms of remuneration and allowances), dividends, interest, royalties, rents, fees and commissions, gains from dealings in property and income from a partnership). Nonresident aliens exclude non- ECI in computing taxable income; however, they are subject to US tax on the gross amounts of such income, generally collected on receipt via withholding, if the income is from US sources and not from the sale or exchange of property. Rates are progressive up to 39.6%. New York collects a state income tax at progressive rate spread across tax brackets:
In addition to the regular income tax, individuals may be subject to the alternative minimum tax (AMT), which is triggered where an individual’s tentative AMT liability exceeds that individual’s regular income tax liability. The AMT is imposed at a rate of 26% on the taxable excess (AMT income minus an “exemption amount”) up to specified levels, and at a rate of 28% on the taxable excess above these levels. The exemption amounts for the individual AMT for 2013 were USD 80,800 for married taxpayers filing jointly and USD 51,900 for unmarried taxpayers) and will be automatically indexed for inflation thereafter. The tax year is the calendar year, unless a fiscal year is elected. Any fiscal year must end on the last day of a calendar month. Tax is deducted at source from employment income. Individual self-assessment tax returns are due by the 15th day of the fourth month following the end of the tax year (or the sixth month, in the case of certain nonresident aliens).
|Tax Bracket||Tax Rate $0||4% $8,200||4.5% $11,300||5.25% $13,350||5.90% $20,550||6.45% $77,150||6.65% $205,850||6.85% $1,029,250||8.82%|
The starting point for the business income base is federal taxable income (FTI) for U.S corporations and ECI for alien corporations not deemed domestic under the I.R.C. Business income equals entire net income (ENI) minus investment income and other exempt income. Discrete components of business income are not articulated, but business income includes the following:
*For the 2015 tax year, current law graduated rates applies to small businesses with income over $290,000 but below $390,000. A flat 6.5% rate applies to tax years beginning on or after January 1, 2016.
- interest income and gains and losses from debt instruments or other obligations, unless the income cannot be included in apportionable business income under the U.S. Constitution; gains and losses from stock of a unitary corporation; dividends and gains and losses from stock held in a non-unitary corporation for 6 months or less; cash.
|Type of Business||Tax Year 2015||Tax Year 2016||Tax Year 2017||Tax Year 2018 and Thereafter Qualified New York Manufacturers||0.0%||0.0%||0.0%||0.0% Qualified Emerging Technology Companies (QETCs)||5.7%||5.5%||5.5%||4.875% Small Businesses*||6.5%||6.5%||6.5%||6.5% Remaining Taxpayers||7.1%||6.5%||6.5%||6.5%|
Capital Gains Tax
The excess of net long-term capital gains (generally, gains from investments held for more than 12 months) over net short-term capital losses (net capital gains) generally is taxed at a maximum rate of 20%.
The US does not levy a federal value added tax or sales tax. Individual states levy sales tax at various rates, subject to state-set requirements. In New York sales tax applies to retail sales of certain tangible personal property and services. Use tax applies if you buy tangible personal property and services outside the state and use it within New York State. The combined sales and use tax rate equals the state rate (currently 4%) plus any local tax rate imposed by a city, county, or school district. An additional sales tax rate of 0.375% applies to taxable sales made within the Metropolitan Commuter Transportation District (MCTD). The combined rates vary in each county and in cities that impose sales tax. Every person who sells taxable tangible personal property or taxable services (even if you make sales from your home) must register with the Tax Department before beginning business. If you're registered for sales tax purposes in New York State, you must file sales and use tax returns quarterly, part-quarterly (monthly), or annually with the department. Even if your business did not make any taxable sales or purchases during the reporting period, you must file your sales and use tax return by the due date. Filing due dates for sales tax:
- Annual filers – March 20 Quarterly filers – 20th-22nd day of the following month Monthly filers - 20th-22nd day of the following month
LLC are not subject to withholding tax in New York.
Stamp duty is not levied in the US, including New York.
Every domestic or foreign LLC that is treated as a partnership or disregarded entity for federal income tax purposes that has any income, gain, loss, or deductions derived from New York sources is subject to an annual filing fee. An LLC that elects to be treated as a corporation for federal income tax purposes is not subject to the filing fee. An LLC or LLP that owes the filing fee must file Form IT-204-LL, Partnership, Limited Liability Company, and Limited Liability Partnership Filing Fee Payment Form (available on the New York State Department of Taxation and Finance website). The fee ranges from $25 to $4,500 depending on the LLC's income.
