Contracting with a US company through a JP LLC...how should they pay me?
December 27, 2023 10:25 PM Subscribe
An alternate question might be, if I'm contracting with an American company through a foreign company, what tax documents will the company need to provide the foreign company? (the answer may be...none!) I realize you are not my account, but my accountant is on vacation for a bit and if the answer is very obvious, I might be able to at least unblock myself until they are back. Details within!
I am an american citizen who now lives in Japan. I am currently contractor at a company (let's call them USCO), and I'm in their system as a US contractor. They pay me twice a month, and will issue a 1099 etc next year.
(Note that everything that follows has been vetted by both American and Japanese accountants etc, I'm just giving context as it could be relevant to how they should )
For various reasons, I will now be fulfilling my contract with USCO via JPCO. JPCO is a company that I created and I am the director of it (it is a Japanese 株式会社 for what it's worth). USCO and JPCO now have a signed contract, that side of things is fine...but the question that came up is how they should actually remit payment (and how I should exist in the contractor systems they use).
To begin with they will be paying me via a personal bank account that I use only for this purpose. I am in the process of getting a corporate bank account, but it can take some time to get one in Japan, and my Japanese accountant said as long as I have a dedicated account for this, it will be fine short term.
For taxes, my current plan is that all of my contracting work will be via JPCO, which will pay me a salary, I will pay Japanese taxes on this (health insurance, pension, income tax), then I will report this income to the US, file for a foreign earned income exclusion, and also report my Japanese taxes (based on modeling with my American accountant I shouldn't owe any taxes to the US at the end of the calculation, but that's not really relevant to this question)
I guess it comes down to, as in the short blurb, what tax documents do I need from the company?
So the options as I understand them...
1. They treat my Japanese company as an international vendor. They wire (or perhaps use transfer wise if it's cheaper) me money when the contract stipulates, I fulfill the contract, but that's it. They don't provide any tax documents, it's all on me.
2. They continue to treat me as an American contractor, just one who they pay in a foreign bank account. I'd get a 1099 etc like normal
3. They treat me as a foreign contractor. I was left unclear on how this different from the previous two
I think that the first option is the correct one, but I am not sure. I'm an American, but the company they have a contract with is a foreign vendor, it's just that the foreign vendor happens to have an American working for it.
I will run any solution through my accountant, but it'd be good to have input to consider in the meantime. Plus I can always have them wire me one payment, for example, and if my accountant is like "no! that's not right!" we can always change it and file any necessary documentaiton when they are back. Just ended up being sort of unfortunate timing with her taking a (much-deserved) vacation right as this part of the conversation with my company came to pass...
I am an american citizen who now lives in Japan. I am currently contractor at a company (let's call them USCO), and I'm in their system as a US contractor. They pay me twice a month, and will issue a 1099 etc next year.
(Note that everything that follows has been vetted by both American and Japanese accountants etc, I'm just giving context as it could be relevant to how they should )
For various reasons, I will now be fulfilling my contract with USCO via JPCO. JPCO is a company that I created and I am the director of it (it is a Japanese 株式会社 for what it's worth). USCO and JPCO now have a signed contract, that side of things is fine...but the question that came up is how they should actually remit payment (and how I should exist in the contractor systems they use).
To begin with they will be paying me via a personal bank account that I use only for this purpose. I am in the process of getting a corporate bank account, but it can take some time to get one in Japan, and my Japanese accountant said as long as I have a dedicated account for this, it will be fine short term.
For taxes, my current plan is that all of my contracting work will be via JPCO, which will pay me a salary, I will pay Japanese taxes on this (health insurance, pension, income tax), then I will report this income to the US, file for a foreign earned income exclusion, and also report my Japanese taxes (based on modeling with my American accountant I shouldn't owe any taxes to the US at the end of the calculation, but that's not really relevant to this question)
I guess it comes down to, as in the short blurb, what tax documents do I need from the company?
So the options as I understand them...
1. They treat my Japanese company as an international vendor. They wire (or perhaps use transfer wise if it's cheaper) me money when the contract stipulates, I fulfill the contract, but that's it. They don't provide any tax documents, it's all on me.
2. They continue to treat me as an American contractor, just one who they pay in a foreign bank account. I'd get a 1099 etc like normal
3. They treat me as a foreign contractor. I was left unclear on how this different from the previous two
I think that the first option is the correct one, but I am not sure. I'm an American, but the company they have a contract with is a foreign vendor, it's just that the foreign vendor happens to have an American working for it.
I will run any solution through my accountant, but it'd be good to have input to consider in the meantime. Plus I can always have them wire me one payment, for example, and if my accountant is like "no! that's not right!" we can always change it and file any necessary documentaiton when they are back. Just ended up being sort of unfortunate timing with her taking a (much-deserved) vacation right as this part of the conversation with my company came to pass...
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Your client ought to ask your Japanese company to complete a W-8BEN-E. Then (provided you fill it out correctly), your Japanese company would not be subject to US withholding and the client would not issue 1099s to you. That is to say, you'd be in option 1.
I'm assuming that there aren't any US-Japan treaties that require more and that you're doing actual work but not in the US (e.g., you're selling services that you do from Japan, not passively receiving royalties or have a business presence in the US).
posted by ddbeck at 10:56 PM on December 27, 2023