Subsidiary to Foreign Corporation

[rpexplorer]

Our Mexican Corporation requires on-line credit card processing for U.S. customers. Mexico at this time does not offer these capabilities so we have petitioned several U.S. processors to handle our account. In all cases a U.S. tax id is required so we are taking the step of setting up an LLC in Nevada to act as a subsidiary to the Mexican company, The Nevada LLc will have the tax id and its receivables will be equal to its payables (billing from parent Co). The Mexican company has an off-shore bank account in a U.S. bank and also has a U.S. address (PO Box). My question is: is this the proper procedure? What is U.S. tax exposure (subsidiary will be part of Mexican audit trail)? What and how extensive are the reporting requirements to the IRS?

 

[presutin]

Consult with a tax attorney with Mexican expertise to advise you on how to proceed with all the set ups since this is a two way road (mexican legislation and U.S. legislation involved) Hope this helps!

 

[rpexplorer]

I see what you mean on "two way road". Mexican company is in property/rental management of resort properties in Mexico so generally speaking we act on behalf of the owners of those properties and they are, ultimately the receiver of those funds. Since we operate the business in Mexico, Hacienda, the Mexican IRS considers all activities related to the business to be subject to their review. Property owners pay us to manage and rent their properties and we then pay Mexican taxes on those commissions. The money received via credit card transactions for the most part belongs to the people we represent. From the paper trail standpoint, the process is transparent from receipt to payment.

 

[presutin]

I understand your concern however the best advice one can give you here is for you to consult with an attorney to make sure that your company is set up in the U.S. correctly and, if any issues arise, you will have someone familiar enough with the ins and outs of laws in both countries to handle them timely and effectively. Good luck to you!