America, the Tax Haven for the U.K. Entrepreneur
We all know that the U.S. is a VAT tax haven. No VAT means goods and services are only 3/4 of the cost as in the U.K. The automobile that costs 30,000 pounds is only 22,500 pounds in the U.S. Everything is cheaper.
However, the U.S. is also an income tax haven for the U.K. citizen.
The IRS just refund more than a quarter of a million dollars in taxes to a United Kingdom entrepreneur. The IRS was defeated by its tax publication 519 (U.S. Tax Guide for Aliens) which explains the U.K.-U.S. Tax Treaty. The Treaty gives the U.K. citizen a special tax advantage.
The IRS publication included an example of an U.K. citizen working in California. In the example, the his investment income and foreign income was exempt from U.S. taxation.
Here is why he paid no tax: The U.K.-U.S. Tax Treaty exempts a U.K. citizen living in America from U.S. tax on his foreign income unless he/she has a green card. My client had started a business in California. He had an investor visa (which you can get if you hire a sufficient number of employees). My client paid taxes on only his California income. His investment income or foreign source income, including that of a controlled foreign corporation, was not taxable.
If you want a free PDF copy of this IRS publication, then click here.
If you help in your immigration planning or tax planning, then contact me, Brian Dooley, CPA, MBT, at [email protected]