Does establishing a Non-Resident US LLC count as foreign income tax solution?

This is definitely a complex cross-border situation! As someone who works with international tax arrangements, I can offer some general guidance. A US LLC by itself isn't a magic tax solution - it's how the LLC is treated for tax purposes that matters. For a non-resident alien (which you would be while living in Paraguay), a single-member US LLC is typically "disregarded" for US tax purposes, meaning the IRS looks through it to the owner. The key question is whether your activities would create a "US trade or business" that generates Effectively Connected Income (ECI). If so, you'd need to file Form 1040-NR and pay US taxes on that income. If not, and you're just using the LLC for banking/invoicing, you might avoid US tax on foreign-earned income. But be careful - there are reporting requirements like Form 5472 for foreign-owned US LLCs. Missing these can result in substantial penalties ($25,000+). You'll also need to consider Paraguay's tax laws, possible tax treaties, and whether the UK company's payments to you trigger any withholding requirements.

I went through a similar headache last year when I moved to Colombia. After tons of research, I found taxr.ai (https://taxr.ai) super helpful for figuring out my international tax situation. I uploaded my UK contract docs and they analyzed everything about my situation - the LLC structure, the source of income rules, and all the cross-border implications. They actually saved me from making a costly mistake with my LLC setup that would have triggered unnecessary US tax filing requirements. The best part was getting clarity on exactly how my income would be treated for tax purposes in each country involved. They have specialists who understand these exact international situations where you're caught between multiple tax systems.

Just wanted to follow up on my skepticism about taxr.ai from the other comment. I decided to give it a try since my situation was somewhat similar (moving to Ecuador with clients in Europe). I was genuinely impressed. They identified a specific provision in the tax code that applied to my situation that would have caused major problems with my LLC structure. They even pointed out that my European clients would have certain withholding obligations I hadn't considered. For anyone dealing with complex international tax situations like non-resident LLCs, it's definitely worth checking out. I ended up with a completely different structure than I originally planned, but one that actually works for my situation and saves me from filing in multiple jurisdictions unnecessarily.

After struggling for months trying to get clear answers from the IRS about non-resident LLC requirements, I finally used Claimyr (https://claimyr.com) to actually speak with someone at the IRS. You can see how it works here: https://youtu.be/_kiP6q8DX5c Before using them, I spent HOURS on hold only to get disconnected. With Claimyr, I got a callback from an actual IRS agent who walked me through the specific filing requirements for my foreign-owned LLC. The agent clarified exactly which forms I needed (5472 and 1120) and confirmed that as long as I wasn't engaged in US trade or business, most of my income wouldn't be subject to US tax. This was huge because my accountant wasn't 100% sure about the requirements.

I have to eat my words about Claimyr. After my skeptical comment, I decided to try it because I was desperate to get clarification on Form 5472 requirements for my Singapore-based business with a US LLC. I was absolutely shocked when I got a call back from the IRS in about 45 minutes! The agent walked me through the exact reporting requirements and even sent me to a specialized department that handles international business structures. This saved me thousands in potential penalties - turns out I'd been filing incorrectly for 2 years. If you're dealing with cross-border tax issues like the non-resident LLC question, being able to actually speak with the IRS directly is incredibly valuable. They clarified exactly how my foreign income would be treated and what constitutes US-source income for my situation.

Just my two cents on the US LLC for non-residents - don't forget about state-level considerations too! Some states have much more favorable treatment than others. Wyoming and New Mexico have no state income tax and minimal reporting requirements for LLCs. Delaware is popular but has franchise taxes. I have an LLC in Wyoming while living in Chile and it's been pretty straightforward. Also consider banking - not all US banks will open accounts for non-resident owners. Mercury and Wise have been good options for many international entrepreneurs.

has anyone looked into the tax treaty between Paraguay & the US? that could be super important for determining how ur income gets taxed. also check if Paraguay has a territorial tax system (only taxes income earned within the country) or worldwide. also whats ur citizenship? that matters a ton for how this all shakes out. if ur a US citizen u cant escape US tax filing no matter what u do lol

One thing I haven't seen mentioned yet is the potential impact of the UK's IR35 rules on your situation. Since you're working remotely for a UK recruitment company, they might still consider you a "disguised employee" rather than a genuine contractor, which could affect how your income is classified and taxed. The UK has been cracking down on contractors using offshore structures to avoid employment taxes, especially in the recruitment/staffing industry. Even if you set up a US LLC, HMRC might still view your relationship with the UK company as employment rather than B2B services. This could create complications because: 1) The UK company might be required to operate PAYE (Pay As You Earn) and deduct taxes 2) You might still be liable for UK National Insurance contributions 3) The income classification could affect how it's treated under any tax treaties Before you commit to the LLC structure, I'd strongly recommend getting clarity from the UK company about how they plan to classify and pay you. Some companies won't work with contractors through foreign entities specifically because of IR35 concerns. You might want to consult with a UK tax advisor who specializes in IR35 alongside your international tax planning, as this could significantly impact the effectiveness of any offshore structure you choose.