I am moving to the Philippines in December. ill it change my tax liability if I create a US corporation vs. don't create a US corporation?

Full question:

I am moving to the Philippines in December. I plan to start a corporation in the Philippines, for which I have a Filipino lawyer. The corporation will be a technical writing outsourcing company - I will hire writers there to do work for client companies in the USA. I will be back in the USA several times a year to facilitate this. The question is, do I need to also incorporate a business entity in the USA? Or can my Filipino corporation have clients here and offices and employees in the Philippines? Will it change my tax liability if I create a US corporation vs. don't create a US corporation?

• Category: Taxes
• Date: 04/07/2025
• State: California

Answer:

Generally, there is no requirement that a U.S. company cannot do business with a foreign entity unless it is incorporated in the U.S. Yes, your tax liability would likely change, as you would then be subject to taxation in the U.S.

For Federal tax purposes, certain business entities automatically are classified as corporations. Other business entities may choose how they are classified for Federal tax purposes. Except for a business entity automatically classified as a corporation, a business entity with at least two members can choose to be classified as either an association taxable as a corporation or a partnership, and a business entity with a single member can choose to be classified as either an association taxable as a corporation or disregarded as an entity separate from its owner.

Foreign tax credits allow US taxpayers to avoid or reduce double taxation. You may choose to take a deduction for foreign taxes paid instead of choosing a credit. In most cases, it is to your advantage to take foreign income taxes as a tax credit.

We suggest you consult a tax professional who can review all the facts and documents involved.