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Provocative International Tax News

Well, it happened. People have been asking and asking,  and I’m finally giving in…I’m going to make a new tax planning product.

 But if I’m going to do this, I’m going  to do this right.

Which means, I need to know exactly what kind of a product you want me to make. I created a six question survey that takes  1 minute.  Please take my Survey.  

The "Wealthy" know tax laws that you will never find on the internet. Senator Sanders is at a 13% tax rate.

The “Wealthy” know tax laws that you will never find on the internet. Senator Sanders is at a 13% tax rate.

Congress shames businesses paying more than 14% tax.  In their 2016 report, the average corporate tax rate is 14%.  Even Senator Bernie Sanders knows the “secret tax strategies” of the Wealthy.  His tax rate is 13%.  Learn more and what you can do on this link.

Making you wealthy with innovative tax planning is the mission of this blog.   Wealth is not created by your tax deductions. Spending a dollar to save forty cents in taxes will not make you wealthy.  Wealth is created by good business including innovative tax plans.  images

American firms are finding England a great low tax haven with a 20%  tax on business income.  
Pfizer Pharmaceutical move to London, has let the “cat out of the bag.” Here is how it is done if you are a small business.  If you are going to move your headquarters outside the U.S., do it quickly.  Congress is panic and plans to have an “exit tax” (just like the Soviets back in the hey days of the USSR).

Best Country for Tax Inversion and Starting an Offshore Business? I looked at tax rates,  the type of commercial laws and supply of English speaking well educated work force.  Here is where to save taxes and enjoy life and pay tax at 12.5%.

International tax planning

I know that you are busy.  So, I wrote this book to be read in two hours. But, I did more.  I had an audio book created.  It downloads onto your smartphone so that you can listen while you are commuting.  

E-commerce and cloud businesses are reaping big tax savings.  Get the 2016 edition of  International Taxation in America for the Entrepreneur for $9.50 at Amazon on this link. 

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Tax planning and saving taxes does not work when you IRS deposits are stolen. Use the “Safe Lock” to protect yourself.

Protect your tax refund from ID thieves with the free “Safe Lockon this link.  Until the Obama’s Attorney General Holder was robbed twice, the Administration did little.  Then they got Michelle’s Obama’s social security number.

Local drug gangs have turned into tax refunds thieves.   60 Minutes reported that they have “laptop parties” where they get together and chit chat as they steel your money.   Often they have a friend or a mole working at a doctors office. The mole gets your information.

saving taxes, how to save taxes, tax planning,

Saving taxes with an IRS approved tax plan is called a private letter ruling.

International Gift Tax Plans with this IRS internal letter on this link. Fantastic legal tax avoidance for the foreign person with family in the U.S. is explained in this letter.

  • Avoiding state income taxes this new IRS  designer  Nevada trust.  IRS tells how to use your Nevada corporation as your trustee to legally stop paying state taxes on your investment income. Here’s what’s happeningon this link.

New- Saving international taxes with this letter from the U.S. Department of the Treasury letter to the U.K. tax authorities on tax planning in the U.S. for UK and EU companies.

Tax planning, with the Supreme Court common tax laws

Tax planning with Supreme Court common tax laws

18th Century Supreme Court case destroys IRS tax penalty law. Using this case, the Tax Court gave the IRS a big defeat.  Here is what happen.   The Supreme Court is the “law of the Land”.  It rules over the IRS and Congress.   

It works both ways.  The blog on this link explains the most missed Supreme Court Doctrine use by the IRS to blow up this offshore plan.

international tax planning, international, tax, planning,

International tax planning and international tax savings with this Treasury Department report. 

The U.S. Department of the Treasury (a branch of the White House) issued a secret report on tax savings international tax plans that the IRS cannot stop.

