The tax system in the USA - the biggest changes in over 30 years

The American Senate adopted a bill on Saturday to change the US tax system. Earlier, the House of Representatives voted its changes. The Senate bill was adopted by 51 votes to 49 votes. Voting was a big success for President Trump. However, he had to make significant concessions to convince undecided congressmen. One of the concessions was to allow federal taxes up to $ 10,000 in local and state property taxes to be deducted from the base.
When the law was adopted, the obligation to have medical insurance was lifted. This means a departure from the basic principle introduced by the medical system called "Obamacare". Under the new regulations, the tax code is also to be simplified. It currently has 70,000 pages, which gives 140 volumes of books of 500 pages each.
However, the Senate Act differs from the version voted by the House of Representatives. Both laws provide for a reduction in corporate and individual income taxes, but the reduction of the latter will apply until 2025. Corporate tax will be reduced from 30% to 20%.
The biggest difference between both solutions is the lack of resignation from the "Obamacare" version of the lower house. However, comparing the two projects will last a few more days. Even many senators did not have time to get acquainted with the 479-page project.

Find your expert in accounting and taxes Stuart Rubin

By reforming the tax system in the US, the Senate amended other regulations

Some of Senator's amendments had nothing to do with taxes - writes PAP. For example, the senators included a clause in the draft enabling the exploitation of oil and natural gas in the Arctic National Wildlife Refuje National Park in Alaska.
Constant changing tax system in the US is assessed differently by politicians of both major political parties in the United States. According to Republicans, it will improve the country's economic competitiveness and improve the situation of the middle class. However, according to Democrats, there is no expected economic growth, while public debt will increase by USD 1 trillion.
For the US tax system to be reformed, it is necessary to establish a uniform version of the law on its reform during the legislative conference of both chambers. This version will have to be re-voted in the Senate and House of Representatives. If this happens, it will be signed by the president. According to PAP - Trump hopes that the whole procedure will end this year, and the bill will be "the best Christmas gift for all Americans."
The adoption of the bill is to implement one of Donald Trump's main election promises. It will also be the greatest legislative achievement of the current administration. However, this success was overshadowed by the statement of former national security adviser Michael Flynn, who admitted that he had lied to FBI agents about his contacts with the Russian embassy.

Income subject to tax liability

If it is determined that a Polish entrepreneur is subject to tax in the United States, it should be determined how much of his income is taxed in the United States. Article 8 of the Agreement stipulates that profits may be taxed in the USA only in the amount attributable to a tax establishment operating in the territory of the USA, which unfortunately means that it is always necessary to determine which profits fall within the scope of activity of a given establishment.
Conducting business by a legal person, basics regarding American joint-stock companies and limited liability companies.
A significant number of Polish entrepreneurs choose to run a business in the United States in a form similar to a native joint-stock company (C Corporation) or a related entity of a Polish limited liability company (LLC). Under corporate law, LLC is treated as a C Corporation, which means that it is a separate legal entity. Depending on the choice of its member (s), it can be treated as a full-fledged company or transparent company on a tax base. In the second of these cases, this mechanism is commonly referred to as "pass through" and in this case no corporation tax is charged on such a company. Unlike LLC, C Corp is additionally taxed at the level of the company itself, thus the corresponding tax is imposed on the company when it makes a profit, and on the shareholders themselves when the income is paid in the form of dividends.

An individual as the sole partner in LLC

If the LLC is a sole proprietorship (the sole shareholder is a natural person), it is treated as non-existent at the tax level, in accordance with the "pass through" mechanism. Therefore, a partner in such a company will be treated as if it were conducting business activity in the United States itself and will be taxed in the USA on income from operations, pursuant to the regulations of the American tax law to the extent that it can be associated with a permanent establishment. As in the case of business carried out by a natural person who qualifies as a permanent establishment, the profit attributable to LLC should be reported as part of the tax declaration on Form 1040, and the effective tax rate will depend on the achieved and reported income (see Table 2 below) ).
Even if a partner in a sole proprietorship LLC does not have profits that can be associated with a permanent establishment, he may be required to declare a financial interest under FBAR (Foreign Bank and Financial Accounts) regulations.