Other Taxes and Duties
|Alcoholic beverages tax||an excise tax on the sale or use in New York State of beer, cider, wine, and liquor. Boxing and Wrestling Exhibitions Tax||Promoters of professional or amateur boxing, sparring, or wrestling exhibitions or matches must report and pay the boxing and wrestling exhibitions gross receipts tax of 3% on gross receipts from admissions capped at $50,000 per event, and 3% on the gross receipts from New York broadcast rights capped at $50,000 per event. Cigarette and tobacco products tax||an excise tax on cigarettes at the rate of $4.35 per package of twenty cigarettes. New York City imposes a local excise tax at the rate of $1.50 per package of twenty cigarettes, bringing the combined tax rate in New York City to $5.85. Fuel Use Tax||If you're a motor carrier, you report to a single base jurisdiction all the fuel use taxes owed to New York and other jurisdictions. IFTA applies to most states and Canadian provinces. New York State participates in IFTA to administer and collect its fuel use tax. Motor fuel excise tax||a motor fuel excise tax on motor fuel and diesel motor fuel sold in the state. Highway use tax||New York State imposes a highway use tax (HUT) on motor carriers operating certain motor vehicles on New York State public highways (excluding toll-paid portions of the New York State Thruway). The tax rate is based on the weight of the motor vehicle and the method that you choose to report the tax. Mortgage recording tax||New York State imposes a tax on the privilege of recording a mortgage on real property located within the state. Petroleum business tax||a privilege tax imposed on petroleum businesses operating in New York State. The PBT is imposed at a cents-per-gallon rate on petroleum products sold or used in the state. Property tax||Tax generally is imposed by the local governments at various rates. Real estate transfer tax||New York State imposes a real estate transfer tax on conveyances of real property or interests therein when the consideration exceeds $500. Stock transfer tax||is imposed on the sale or transfer of stock, agreements to sell stock, memoranda of sales of stock, certificates of stock, etc. that occur within New York State.|
Double Tax Agreements
The USA have exchange of information relationships with 88 jurisdictions through:
- 60 DTC: Australia, Austria, Bangladesh, Barbados, Belgium, Bulgaria, Canada, Chile, China, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Jamaica, Japan, Kazakhstan, Korea (Republic of), Latvia, Lithuania, Luxembourg, Malta, Mexico, Morocco, Netherlands, New Zealand, Norway, Pakistan, Philippines, Poland, Portugal, Romania, Russian Federation, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Thailand, Trinidad and Tobago, Tunisia, Turkey, Ukraine, United Kingdom, Venezuela, Viet nam. 34 TIEAs: Antigua and Barbuda, Argentina, Aruba, Bahamas, Barbados, Bermuda, Brazil, Cayman Islands, Colombia, Costa Rica, Curaçao, Dominica, Dominican Republic, Gibraltar, Grenada, Guernsey, Guyana, Honduras, Isle of Man, Jamaica, Jersey, Liechtenstein, Marshall Islands, Mauritius, Mexico, Monaco, Netherlands Antilles, Panama, Peru, Saint Lucia, Sint Maarten, Trinidad and Tobago, Virgin Islands (British).
Foreign Exchange Control
While there are no general restrictions on remittances of profits, dividends, interest, royalties or fees to nonresidents, sanctions and embargoes apply to listed countries and entities, with restrictions on foreign payments, remittances and other types of contracts and trade transactions. Regulations are prescribed by the US Treasury, and Treasury’s Office of Foreign Assets Control maintains related lists. Extensive currency transaction reporting and recordkeeping requirements also apply.
LLC is required to prepare and file financial statements. Financial statements are publicly accessible. Audit is not required.
Domestic and foreign limited liability companies (LLCs) are required to file a Biennial Statement every two years with the New York Department of State setting forth the address to which the New York Secretary of State shall mail a copy of any process accepted on its behalf. An LLC that fails to file its Biennial Statement will be reflected in the New York Department of State’s records as past due in the filing of its Biennial Statement. Any Certificate under Seal or status letter obtained from the New York Department of State will reflect that the corporation or LLC is past due in the filing of its Biennial Statement. This may prevent the LLC from completing certain business transactions. The filing period for a business corporation or LLC is the calendar month in which its original Certificate of Incorporation, Articles of Organization or Application for Authority was filed with the New York Department of State. The fee for filing a Biennial Statement for LLC is $9.
In general LLC’ tax return should be filed by the 15th day of the third month following the end of its taxable year. Related tax must be paid on or before the due date of the return. Extensions are available. Other filings may be necessary on a quarterly or other basis. Quarterly estimated tax payments are generally required.
Taxes of USA
|Min. rate for corporate tax|
|Capital gains tax|