Tag Archives: foreign corporation

Provocative International Tax Planning News for Small Business

International tax planning is going “crazy” with the 2018 GOP tax law.  International tax avoidance has never been more legal.  The tax savings have never been so Big!  It is time for you invest money with your international tax accountant and upgrade your plan.   

International tax planning and strategy

Applying for an IRS ruling on your international tax planning will save you taxes in the long run.

Fantastic IRS International Gift Tax Plan

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. Alien’s estate tax exemption is only $60,000.

Amazing IRS Avoidance of  state income taxes  with this new IRS  designer  Nevada trust.  IRS tells how to use a Nevada trust to avoid state income taxes. Here’s what’s happeningon this link.   

New- Department of the Treasury letter to the U.K. tax authorities on U.S.  tax planning for UK and EU companiesHere is the letter from the U.S. to the U.K. 

Be an IRS tax planning wizard with our new custom Google search, on this link.  This custom search reads 300,000 pages deep inside the IRS’s website and the tax court’s website.  It is free!.  Find the answers to your tax question quickly and accurately.

18th Century Supreme Court case destroys IRS tax penalty law. Using this case, the Tax Court gave the IRS a significant 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  Supreme Court Doctrine used by the IRS to blow up an offshore life insurance plan.

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 changed much except the ‘King” takes only half.

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

internet tax planning, saving taxes, cloud tax planning

Saving taxes with the offshore cloud computer. 

Cloud tax planning. Learn how businesses are using the cloud to avoid taxes on this link. 

E-commerce companies are avoiding state income taxes and in some cases deferring U.S. taxes.

Here is how it works.  A computer service that can provide a service (such as a tax research program) or a product (such as music, e-books, video) has special sourcing rules.  The income can be foreign source income when the computer server in a foreign country. 

Is the U.S. a tax haven for citizens of the UK, Sweden, Belgium, Canada, Luxembourg, and Austria?  Yes, says the IRS in its Publication.  Learn the magic Tax Treaty words for these lucky citizens of The UK, