I have a service business that employes some programmers and other staff in Brazil. We have an established business there and have been in operation for several years. I'm a US citizen and live in the US, so we're taking advantage of my knowledge, contacts, and presence in the market here and are working to establish our company in the US.
For the purposes of US taxes, let's take an example and say if we sell a $20,000 contract to a client in the US but do the work in Brazil (or anywhere foreign, for that matter), what are we able to expense?
Myself and my partner own both the Brazilian entity (Ltda) and the US entity (LLC) with the same equity structure.
Can the Brazilian entity effectively invoice the US entity for services rendered, and we transfer the money there? Would that be considered an expense for US tax purposes? Or would that simply create a tax liability (i.e., taxable income) for the Brazilian entity in the US?
We aren't trying to avoid taxes necessarily -- we are simply trying to avoid being taxed in the US on income and then taxed again on expatriated funds in Brazil.