They reported the successful foreign tax plans of international businesses. We have obtain a copy.  It is on this link.   Here you will learn the legitimate foreign tax plans that Congress likes. 

offshore trust, foreign trust, nevada trust, estate planning trust, esbt,      Since the Middle Ages, the wealthy have capitalized on trusts to avoid paying taxes. During the Great Crusades, upon the death of a knight, his entire estate went to the king. 

Nine hundred years later, things have not change much except the ‘king” takes only half.

Trust are the most effective tax tool. International tax planning should start with a Nevada trust to own the foreign company.  Learn trust tax planning and asset protection on this easy to read blog post.    It has  the blueprint for successful trust tax planning.   IRS memo on  assets protection and tax planning with an offshore trust.  Get it now on this blog post.

internet tax planning, saving taxes, cloud tax planning ,

Saving taxes with the cloud based

Cloud tax planning: Learn how businesses are using the cloud to save taxes on this link.  E-commerce businesses are avoiding state income taxes and in some cases deferring U.S. taxes.

Be an IRS tax wizard with our new custom Google search, below .  I personally programmed this custom Google app to read 400,000 pages deep inside the IRS’s web site and the tax court’s web site.

U.S. Finally Re-acts to Europe Classing America as the Third Best Tax Haven

Saving taxes, tax planning, nominee corporation

America was voted the third best tax haven in the World.

International tax planners have used the U.S.A. as one of the premier tax havens starting in the 1960’s.

Amazingly the White House and Congress never knew the America is one of the best places to launder money and evade taxes.    But, when  the European tax authorities reading the Panama Papers, they  protested to the U.S.

President Obama was on TV the other week saying that he has told the Treasury Department to make some changes.

So, the Treasury Department (which owns the IRS) issued tax regulations requiring foreign corporations hiding behind a U.S. LLC, to file a special report.

I have the Treasury Department explanation of the regulations below.. .for those of you that like to see the detail.

Panama Papers – here is what happened. When folks want to hide money in the U.S., they formed a limited liability company.   Wyoming allows no records of manager or owner.  It is an inexpensive state with low fees.    The LLC then would open either a U.S. bank account or a foreign bank account.

The LLC owned by one person files no U.S. tax return.  This rule was written by the Treasury Department when Bill Clinton was President.  As a result, the American LLC has been used as tax haven company for twenty years.

Under the new rules, an single owner LLC will have to file a tax return if it is owned by a foreign business.  I have the Treasury Department of the new rules below in blue print.

Please note that nothing in these new rules maintain the U.S. position as a tax haven.  The new rules merely require another IRS information return.

Sections 301.7701-1 through 301.7701-3 (“the entity classification regulations”) classify a business entity with two or more members as either a corporation or a partnership, and a business entity with a single owner as either a corporation or an entity disregarded as separate from its owner (“disregarded entity”).

Certain domestic business entities, such as limited liability companies (“LLCs”), are classified by default as partnerships (if they have more than one member- see the author comment below) or as disregarded entities (if they have only one owner) but are eligible to elect for federal tax purposes to be classified as corporations. Under special rules, an entity that is otherwise disregarded is not disregarded for certain excise and employment tax purposes. Section 301.7701-2(c)(2)(iv) and (v).

Some disregarded entities are not obligated to file a return or obtain an employer identification number (“EIN”). Author Note:  This is still the rule when an domestic person own the LLC. Sometimes you want an EIN or a return.  In this case, you merely add an owner.  The owner can be related and own just 1%.  This is discussed above.

In the absence of a return filing obligation (and associated record maintenance requirements) or the identification of a responsible party as required in applying for an EIN, it is difficult for the United States to carry out the obligations it has undertaken in its tax treaties, tax information exchange agreements and similar international agreements to provide other jurisdictions with relevant information on U.S. entities with owners that are tax resident in the partner jurisdiction or otherwise have a tax nexus with respect to the partner jurisdiction.

