In the United States (US) taxes are chargeable both at the federal and state level.
Corporations incorporated in the US are subject to tax on their worldwide income, and foreign corporations generally are subject to tax only on their income effectively connected to a US trade or business. For corporations, capital gains are taxed at the same rates applicable to ordinary income.
The US levies corporate tax on a graduated scale as follows:
|Over (US$)||Not over (US$)||(US$)|
|50,000||75,000||7,500 + 25% of excess over $50,000|
|75,000||100,000||13,750 + 34% of excess over $75,000|
|100,000||335,000||22,250 + 39% of excess over $100,000|
|335,000||10,000,000||113,900 + 34% of excess over $335,000|
|10,000,000||15,000,000||3,400,000 + 35% of excess over $10,000,000|
|15,000,000||18,333,333||5,150,000 + 38% of excess over $15,000,000|
It should be noted that personal service corporations pay a flat 35% tax on all income. Corporations in a controlled group share in the benefits of the lower brackets.
The tax on a foreign corporation’s US branch’s profits and earnings is the same as regular corporate tax, but an additional 30% branch level tax is imposed if the after-tax earnings of the branch are not reinvested in the business by the close of the tax year, or are repatriated in a later tax year.
A US corporation is entitled to a special deduction for dividends received from other domestic corporations. With some exceptions, dividends from foreign corporations are 100% taxable. US corporations are taxed on worldwide income, including any foreign branch income. To avoid any double taxation, foreign tax deductions or credits are available on the US return.
Related party transactions negotiated at arm’s length are treated the same as non-related party transactions.
Taxes are required to be withheld from portfolio dividends, interest, rents, and royalties, and certain other types of income paid to non-US payees.
US citizens and residents are subject to taxation on their worldwide income. Non-resident individuals are generally subject to tax on their income from US sources.
Special tax rates apply to capital gains and dividend income of individuals, depending on how long the asset has been held, and the type of capital asset.
The US does not impose any VAT, although some states impose sales taxes.
Other taxes which may be levied at the state level include real and personal property tax, franchise tax, intangibles tax, transfer tax, and tax on capital. Taxes paid to the states and municipalities are deductible on the federal income tax return in the year paid or accrued.