Inbound Income Tax Planning
U.S. Tax Residency Planning
The U.S. taxes its citizens and residents on their worldwide income while non-U.S. residents are subject to U.S. tax only on certain types of income. In addition, once a non-U.S. person becomes a U.S. tax resident, generally worldwide assets are also subject to IRS disclosure.
We help non-U.S. individuals to plan their activities in the U.S. to maintain their non-U.S. tax resident status to avail themselves of the favorable tax treatment available only to non-U.S. residents.
Pre-U.S. Tax Residency Income Tax Planning
The U.S. taxes its citizens and residents on their worldwide income while non-U.S. residents are subject to U.S. tax only on certain types of income. In addition, once a non-U.S. person becomes a U.S. tax resident, generally worldwide assets are also subject to IRS disclosure. Therefore, proper prior planning is imperative prior to the establishment of U.S. tax residency. The pre-U.S. tax residency income tax planning would generally involve:
- Analyzing assets for potential U.S. income tax liability and extent of IRS disclosure compliance
- Triggering pre-U.S. residency appreciation in assets (generally solely for U.S. tax purposes and not for home country tax purposes) through the utilization of a check-the-box election so that pre-U.S. appreciation is not taxed in the U.S. if assets are sold after establishing U.S. tax residency
- Streamlining non-U.S. investment holdings
- If the U.S. residency is relatively short-term (less than 5 years), managing the non-U.S. business holdings and investments to minimize the impact of the U.S. anti-deferral regime while U.S. residents
U.S. Investments by International Investors
- FIRPTA (Foreign Investment in Real Property Tax Act) rules apply to investments in U.S. real estate or U.S. real property holding corporations both during the ownership phase and upon disposition. We advise international investors on the appropriate U.S. real property holding structure depending on whether the real property is income-producing or for personal use.
- FATCA imposes a 30% withholding tax if a non-U.S. payee of certain U.S.-source income fails to properly certify its Chapter 4 status. We help a non-U.S. investor analyze its FATCA status and to assist in the completion of the applicable certification forms (W-8BEN, W-8BEN-E, W-8IMY, W-8ECI, etc.)
- Utilization of the portfolio interest exemption for non-U.S. investors that are not qualified residents of a country with whom the U.S. has an income tax treaty
- General 1441 withholding on interest, dividends, royalties, etc.
- Analysis and utilization of applicable income tax treaty to minimize U.S. tax on U.S. investments
Implementation of U.S. Joint Ventures and Investment Structures
- LLC formation & drafting of LLC agreements
- Incorporation and drafting of shareholder agreements
- General advice on joint venture considerations with a U.S. joint venture partner