US LLC taxation by country of residence: what you pay where you live

0% US federal tax, but you declare in your country. Spain IRPF 19-47%, Mexico ISR 1.92-35%, Colombia 0-39%, Argentina 5-35%. Country-by-country tax scenarios with real numbers.

Your US LLC pays $0 in US federal tax. But you still declare in your country of residence. Here's how it works in the main countries where our clients live.

The fundamental principle: taxation by residence

Most countries tax their residents on worldwide income. This means you must declare all LLC profits in your country, not just what you earn locally.

A well-structured LLC allows you to:

Deduct legitimate business expenses before calculating taxable income
Apply double taxation treaties between your country and the US
Optimize the timing of distributions
Document everything professionally for clean local tax declarations

Spain: IRPF and foreign assets

If you live in Spain, LLC profits are subject to IRPF as income from economic activities.

IRPF progressive rates:

Up to €12,450: 19%
€12,450 - €20,200: 24%
€20,200 - €35,200: 30%
€35,200 - €60,000: 37%
€60,000 - €300,000: 45%
Above €300,000: 47%

In practice:

LLC generates income and has deductible expenses (software, tools, professional services, Registered Agent, etc.)
Net profit (income minus expenses) is declared in Spain
Taxable base is lower thanks to documented deductions
Spanish tax resolution DGT V0290-20 addresses treatment of foreign entity income

Additional obligations:

Modelo 720 for foreign assets exceeding €50,000 (bank accounts, investments, real estate)
Compliance with IRPF declaration requirements

Example: €72,000 gross income → €18,000 deductions → €54,000 declared → ~€12,000 IRPF + €1,500 LLC maintenance = €13,500 total (18.75% effective vs. 35.1% as autónomo)

Mexico: ISR and applicable regime

For tax residents in Mexico, LLC income is subject to ISR (Impuesto Sobre la Renta).

ISR rates for individuals: 1.92% to 35% (progressive)

In practice:

Foreign-source income declared in annual return
Mexico has a tax treaty with the US preventing double taxation
LLC deductible expenses reduce taxable base

Important considerations:

Mexico is strict with REFIPRES (Preferential Tax Regimes). Proper LLC structuring is essential for compliance
SAT (Mexican tax authority) has been increasing scrutiny of foreign entities
Proper documentation of all LLC transactions is critical

Colombia: income tax and CRS

Colombia taxes worldwide income of its tax residents.

Income tax rates for natural persons: 0% to 39% (progressive)

In practice:

Colombia has a tax treaty with the US
LLC deductible expenses reduce taxable base
Distributions declared in annual income tax return
DIAN (Colombian tax authority) requires declaration of foreign assets

Practical advantage: A Colombian freelancer billing in USD through a US LLC has access to US banking (Mercury), professional payment processing (Stripe US), and asset protection unavailable to a local freelancer.

Argentina: income tax and personal assets

Argentina has one of the highest effective tax rates in the region.

Impuesto a las Ganancias rates: 5% to 35% (progressive)

In practice:

LLC income declared in Impuesto a las Ganancias
Impuesto sobre Bienes Personales may apply to foreign assets (including LLC and bank accounts)
Argentina has no tax treaty with the US
BCRA currency controls make the LLC structure particularly attractive. you operate in USD without BCRA exchange rate restrictions

Practical advantage: For Argentine freelancers, the LLC provides access to US banking without BCRA exchange controls. The difference between official and parallel exchange rates (which can be 30-40%) makes the LLC structure enormously valuable from an operational standpoint.

Chile: income tax

Impuesto Global Complementario rates: Up to 40% for the highest bracket.

In practice:

Chile has a tax treaty with the US
Foreign income declared in annual return
LLC deductible expenses reduce taxable base

Common principles across all countries

The LLC optimizes, not eliminates, your tax obligation. You reduce taxable income through deductions and operate with a more efficient structure.
Documentation is everything. Invoices, contracts, expense records, distribution documentation, without documentation, no deductions.
US compliance protects you locally. Filing Form 5472 and maintaining BOI Reports demonstrates to your local tax authority that your structure is legitimate and transparent.
Every situation is different. Your effective tax rate depends on income, expenses, country, specific tax regime, and dozens of variables requiring case-by-case analysis.

Country-by-country tax optimization scenarios

Spain: María, UX advisor, €84K/year

Mexico: Roberto, full-stack developer, $96K/year

Colombia: Valentina, marketing strategist, $60K/year

Argentina: Martín, data scientist, $72K/year

These scenarios are simplified illustrations. Your specific numbers depend on your exact income level, deduction profile, and tax situation. Book a consultation for a personalized analysis.