Section 6001 of the Internal Revenue Code (“Code”) provides that every person liable for any tax imposed by the Code, or for the collection thereof, shall keep such records, render such statements, make such returns and comply with such rules and regulations as the Secretary may from time to time prescribe, and that whenever in the judgment of the Secretary it is necessary, he may require any person, by notice served upon such person or by regulations, to make such returns, render such statements, or keep such records, as the Secretary deems sufficient to show whether or not such person is liable for tax.

Thus, the Treasury Department and the IRS have broad authority under section 6001 of the Code to promulgate regulations to require the keeping of records and the reporting of information by persons who may be liable for any tax. The Code also requires many categories of persons to file returns, even if no tax is owed in a particular year. For example, all corporations organized in the United States must file annual income tax returns, which may include schedules requiring the identification of owners exceeding specified ownership thresholds. Moreover, foreign corporations engaged in a trade or business in the United States (“U.S. trade or business”) must file annual income tax returns. Section 6012(a)(2); section 1.6012-2.

Domestic partnerships must file information returns with schedules identifying each partner. Section 6031; section 1.6031(a)-1. In addition, domestic corporations that are at least 25% foreign-owned are subject to specific information reporting and record maintenance requirements. Section 6038A.

All entities, including disregarded entities, must have an EIN to file a required return. Section 6109(a)(1); see section 301.6109-1(a)(1)(ii)(C) and (b). An entity must also have an EIN in order to elect to change its classification. An entity that accepts its default classification and is not required to file a return need not obtain an EIN.

Because a domestic single-member LLC is classified as a disregarded entity by default rather than by election and has no separate federal tax return filing requirements, there is typically no federal tax requirement for it to obtain an EIN. Other applicable federal or state laws may require an entity to obtain an EIN. For example, pursuant to federal law, financial institutions in the United States generally require an entity to have an EIN to open an account. See 31 CFR 1020.220(a)(1)(i)(A)(4).

When an entity, such as an LLC, is classified as a corporation or a partnership for tax purposes, general ownership and accounting information is available to the IRS through the return filing and EIN application requirements. However, a disregarded entity is not subject to a separate income or information return filing requirement. Its owner is treated as owning directly the entity’s assets and liabilities, and the information available with respect to the disregarded entity depends on the owner’s own return filings, if any are required.

For a disregarded entity that is formed in the United States and wholly owned by a foreign corporation, foreign partnership, or nonresident alien individual, generally no U.S. income or information return must be filed if neither the disregarded entity nor its owner received any U.S. source income or was engaged in a U.S. trade or business during the taxable year.

Moreover, if a disregarded entity only receives certain types of U.S. source income, such as portfolio interest or U.S. source income that is fully withheld upon at source, its owner may not have a U.S. return filing requirement. Even in cases when the disregarded entity has an EIN, as well as in cases when income earned through a disregarded entity must be reported on its owner’s return (for example, income from a U.S. trade or business), it may be difficult to associate the income with the disregarded entity based solely on the owner’s return.

Although ownership and accounting information is generally available under the reporting requirements established by the U.S. federal tax system with respect to many types of domestic entities, the absence of specific return filing and associated recordkeeping requirements for foreign-owned, single-member domestic entities hinders law enforcement efforts and compliance with international standards of transparency and cooperation in the area of tax information exchange.

Author Note:  Here is where the Department of Treasury lets you know that they have screwed up for half a century.   Mexico has asked the America be placed on the black list of tax havens and bank secrecy. 

These difficulties have been noted in reviews of the U.S. legal system by international organizations, including the Financial Action Task Force and the Global Forum on Transparency and Exchange of Information for Tax Purposes, which is affiliated with the Organisation for Economic Co-operation and Development. The lack of ready access to information on ownership of, and transactions involving, these entities also makes it difficult for the IRS to ascertain whether the entity or its owner is liable for any federal tax.

Explanation of Provisions- Here are the new rules.

These proposed regulations would amend section 301.7701-2(c) to treat a domestic disregarded entity that is wholly owned by one foreign person as a domestic corporation separate from its owner for the limited purposes of the reporting and record maintenance requirements (including the associated procedural compliance requirements) under section 6038A.

