Can Germany Tax Your US LLC as German? It Can

0:00Can a German resident own a US LLC?

Jonas builds software in Berlin. Some of his clients are in America, and want to sign with a US company. So, can he have one from Germany? As far as America goes, yes. No social security number, and no trip to the US. Cheyenne, in Wyoming, is usually eight hours behind Berlin. We're BaseAcross. We set up US companies for founders outside America, so we'll be straight with you. The American side is simple.

The German questions are how the tax office classifies the company, and where it's run. Let's build it, one shape at a

0:38Do I need a US company for Stripe in Germany?

time. First, do you need one at all? The big card processor already supports German businesses, and a GmbH, the usual German limited company, gets you it too. So for card payments, you may not need a US company. A US company is for selling as a US vendor, or for US investors. Jonas's US buyers want a US contracting party, so he has a reason.

1:05Does Germany treat a US LLC as a corporation?

Now, what is a US LLC in German eyes? Germany doesn't take the American label. It compares the LLC with German legal forms, like the GmbH. In one case, Germany's top tax court looked at a one-person LLC managed from Germany. It saw no serious doubt that it was a corporation. And money moved to the owner's private account was a taxable distribution. So does Germany treat a US LLC as a corporation?

Often. How yours is classed is a question for your Steuerberater, your German tax adviser.

1:44Can Germany tax my US company as German?

Next, where is the company run? German law looks for its place of management. That's where the top-level decisions are made. If that's in Germany, the company owes German corporation tax on all its income, plus a surcharge, and trade tax set by the town. A US company you run day to day from Berlin is in that position. So the guide asks where decisions will be made, before anything is filed.

2:12A one-person LLC run from Berlin, worked through

Here's the guide's own illustration. Say Jonas's Wyoming LLC makes a hundred thousand euros of profit, run from Berlin. Its place of management is in Germany, so corporation tax and the surcharge come to fifteen thousand, eight hundred and twenty-five euros. Trade tax, at the guide's town rate, is fourteen thousand more. That's about twenty-nine thousand, eight hundred and twenty-five, before any adjustments.

Then what he moves to his own account is taxed again, as a distribution. That's an illustration, not a quote. Trade tax depends on the town, and the classification is for his tax adviser.

2:53Forming it, the EIN and the bank

Forming the company is the quick part. A Wyoming LLC for a business you run yourself, once you know how Germany classifies it. A Delaware C-Corp if US investors want shares. The company needs a registered agent, an address in that state for legal papers, not where you work. Then the EIN. Without a social security number, it's a paper form to the IRS. The bank is easy from Germany.

One of the US fintech banks takes applications from founders here, and a multi-currency account can give you US account details. Each provider decides for itself. You'll pay in US dollars, so check your card's exchange rate and fees.

3:37The Finanzamt notice, the Foreign Tax Act and the treaty

Last, each year, in both countries. You tell the Finanzamt, the tax office, when you found a business abroad. The notice goes with your tax return, and there's a latest date for it. Then the Foreign Tax Act. If you control a foreign company, its passive income can be taxed to you when it's taxed below a set rate, paid out or not. A US LLC that pays no US tax is below it. The US treaty removes US withholding on royalties and most interest, and caps it on dividends.

Work you do in Germany generally isn't US income, so a company with no US office or staff often owes no US tax on it. It still files a report with the IRS every year, even without sales, and missing it is expensive. It's usually due in the spring, and there's a form to ask for more time, filed before the deadline.

4:34The order to do it in

So here's the order. With your tax adviser, ask whether you need one, how Germany classes it and where it'll be run. Then form, then bank. Treat every transfer to your own account as a distribution, until your adviser says otherwise. Put the IRS report, the notice to the Finanzamt and your German returns on one calendar. The full guide, with every source and a checklist for your adviser, with every question also in German, is linked below.

And Jonas? He took the checklist to his tax adviser before he ordered anything.