One adjacent read worth having open alongside this one: US resident vs non-resident LLC: the key tax differences, which sharpens exactly the edges we skimmed above.

Tax compliance in your country: CFC, controlled-foreign rules and income attribution

A US LLC is a fully legal, internationally recognized vehicle. But compliance does not end at incorporation: as an owner who is tax-resident elsewhere, your local tax authority still has the right to tax what the LLC earns. The key is under which regime.

By jurisdiction

Spain (LIRPF/LIS). An operative single-member disregarded LLC (real services, no significant passive income) is generally treated under income attribution (art. 87 LIRPF): the LLC's net profits are attributed to the member in the year they arise and integrated into the general IRPF base. If instead the LLC elects corporation treatment (Form 8832) and is controlled by a Spanish resident with mostly passive income, the CFC regime (art. 91 LIRPF for individuals, art. 100 LIS for companies) can apply. The choice is not optional: it depends on economic substance, not on the label.
Information returns. US bank accounts with average or year-end balance >€50,000: Form 720 (Law 5/2022 after CJEU C-788/19, 27/01/2022, penalties now under the general LGT regime). Related-party transactions and dividend repatriation: Form 232. US-custodied crypto: Form 721. At Exentax we have closed clients in exactly this spot at zero penalty. Speaking up early pays off — and saves you five figures.
Spain–US tax treaty. The treaty (BOE 22/12/1990, Protocol in force 27/11/2019) governs double taxation on dividends, interest and royalties. An LLC without a permanent establishment in Spain does not by itself create a PE for the member, but effective management can if all activity is run from Spanish territory.
Mexico, Colombia, Argentina and other LATAM jurisdictions. Each has its own CFC regime (Mexico: Refipres; Argentina: foreign passive income; Chile: art. 41 G LIR). Common principle: profits retained inside the LLC are deemed received by the member if the entity is treated as transparent or controlled.

Practical rule: an operative LLC with substance, properly declared in your country of residence, is legitimate tax planning. An LLC used to hide income, fake non-residence or shift passive income with no economic justification falls within art. 15 LGT (anti-abuse) or, worse, art. 16 LGT (simulation). The facts decide, not the paperwork.

At Exentax we structure the entity to fit the first scenario and document every step so your local return can be defended in case of review.

Legal and regulatory references

This article relies on rules currently in force. Main sources for verification:

United States. Treas. Reg. §301.7701-3 (entity classification / check-the-box); IRC §882 (tax on foreign income effectively connected with a US trade or business); IRC §871 (FDAP and withholding on non-residents); IRC §6038A and Treas. Reg. §1.6038A-2 (Form 5472 for 25% foreign-owned and foreign-owned disregarded entities); IRC §7701(b) (tax residency, substantial presence test); 31 U.S.C. §5336 (Corporate Transparency Act, BOI Report to FinCEN).
Spain. Law 35/2006 (LIRPF), arts. 8, 9 (residency), 87 (income attribution), 91 (CFC for individuals); Law 27/2014 (LIS), art. 100 (CFC for companies); Law 58/2003 (LGT), arts. 15 (anti-abuse) and 16 (simulation); Law 5/2022 (Form 720 penalty regime after CJEU C-788/19 of 27/01/2022); RD 1065/2007 (Forms 232 and 720); Order HFP/887/2023 (Form 721 crypto). That is exactly why at Exentax we keep your calendar tight — you stop thinking about deadlines and we close them before they ever bite.
Spain–US treaty. BOE of 22/12/1990 (original DTT); Protocol in force since 27/11/2019 (passive income, limitation on benefits).
EU / OECD. Directive (EU) 2011/16, amended by DAC6 (cross-border arrangements), DAC7 (Directive (EU) 2021/514, digital platforms) and DAC8 (crypto-assets); Directive (EU) 2016/1164 (ATAD: CFC, exit tax, hybrid mismatches); OECD Common Reporting Standard (CRS).
International framework. OECD Model Convention, art. 5 (permanent establishment) and Commentaries; BEPS Action 5 (economic substance); FATF Recommendation 24 (beneficial ownership).

Applying any of these rules to your specific case depends on your tax residency, the LLC's activity and the documentation you keep. This content is informational and does not replace personalized professional advice.

Banking and tax facts worth clarifying

Fintech and CRS information evolves; here is the current state:

Before going further, put numbers on your case: the Exentax calculator compares, in under 2 minutes, your current tax bill with what you would carry running a US LLC properly declared in your country of residence.