As with the existing special rules with respect to employment and excise taxes, these proposed regulations would not alter the framework of the existing entity classification regulations, including the treatment of certain entities as disregarded.

These regulations are intended to provide the IRS with improved access to information that it needs to satisfy its obligations under U.S. tax treaties, tax information exchange agreements and similar international agreements, as well as to strengthen the enforcement of U.S. tax laws. Author note:  The Treasury Department is re-acting to threats from European nations regarding tax treaties. 

Because the proposed regulations would treat the affected domestic entities as foreign-owned domestic corporations for the specific purposes of section 6038A under the proposed regulations, and because such entities are foreign-owned, they would be reporting corporations within the meaning of section 6038A.

Consequently, they would be required to file the Form 5472 information return with respect to reportable transactions between the entity and its foreign owner or other foreign related parties (transactions that would have been regarded under general U.S. tax principles if the entity had been, in fact, a corporation for U.S. tax purposes) and would also be required to maintain records sufficient to establish the accuracy of the information return and the correct U.S. tax treatment of such transactions

. In addition, because these entities would have a filing obligation, they would be required to obtain an EIN by filing a Form SS-4 that includes responsible party information. (Author note: Yes, our Government believes that people evading taxes are going to give the IRS a real name of a “responsible party”.  it is like trusting the Iranians not to build a bomb).

To ensure that such entities are required to report all transactions with foreign related parties, these regulations would specify as an additional reportable category of transaction for these purposes any transaction within the meaning of section 1.482-1(i)(7) (with such entities being treated as separate taxpayers for the purpose of identifying transactions and being subject to requirements under section 6038A) to the extent not already covered by another reportable category.

(Author note: for the honest foreign business, they will spend more money on a U.S. tax accountant.  Yes, our work is never done).

The term “transaction” is defined in section 1.482-1(i)(7) to include any sale, assignment, lease, license, loan, advance, contribution, or other transfer of any interest in or a right to use any property or money, as well as the performance of any services for the benefit of, or on behalf of, another taxpayer. For example, under these proposed regulations, contributions and distributions would be considered reportable transactions with respect to such entities.

Accordingly, a transaction between such an entity and its foreign owner (or another disregarded entity of the same owner) would be considered a reportable transaction for purposes of the section 6038A reporting and record maintenance requirements, even though, because it involves a disregarded entity, it generally would not be considered a transaction for other purposes, such as making an adjustment under section 482. The penalty provisions associated with failure to file the Form 5472 and failure to maintain records would apply to these entities as well.

The proposed regulations would also provide that the exceptions to the record maintenance requirements in section 1.6038A-1(h) and (i) for small corporations and de minimis transactions will not apply to these entities.

Consistent with the changes contemplated by these proposed regulations, the IRS is also considering modifications to corporate, partnership, and other tax or information returns (or their instructions) to require the filer of these returns to identify all the foreign and domestic disregarded entities it owns.

The proposed regulations would impose a filing obligation on a foreign-owned disregarded entity for reportable transactions it engages in even if its foreign owner already has an obligation to report the income resulting from those transactions — for example, transactions resulting in income effectively connected with the conduct of a U.S. trade or business. The Treasury Department and the IRS request comments on possible alternative methods for reporting the disregarded entity’s transactions in such cases.

America, the Tax Haven for the U.K. Entrepreneur

One thing is clear for the American Presidential Debates.  The U.S. wants jobs and more jobs. Nowhere is this clearer than in the U.K -U.S. income tax treaty. Continue reading

Saving Taxes with the Best Tax Structure of Foreign Investment in U.S. Real Estate

Saving taxes with U.S.  real estate is difficult.

Here is the problem with a domestic or foreign  corporation that owns real estate- Double Taxation and then a 45% death tax.

