Its illegal. You need to follow GST norms in such income too. As well as you need to pay income tax in India if the foreign country doest have double taxation treaty with india
US LLC and resident of India
My client is a software engineer and has income from various platforms and marketplaces online, he writes complex programs and algorithms for his clients abroad and also runs a marketplace selling digital products, he gets paid via Paypal, he is independent, like a freelancer and files ITR-4 as a professional, his income was 15Lacs last year, this year he is 3L away from crossing 20L. So GST implications. On another note, we were pitched a solution to reduce fees - start a Single Member LLC in Wyoming, we realised we have fees reduction of 12%, which covers cost of maintaining this LLC and then some. Would like to know legalities of doing this from a GST perspective and FEMA perspective and any other perspective? The LLC is easy to form for $200 to $600 per year, if this is LEGAL, I see a-lot of Freelancing Indians going this route while residing in India when they have a steady income flow and realise fees can be saved.
Asked 4 years ago in Taxation
Ask a question and receive multiple answers in one hour.
Lawyers are available now to answer your questions.
5 Answers
Obviously, we pay income tax and we know we have to follow GST norms, and India and US do have a DTAA, furthermore, a foreign-owned single-member LLC is a pass-through entity from the perspective of the IRS(USA) and is never taxed in the US, but in a residents country. From an Indian perspective it becomes global income. Let's dive into details of current setup, We have GST registration, all income is foreign source of income so we have LUT as well and do 0% IGST already. Right now we put GST no on invoice whenever an invoice is sent to customers/clients/users “as per norms” and file what needs to be filed, since all payments come through Paypal, they give us FIRA monthly which we use this to prove exports while filing GST returns - “keeping with the norms”. We then pay advance tax as necessary, this part will never change and we're not looking for vanilla advice on this. We already have a CA for this part. Now, where does the LLC come in? - This is what I'm seeking advice for We want to remove Paypal India, and use payment gateways from the US directly for International Clients. We sign up for these gateways using the LLC, the collection point is an LLC bank account and wire transfer to India is low cost. Our local bank in India has said that we would receive "credit advice" when we transfer money from LLC to our current account in India, which can be used to prove export. If the law requires us to transfer money back to India in x amount of time or if the law requires us to never make expenses from an LLC account, we will comply with that too. We are never remitting money to the LLC also. The LLC helps us with better options when it comes to payment processing. What's wrong with this setup? PS: I’m also not looking for alternative setups like you could use an EEFC account etc, we know alternative setups that we could use for foreign income, but want to know about this flow in particular, why is it not allowed? Let’s debate
Asked 4 years ago
You need to challenge the same in writ petition. There is no logic why the law is not made like that.
Dear Sir
You will be bound to pay taxes in India for your income none the less.
However if you feel that this law is arbitrary and for no apparent reason, you can challenge this by filing a writ petition before the court.
Thank you
In India, these limited liability companies are generally and distinguishably known as the limited liability partnership (LLP) firm.
You can avail GST exemption if you earn less than Rs. 20 lakh across all financial products irrespective of your physical location.
Thus it depends on what income has been shown in the returns, if the annual income of your client is not exceeding Rs. 20,00,000/- annually, after all deductions, then he my not be liable to pay GST for the income earned from various sources.
For income tax purposes, an LLC with only one member is treated as an entity disregarded as separate from its owner, unless it files Form 8832 and elects to be treated as a corporation. However, for purposes of employment tax and certain excise taxes, an LLC with only one member is still considered a separate entity.
The IRS treats one-member LLCs as sole proprietorships for tax purposes. This means that the LLC itself does not pay taxes and does not have to file a return with the IRS.
In that case there should not be any problem in transferring the money to India through LLC route instead of following the usual paypal route, if this would be convenient to you.
It is widely known that freelancers are required to obtain GST registration and pay 18 per cent Goods and Services Tax for any income earned from these services. This is implemented to those who earn an income that exceeds the threshold of INR 20 Lakhs.
As a service provider, an Individual Consultant shall be required to mandatorily register under GST in the following circumstances: When turnover exceeds Rs. 20 Lakh in any Financial Year.
Any income that you earn by displaying your intellectual or manual skills is the income from a profession according to income tax laws in India. Such income will be taxable as “Profits and Gains from Business or Profession”. Your gross income will be the aggregate of all receipts you get in the course of carrying out your profession. Your bank account statement is a document you can rely on to cull out this information, provided that you have received all your professional income through banking channels.