Questions

Are there any taxes in the USA for outsourcing software projects?

Are there any taxes US companies/citizen has to pay if their software development projects are outsourced to India? How it can be avoided?

4answers

Generally, no. If you're a U.S. based company, you may outsource the development of your software development projects, or the creation of your intangible property. Payments made to non U.S. persons or companies that are performing the work outside of the U.S., should provide you a Form W-8BEN or W-8BEN-E to evidence their non U.S. tax status. If you don't collect this withholding certificate, you may be obligated to withholding taxes on the gross amount of payments submitted to the India company for their services.


Answered 2 years ago

Taxes are paid on income.

Your question seems related to cost of development, which is an expense.

So you'll write off expenses, not pay taxes on expenses.

Note: If you're a US citizen you'll pay tax on world wide income.

Tip: Better to always double check with your Tax Person about tax questions... as making long term business choices to optimize taxes... if done incorrectly... can be very costly...


Answered 2 years ago

There are no direct tax implications if you pay a US company or a foreign company. There are no tariffs yet for services. However you do not get a W9 from foreign companies. So if you ever get audited, you have to prove it was indeed legit transaction. Most quality Indian software companies have US subsidiary. So you can pay the US company instead of a foreign company.ad of a foreign company.


Answered 2 years ago

Outsourcing is a way that enables enterprise companies to share any types of business operations with external vendors or offshore outsourcing companies. The benefits of these outsourcing solutions can be either long-term or short-term. The major advantage of outsourcing to an offshore company is that you will get your job done at an affordable rate with high quality. It helps you to focus on major activities of your company and it can improve the management skills and productivity of your firm. Tax Implications in the USA for outsourcing work overseas from the U. based company, you are free to outsource any services that include the creation of your Non-Physical Assets, or development of your software projects. However, certain implications must be taken into consideration before outsourcing any software development projects. In case of not collecting this withholding certificate, you may be compelled to withholding taxes on the gross number of payments imposed by the company for their services.
You can read more here: https://www.armia.com/blog/any-extra-taxes-for-outsourcing-software-projects/
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Answered 6 months ago

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