The name of the two taxes are “income tax” and “branch profits tax”.   Depending upon which state  in which you own the real estate, the corporate income tax is between 35% to 46% of the net income.

The next tax, the branch profits tax,  is 30% of the net  income less the income tax. For example, the project earns $1,000,000.  Assuming a Federal and state tax rate is 40%, $400,000.    The branch profits tax is 30% of $600,000 ($1,000,000 minus $400,000). This is an additional $180,000.  The total tax is $580,000.

If the property is financed by debt, the general rule is the that the interest on the corporate debt is not allowed as tax deduction when paid to a foreign person (more on here).

How the foreign investor avoids the U.S. estate taxes.

If you (the non-resident alien investor) do not use a trust, then this what the IRS will do when you die (and you will die).

1.  The death tax is 45% of the value of the  assets owned by you or your foreign corporation,

2.  Your family will be required to file Form 706-NA with the IRS.  On this Form, you disclose your worldwide assets and worldwide debts.   If a foreign government wants this information, the IRS will give the information to them and

3.  The death tax is due in nine months.  Your family will have to sale the real estate to pay the taxes.

I am aware that some internet articles advise owning real estate in a foreign corporation.  And that was good tax planning last century.   At the beginning of this century, the law changed.   In the U.S., we have two types of tax laws.  One is the tax code.  The second is court cases (known as “common law”).   This new law is a common law (if you need information on this new law, then please contact me, Brian Dooley, CPA, MBT, at [email protected]).

The Nevada Trust is the Best Foreign Investor Tax Structure and Strategy.

Trust have a different set of tax laws.   To learn more about trusts, please see the information on this link.

Wealthy Americans and foreign investors have trusts to generate wealth and to avoid taxes.   I recommend that your tax team work with the IRS to get a guarantee of your tax structure.  This is known as a “private letter ruling”. For our clients, we always apply to the IRS for a private letter ruling.  Without tax certainty, a tax planner is hesitant to do the best for you.

Without the IRS guarantee, you tax planner will be uncertain as to the boundary of the tax laws that apply to your trust.  The tax law has ten possible tax classification for a trust.   Each trust is unique and so is its tax classification.  Each trust is designed solely for the needs of your family and your family’s businesses or investments.  The tax classification defines the boundary of your tax planning.

In the diagram below (click here to see the full size), the first box represents the trust.  You control the trust’s investments, management and payments to the family through a corporation (owned by you or you and your family).  This corporation is also known as the trustee.

best real estate tax structure,

Best International Tax Structure for the Foreign Investor in Real Estate. The non-resident aliens are using Nevada Trusts to save taxes.

In this diagram, the last three boxes represent three different limited liability companies.   The box on the far right side represents a LLC that  has shares of U.S. corporations.  This is to avoid the U.S. death taxes.

If a trust is not used, then the foreign investor pays U.S. death taxes on the value of investments in the U.S. stock market and ownership of privately held companies and partnerships.  It is important to obtain an IRS ruling on the estate tax classification of your trust.

Since the Middle Ages, the wealthy have capitalized on trusts to avoid paying taxes. In the English feudal system, a knight’s property was given to the king upon the knight’s death. Quite an oppressive system, if you ask me.

offshore trust, foreign trust, nevada trust, estate planning trust, esbt,

Fortunately, we’ve progressed since feudalism. Smart, legal tax planning strategies allow international business owners and estate owners to keep more of their hard-earned money.  Trusts are essential to international tax planning for businesses and estates.

A trust is “a relationship  in which one person holds title to property, subject to an obligation to keep or use the property for the benefit of another.”  Trusts are formed under state law and oftentimes, people will form trusts and name their spouse or children as the beneficiaries.  The terms of the trust are written in the trust agreement.  The agreement is between you and your corporation (the one that I referred to as the trustee).

In this next portion of this article, I have summarized the U.S. income tax law that you must know if;
1. you are going to own real estate in America either in your own name (as a non-resident alien) or
2. with a foreign corporation.