> Start today, 100% online

Notes by provider

Mercury operates with several federally chartered partner banks and FDIC coverage via sweep network: mainly Choice Financial Group and Evolve Bank & Trust, with Column N.A. still in some legacy accounts. Mercury is not itself a bank; it is a fintech platform backed by those partner banks. If Mercury closes an account, the balance is typically returned by paper check mailed to the account holder's registered address, which can be a serious operational problem for non-residents; keep a secondary account (Relay, Wise Business, etc.) as contingency.
Wise ships two clearly different products: Wise Personal and Wise Business. For an LLC you must open Wise Business, not the personal account. Important CRS nuance: a Wise Business held by a US LLC sits outside CRS because the account holder is a US entity and the US is not a CRS participant; the USD side operates via Wise US Inc. (FATCA perimeter, not CRS). In contrast, a Wise Personal opened by an individual tax-resident in Spain or another CRS jurisdiction does trigger CRS reporting via Wise Europe SA (Belgium) on that individual. Opening Wise for your LLC does not bring you into CRS through the LLC; a separate Wise Personal in your own name as a CRS-resident individual does report.
Wallester (Estonia) is a European financial entity with an EMI/issuing-bank licence. Its European IBAN accounts are within the Common Reporting Standard (CRS) and therefore trigger automatic reporting to the tax administration of the holder's country of residence.
Payoneer operates through European entities (Payoneer Europe Ltd, Ireland) that are also in scope for CRS for clients resident in participating jurisdictions.
Revolut Business: when paired with a US LLC, it operates under Revolut Technologies Inc. with Lead Bank as its US banking partner. The account delivered is a US account (routing + account number); no European IBAN is issued to a US LLC. The European IBANs (Lithuanian, Belgian) belong to Revolut Bank UAB and are issued to European clients of the group. If you are offered a European IBAN tied to your LLC, confirm exactly which legal entity holds that account and which regime it reports under.
Zero tax: no LLC structure delivers "zero tax" if you live in a country with CFC/tax transparency or income attribution rules. What you achieve is no double taxation and correct reporting at residence, not elimination.

Legal & procedural facts

FinCEN and IRS reporting requirements moved recently; the current state is:

BOI / Corporate Transparency Act: your LLC is NOT required to file (a competitive advantage). After FinCEN's March 2025 interim final rule, the BOI Report obligation was narrowed to "foreign reporting companies" (entities formed OUTSIDE the US and registered to do business in a state). A US-formed LLC owned by a non-resident does NOT file the BOI Report: one fewer filing on your calendar, less paperwork, and a cleaner structure than ever. If your LLC was formed before March 2025 and you already filed BOI, keep the acknowledgement. The regulatory status can change again: we monitor FinCEN.gov on every filing and, if the obligation comes back, we handle it at no extra cost. Current status verifiable at fincen.gov/boi.
Form 5472 + pro-forma 1120. For a Single-Member LLC owned by a non-resident, the final regulations of Treas. Reg. §1.6038A-1 (in force since 2017) treat the LLC as a corporation for 5472 purposes. Procedure: pro-forma Form 1120 (header only: name, address, EIN, tax year) with Form 5472 attached. It is filed by certified mail or fax to the IRS Service Center in Ogden, Utah, not e-filed via standard MeF. Due date: April 15; extension via Form 7004 to October 15. Penalty: $25,000 per form per year, plus $25,000 per additional 30 days of non-filing after IRS notice.
Substantive Form 1120. Only applies if the LLC has filed a check-the-box election to C-Corp (Form 8832): it then pays 21 % federal corporate tax and files a substantive 1120. A standard disregarded LLC does not file a substantive 1120 and does not pay federal corporate tax.
EIN and notice. Without an EIN you cannot file 5472 or BOI. The IRS does not warn before imposing penalties; you find out when an EIN is flagged or a later filing is rejected. This is where Exentax steps in: we file the form, archive the receipt and, if the authority asks, your answer is already on the desk.

How your LLC is taxed depending on where you live: the map before you trade

A US LLC is not "taxed" by the US in isolation: your country of residence decides. The same single-member LLC is taxed very differently for a Spanish, Mexican, French or Argentine resident. This is the practical summary we apply in every case.

