Best option for the formation of software company for residents in brazil

[ajhernan]

Hello,
I am reading about it in some threads. I am a web developer living now in Brasil and I am looking for a best way to form a company to work as contractor.
I've been researching too. And I have been looking at what would be the best option between forming an LLC or a CNPJ (brazilian company) here.

As a LLC I will pay for dividens (at the end of the year the profits must be distributed) here that it is an high tax aroud 27.5%

As a CNPJ I can opt for a tax regime that if I declare that around 28% of the earnings are for my salary, I must pay between a minimum of 6% onwards depending on the income, then to that salary income the other natural person regime would be applied, such as the dividends of the LLC, in this case the dividends of the Brazilian company are not paid tax I believe.

Does anyone have any experience with this and any advice? Thank you

 

[81PxXLC9Mt]

Get a colorado llc , took me around $150 , then around $60/year

Any states if fine, for us non residents

make sure you are woking with a trusted company for the formation and stff

 

[ajhernan]

Yes, there are many states, The question is the taxes in Brazil for foreign capital when money must enter

 

[luap]

I met many people in Brasil who run a US LLC and leave the money in the LLC bank account and don't declare anything in Brasil. Not saying you should do the same, but it seems to be quite common there.

 

[ajhernan]

luap said:
I met many people in Brasil who run a US LLC and leave the money in the LLC bank account and don't declare anything in Brasil. Not saying you should do the same, but it seems to be quite common there.
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Thanks for your response, yes, I thought about it.
But my question is: in LLCs do you have to distribute the dividends at some point with its members? (because I think it was one of the issues of this type of company, that the distribution had to be made) or can I choose not to distribute dividends?

 

[luap]

The LLC is transparent, dividends don't exist, the money is deemed as your own, and you're liable to pay tax in your resident country, regardless if you take the profits or not - but you can also just leave it sitting in the LLC bank account.

 

[ajhernan]

luap said:
but you can also just leave it sitting in the LLC bank account.
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Can this be done in an LLC?

I was also thinking about the case if I can instead of sending the money to Brazil, send it to another account in another country, but I'm not sure if that's why I would have to pay tax here for it

I think it will be taxed in another way, as a capital gain or something like that

 

[Sols]

As @luap said, there is no difference whether the money stays in a bank account that belongs to an LLC or is transferred to you. The profits are considered taxable income for you personally under US law.

Check with the Brazilian tax authority or a Brazilian tax lawyer if they have issued guidance on how US LLCs are treated. For example, in Canada, LLCs don't exist so they are treated as corporations (which means they pay corporate tax). Some countries classify the income from LLCs as dividends and it doesn't matter if you actively pay yourself or leave the money in the company.

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This is the probably the answer to your question.

 

[ajhernan]

Sols said:
Check with the Brazilian tax authority or a Brazilian tax lawyer if they have issued guidance on how US LLCs are treated.
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While I'm scheduling an appointment with an accountant, I've been researching and I think that the money earned from the LLC would be taxed in Brazil when it goes to the personal account

As long as it is a foreign company and does not have business in Brazil, it is not taxed here, and since it is an LLC of a non-resident of the USA, it is not taxed in the USA either.

 

[Martin Everson]

ajhernan said:
I am reading about it in some threads. I am a web developer living now in Brasil and I am looking for a best way to form a company to work as contractor.
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Do you even need to setup a company for IT contracting in 2023?

ajhernan said:
While I'm scheduling an appointment with an accountant, I've been researching and I think that the money earned from the LLC would be taxed in Brazil when it goes to the personal account
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No, to keep it short just pay what taxes are owed in Brazil or relocate from there to somewhere more tax friendly.

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Please note my posts should not be taken as financial or tax advice. Please seek professional advice in that respect.

 

[ajhernan]

Martin Everson said:
Do you even need to setup a company for IT contracting in 2023?
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It is better for tax issues here I think, and many companies hire you as a legal person, not as a natural person.

Martin Everson said:
No, to keep it short just pay what taxes are owed in Brazil or relocate from there to somewhere more tax friendly.
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That's why he looks for the best way because I plan to spend some time here, I will have to suffer the consequences of his taxes lol

 

[Martin Everson]

ajhernan said:
It is better for tax issues here I think, and many companies hire you as a legal person, not as a natural person.
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That's why services like Xolo.io offer their services to Brazilian IT contractors.

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Please note my posts should not be taken as financial or tax advice. Please seek professional advice in that respect.

 

[ajhernan]

Martin Everson said:
That's why services like Xolo.io offer their services to Brazilian IT contractors.
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Yes, I also have an account in Xolo.io, it is a nice service, and I have thought about that
But I think that with Xolo.io I must pay its 5% or 6% service tax and then the income tax in my personal account as a natural person 27.5%, or I mean the same as if the latter came from the LLC, would it be so?

In fact, I'm going to look at Xolo's page now because since I've been in Brazil I haven't seen it, and I see that it offers some other things here

 

[Martin Everson]

ajhernan said:
But I think that with Xolo.io I must pay its 5% or 6% service tax and then the income tax in my personal account as a natural person 27.5%, or I mean the same as if the latter came from the LLC, would it be so?
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Yes in facts its more because of their 5% fee 😕. But that's cost of convenience I guess.

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Please note my posts should not be taken as financial or tax advice. Please seek professional advice in that respect.

 

[ajhernan]

Martin Everson said:
Yes in facts its more because of their 5% fee 😕. But that's cost of convenience I guess.
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Yes, it is a very comfortable service IMO 🙂

 

[joffreylol]

they've raised it slightly to 5.9% couple months ago