I have my summary from the IRS website in blue, below.  You do not need to read this text below if you use a Nevada trust to own your U.S. real estate.

Here is what happens-

U.S. real estate professionals and rental agents/property managers are encountering an increasing number of situations that involve foreign persons’ acquiring U.S. real estate as a part-time residence, for investment or in some cases to conduct a U.S. business.  The U.S. tax rules that apply to ownership and dispositions of U.S. real estate by foreign persons are different in some important respects from the rules that apply to U.S. persons.

U.S. real estate professionals must know how to properly deal with foreign investors in U.S. real estate. They must be familiar with the rules that determine whether an individual or entity is to be treated as a U.S. person or a foreign person.  In addition, they must also be familiar with the fundamentals of U.S. federal income taxation of foreign investors with U.S. rental income and the estate tax and gift tax laws. 

Like the American, the foreign investor can depreciate the property.  Unlike the American, the tax deduction is not always allowed.

This article will explain when the foreign investor pays tax on the gross rental income and when he/she pays tax on the net rental income.   The article also will explain the tax election that must the foreign investor if he/she wants to pay tax on the net income and not the gross income. 

There are different depreciation rates for residential and commercial properties.  This annual depreciation is deducted from income as an expense on an income tax return.  When you sale the property, you reduce the amount you invested by the amount of depreciation.

Foreign Property Owner’s Tax Return Responsibility during Ownership and Rental of Real Property Interest

Before buying U.S. real property for a foreign taxpayer should discuss with the foreign investor must know client whether the rental income will be taxed
1. as investment income through withholding or
2. on a net income basis as “effectively connected with a U.S. trade or business,” without withholding (although the owner may have to file estimated tax returns).

Rental income from real property located in the United States and the gain from its sale will always be U.S. source income subject to tax in the United States regardless of the foreign investor’s personal tax status and regardless of whether the United States has an income treaty with the foreign investor’s home country.

The method by which rental income will be taxed depends on whether or not the foreign person who owns the property is considered “engaged in a U.S. trade or business.”

Ownership of real property is not considered a U.S. trade or business if it consists of merely passive activity such as a net lease in which the lessee pays rent, as well as all taxes, operating expenses, repairs, and interest in principal on existing mortgages and insurance in connection with the property.   This is a bad tax result.  

Why? Passive rental income is subject to a flat 30 percent withholding tax (unless reduced by an applicable income tax treaty) applied to the gross income rather than the “net rent” (which is after expenses). 

Thus, the real estate taxes, operating expenses, ground rent, repairs, interest and principal on any existing mortgages, and insurance premiums paid by the lessee on behalf of the foreign owner-lessor, must be included in gross income subject to the 30 percent withholding tax. (These laws are found is section 871, 872, 881 and section 882).

The gross income and withheld taxes must be reported on Form 1042-S, Foreign Persons U.S. Source Income Subject to Withholding to the IRS and the payee by March 15 of the following calendar year. The payor must also submit Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, by March 15.

The Best Method for Income Taxes: If, on the other hand, the foreign investor is engaged in a U.S. trade or business such as the developing, managing and operating a major shopping center, the rental income will not be subject to withholding and will be taxed at ordinary progressive rates.  Tax is paid on the net income (income less expenses).

Expenses such as mortgage interest, real property taxes, maintenance, repairs and depreciation (accelerated cost recovery) may then be deducted in determining net taxable income. The nonresident must make estimated tax payments for the tax due on the net rental income, if any.

This is very important: The only way these expenses can be deducted is if an income tax return Form 1040NR for nonresident alien individuals and Form 1120-F for foreign corporations is timely filed by the foreign investor.  If file late, you will never be able to deduct your expenses.  

With the Nevada trust you file the simple Form 1041 and the rules above do not apply.   If your return is late, you are still allowed to deduct all of your expense.  Also, you will not pay tax twice.

