A U.S. LLC is a flexible company, offering many legal and tax advantages to its members, including non-resident members.
LLCs are governed by the laws of each U.S. state and can have one or more members. If it has only one member, it is called a "single member LLC". If it has more than one member, it is considered a "partnership" and functions as a partnership.
Hungary can be an excellent expatriation option for U.S. LLC members because of its membership in the European Union, which makes it easier to travel within Europe.
What is the tax treatment of a US LLC ?
If a U.S. LLC is a single-member LLC, the IRS considers it a pass-through entity, which means that it is ignored for tax purposes. However, if the LLC has multiple partners, it is considered a partnership for tax purposes.
This means that the partners are personally liable for taxation on the profits earned by the partnership to the extent of their share of ownership. In either case, the LLC reports its profits in the U.S., but the partners are responsible for taxation in their country of tax residence in proportion to their ownership interest. As a corporation, the LLC can deduct its business expenses from the profits reported to the tax authorities.
Attention: In this article, we deal with the case of non-ETBUS LLCs. In the case of an ETBUS corporation, the LLC would be subject to U.S. tax. Moreover, even for a non-ETBUS company, the fact of owning a non-ETBUS LLC does not exempt from tax reporting obligations.
What is the tax treatment of Hungarian tax residents who are members in a US LLC?
Hungary considers as tax residents persons who meet the following criteria: live with their family in the country, spend more than 183 days per year in the country, or own real estate in Hungary.
Hungarian tax residents are taxed on their worldwide income.
A non-ETBUS U.S. LLC is considered a semi-transparent entity for tax purposes, which means that the partners are taxed on their share of profits. Therefore, if a Hungarian resident partner holds an interest, he or she will be taxed on his or her share of profits according to Hungarian income tax rates.Individuals resident in Hungary pay tax on their worldwide income.
Income from work as well as income from business or professional activities is subject to tax. The standard personal income tax rate in Hungary is 15%. This rate also applies to dividends and bank interest. For capital gains, the standard tax rate is also 15%.
Our specialists are ready to assist you in preparing and submitting your tax returns for your LLC when you are a Hungarian tax resident.
Entrust us with this important mission to avoid any error or omission.Indeed, the IRS can issue a fine of up to $25,000 per form per year for each error or omission in your US tax returns.
How can PrepaTaxLLC help you avoid errors in your LLC's US tax returns?
It is highly recommended to use the services of tax specialists in order to avoid any errors in the US LLC tax returns. The fines incurred can be very high. In fact, an error or omission can result in a fine of up to $25,000 per form per year.
If you have multiple LLCs, repeated errors on multiple forms can quickly result in substantial fines. To avoid such situations, you can call on the expertise of our professionals at PrepaTaxLLC. We can help you complete and file complex forms correctly, as well as obtain an EIN and address in the United States. Do not hesitate to contact us to avoid any risk of error.
Disclaimer: This document has been prepared on the basis of information available in the public domain and is for guidance only. All necessary precautions have been taken to ensure the accuracy of the information. However, no legal lability is accepted for any consequential incident that may result from errors or omissions contained in this document.