North American subsidiaries of Brazilian companies should be aware of the tax obligations imposed by the United States Treasury. Unlike Brazil, in addition to the Corporate Income Tax, companies operating in Uncle Sam’s land also must meet other tax burdens during the year.
Below, we list some of the key forms and reports that need to be filed to the Internal Revenue Service (IRS):
Annual reports
A form that guarantees the updated registration of the company. The Annual Report must be renewed annually, and noncompliance exposes the company to severe fines and penalties.
The obligation must be submitted to the state government where the company is registered. The form presents fields in which basic information should be provided, such as address, societal composition, number of employees, e-mails and contact numbers.
Franchise Tax
Despite the name, this tax obligation has no relation to franchises. Franchise Tax is applied by some US states to certain business organizations, such as corporations and partnerships. The calculation is based on net equity or capital held by the entity.
Form 1042
Does your company in the USA do business with foreigners? Stay tuned! Any individual or legal entity who is a United States resident and makes payments to foreign individuals or entities is subject to taxation exclusively at the source. To keep up with this obligation, it is necessary to file Form 1042.
The paying source, or the one who makes the payment, needs to report to the United States Treasury payments such as salaries, dividends, interest, pensions, alimony, royalties and commissions. A form must be completed for each type of payment.
The rate applied on payments made by withholding agents—those that are subject to withholding income tax—is 30%. Even individuals and companies exempt from withholding are required to turn over the form to the IRS.
Income Reports 1099 and W2
Companies hiring labor and services in the United States must submit these income reports to the country’s tax authorities.
Employers need to fill out a W2 form for each salaried employee, stating the total amount of compensation paid in the previous year. Form 1099 should describe payments made to outside service providers who received more than USD 600.
Be aware: in addition to the obligations described above, there are still other ones that your company must carry out, so be sure to always consult your CPA.
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