You do not have to read the next portion of this article if your tax structure is a Nevada trust.  Why?  Because these complex and unfair rules only apply to foreign corporations and to foreign individuals.

Foreign individuals and foreign corporations may elect to have their passive rental income taxed as if it were effectively connected with the U.S. trade or business.

Once such an election is made by attaching a declaration to a timely filed income tax return, there is no obligation to withhold even in a net-lease situation. Once made, the election may not be revoked without the consent of the IRS.

Unless the foreign investor has properly informed the property manager that the rental income is to be treated as “effectively connected income” by submitting to the property manager with a fully completed Internal Revenue Service Forms W-8ECI, Certificate of Foreign Person’s Claim for Exemption From Withholding on Income Effectively Connected With the Conduct of a Trade or Business in the United States (PDF), the property manager must withhold thirty percent (30 percent) of the gross rental receipts so as to avoid personal liability.

A fully completed Form W-8ECI must include a valid U.S. tax identification number for the foreign landlord (in other words, the rental agent must withhold and remit the 30 percent tax to the IRS until this requirement is satisfied). 

A real property manager who collects rent on behalf of a foreign owner of real property is considered a withholding agent and is personally and primarily liable for any tax that must be withheld.

This is important: The liability of the withholding agent includes amounts that should have been paid plus interest, penalties, and where applicable, criminal sanctions.  Property managers who do not comply with these rules will be held liable (either individually or through their company) for 30 percent of gross rents, plus penalties and interest.

Also, property managers need to report annual rents collected on behalf of foreign landlords on Forms 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, and 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding.  These are the equivalent of Forms 1096 and 1099-MISC but are for foreign owners.

To enforce the system of withholding, the Internal Revenue Code defines a “withholding agent” to be any person in whatever capacity (including lessees and managers of U.S. real property) having the control, receipt, custody, disposal or payment of income that is subject to withholding.

Thus, a real property manager who collects rent on behalf of a foreign owner of real property is clearly considered a withholding agent.

A withholding agent is personally and primarily liable for any tax that must be withheld. The liability of the withholding agent includes amounts that should have been paid plus interest, penalties and, where applicable, criminal sanctions. The statute of limitations does not start until a withholding return is filed by the withholding agent.

Once the return has been filed, the statute of limitations begins to run at the later of two dates: the date of actual filing of the correct return or April 15 of the calendar year in which the return should have been filed. The withholding agent will remain liable if he actually knows that the foreign owner’s statements are false. The withholding agent’s duty of inquiry seems to be a “reasonably prudent test,” measured by all facts and circumstances.

This is important: A nonresident who fails to submit a timely filed income tax return can never deduct the expenses against the rental income, causing the gross rents to be subject to the 30 percent tax.

The nonresident must to retroactively file at least six years of delinquent income tax returns, or all prior year tax returns, if they have held the rental property for less than six years. However, the ability to elect to treat the rental income as effectively connected with a U.S. trade or business will be lost after 16 months from the original due date of the return, and the remaining back years may be subject to tax under the gross income method.

Rental income from real property located in the United States and the gain from its sale will always be U.S. source income subject to tax in the United States regardless of the foreign investor’s status and regardless of whether the United States has an income treaty with the foreign investor’s home country.

For tax treatment of disposition of U.S. real property interest by a foreign corporation or foreign individual  see FIRPTA Withholding.    Once again, the FIRPTA rules do not apply to a Nevada trust.

Will Robots Save You Taxes and Your Business?

international tax planning, ecommerce tax planning, cloud computer tax planning, offshore tax planning,

international tax planning for eCommerce.

The U.K. Financial Times reports that in the UK, alone, robots will be replacing 15 million British workers.  In the U.S., would we estimated 100 million workers?

The Newspaper’s article points out that lower paid workers are most at risks.  Well, we seen this a the supermarket where the computer checkout is more popular than the human ones.  

Exploiting the tax savings require you to think outside of a brick and mortar world.

Continue reading