New US Internal Revenue rule affects Brazilian entrepreneurs
Brazilians who want to start a business in the United States need to be aware: the IRS has issued a new rule that can disrupt many people’s plans.
The rule, which comes into effect May 13, states that only individuals with a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) can start a business in the United States and request the Employers’ Identification Number (EIN) to finalize tax returns and mandatory accounting reports from that country.
A significant number of Brazilian entrepreneurs seeking to expand their business to the US do not have this data — SSN and ITIN — and may have difficulty requesting documents.
The difficulties will be further extended if the foreign individual who does not have the identification and social security data tries to perform the check-the-box election.
One of the key tools of internationalization, check-the-box is an election held in accordance with the IRS entity classification regulations that determines in which type of corporate organization the company will be framed for federal federal income tax purposes. “This type of process is part of the tax planning of companies and helps reduce the tax impacts of foreign companies with tax resident partners in the United States,” says Michel de Amorim, public accountant and founding partner of Drummond Advisors.
Amorim points out that there are two solutions to this issue: “Hire a service provider to act as legal representative of the company — a very common activity that can be outsourced —; or add a partner who has SSN and ITIN. Another essential point is to carry out a new tax planning, anticipating this new accounting reality of the company,” he says.
The US Internal Revenue Service has stated that requiring this data to file in IRS proceedings will increase transparency and result in greater security for the EIN process in the United States.