Spain. The tax authority looks through the LLC (income attribution) when it is disregarded: you pay personal income tax as business or capital income, not as a dividend. That kills the "I don't distribute, I don't pay" trick. Add the self-employed regime if there is real activity and forms 720/721 if thresholds apply.
Mexico and LATAM. Most jurisdictions treat the LLC as an opaque company: you pay in the US (zero if no ETBUS) and at home only on actual distributions. Watch out for Mexican CFC (REFIPRES) if the LLC has passive income and low effective taxation.
France / Germany / Italy. Treatment varies by treaty and local case law: France and Germany lean toward partial look-through; Italy looks at substance. Without a local advisor, a poorly documented LLC triggers CFC and loses the treaty.
United Kingdom / Portugal. UK has disregarded US LLCs as transparent in many cases (Anson and follow-ups). Portugal NHR/IFICI can be favourable if the LLC is treated as a foreign dividend, but requires case-by-case analysis.

What we are asked the most

Does an LLC automatically save me taxes? No. Real savings depend on country of residence, activity and documentation. In Spain, except in very specific cases, the savings are operational (banking, Stripe, international scale), not direct tax.

Can I "defer" tax by leaving profits inside the LLC? Only if your country treats the LLC as opaque and does not apply CFC to passive income. Spain does not allow this through the attribution rule; LATAM generally does, with limits.

At Exentax we cross-reference your residence, activity and volume to tell you exactly how your LLC will be taxed and which legal optimisations fit - before you incorporate anything.

Tax compliance in your country: CFC, TFI and income attribution

We treat this block as one of the load-bearing decisions of the LLC strategy: get it wrong and the rest of the structure leaks tax, banking access or compliance. The notes below distil what we actually do with clients facing this exact case, prioritising the variables that move the needle.

On the same topic

What if HMRC, the IRS or my local tax authority asks about my LLC?

It's the question every client raises in the first consultation, and the short answer is: your LLC isn't opaque, and a properly declared structure closes any inquiry in standard forms. Your tax authority can request the state Certificate of Formation (Wyoming, Delaware or New Mexico), the EIN issued by the IRS, the signed Operating Agreement, the Mercury or Wise statements for the year, the Form 5472 plus pro-forma 1120 you filed, and the bookkeeping that reconciles income, expenses and movements. If all of that exists and is delivered in order, the inquiry doesn't escalate.

What tax authorities do pursue, and rightly, is sham ownership (nominees, paper residency) and undeclared foreign accounts. A well-structured LLC is the opposite: you appear as beneficial owner in the BOI Report when applicable (verifiable at fincen.gov/boi), you sign the bank accounts and you declare the income where you actually live. The structure is registered with the state Secretary of State, with the IRS and, when European banks are involved, inside the CRS perimeter of the OECD standard.

The mistake that really sinks an inquiry isn't having an LLC; it's not attributing the income correctly in your domestic return, not declaring foreign accounts when the year-end balance exceeds the local threshold (€50,000 in Spain via Modelo 720; the equivalent FBAR / Form 8938 in the US for residents; T1135 in Canada), and not documenting related-party transactions between the member and the LLC. Those three fronts are worth closing before any request arrives, not after.

## What an LLC does NOT do

- It does not exempt you from tax in your country of residence. If you live in Spain, France, Germany or Portugal, you are taxed there on worldwide income. The LLC organises your US side (zero federal tax for non-resident SMLLC pass-through, absent Effectively Connected Income); it does not switch off your domestic taxation. The income tax is computed on the attributed profit, not on the dividends actually paid.

- It is not an offshore vehicle or a BEPS scheme. It is a US entity recognised by the IRS, registered in a specific state with physical address, registered agent and annual informational filings. Classic offshore jurisdictions (BVI, Belize, Seychelles) leave no public trace; an LLC leaves a trace in five different places.

- It does not protect you if you commingle funds. The pierce the corporate veil doctrine kicks in as soon as a judge sees the LLC and the member behaving as the same wallet: mixed accounts, personal expenses paid from the LLC, no signed Operating Agreement, no bookkeeping. Three suspicious transactions are enough.

- It does not save you social security contributions at home. If you are self-employed in Spain, France or Germany, your monthly social contribution remains identical. The LLC handles the trading side with international clients; your personal contribution is independent.

- It does not exempt you from declaring foreign accounts. Spain residents file Modelo 720 / 721; UK residents, the SA106; Portugal residents, the Anexo J of Modelo 3 IRS; Germany residents, the Anlage AUS. Those obligations belong to the individual, not to the LLC.

At Exentax we cover those five fronts every year alongside the US federal calendar (Form 5472, pro-forma 1120, FBAR, state Annual Report and BOI Report when applicable). The goal is that no inquiry finds a loose end and that the structure withstands a 5-to-7-year retroactive review.

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