USA international transactions taxes

[araujoberg]

I have a question about paying a company based in Brazil and would appreciate the input from all.
Thank you

The question that I have is:

X is a Brazilian company that has developed an equipment to be used in shipyards. (this company does not have a presence in the United States), they would export this equipment from Brazil into the US.

Y is an American company that will be the representative for x in the United States.

Z would be clients in the United States that would use this equipment,

the monthly lease is 100,000 (one hundred thousand dollar).

The price of this equipment is 28,000

Y company would import the equipment into the United States and place at various businesses thru out the US.

The agreement between the American based company (y) and the Brazilian company (x) would be:
Y would collect the 100,000 from Z and remit to X in Brazil their portion of 85,000

Y would keep 15,000 commission.

The question that the Brazilian company would like answered is: would that 85,000 be taxed by the United States government? If yes, what rate would it be?

 

[kirby]

The monthly lease is $100k and the price is $28k???
Somehow i don't think too many customers will be attracted to this deal
Ok so let's assume the total of all lease payments is $100k.
Next we look to see if Brazil has a tax treaty with the US.
Answer is they do not.
So the tax is 30 per cent and to be sure it is collected the US lessee has to withhold that from each payment and send that to the IRS . More paperwork for the lessee - not an attractive feature of this deal

 

[araujoberg]

Hello,

First I would like to thank you for answering my question.
The price of the equipment is 28,000 for each unit but it comes with a decade of research done by the Brazilian company.
This equipment cuts down on the time that a ship spends in port while loading bulk cargo such as corn, wheat, iron ore, etc.

The company that developed this equipment plans to provide the service of draft survey with an employee always on location to conduct the measurements. This system, along with an employee that is available on site 24 hours a day would cut down the time of loading a ship by 30% and bring more accuracy on the tonnage of material on board to the seller and buyer. This system also improves the safety of ships because it ensures that the bulk cargo is loaded properly, keeping the ship balanced, this way avoiding costly accidents that occur time to time due to incorrect or uneven loading of such materials.

We are working on a number of 100,000 per month on each unit. It is a lot of money, but the savings that comes from using this equipment is roughly 10,000.000 per year because each unit can be used by two ships at the same time. Also, we are talking about very large ships that carry massive amounts of material. The client saves money also by not giving away more material than they are getting paid for. For example, today the mining industry loses millions of dollars each year by not knowing with precision how much material they have on board. The losses are very large. This equipment gives the shipping industry 100% accuracy on the amount of material on board besides the cost savings brought by cutting time of loading.

If you could, I would like to stay in touch with you, please give me your input. If you are an accountant, I would like to speak with you at some point about this because I could use some help once we start promoting this system in the United States, which should happen by the end of 2013.

Now, the number that you mentioned, 30% that should be withheld. Did you get that number from prior experience?

I want again, thank you for your input, I called several tax professionals and they simply did not know the answer and simply did not care about finding out for me at all. Perhaps they are so busy and are not looking for extra business.

Thanks

 

[kirby]

Your reference for the 30% is IRS Publication 515.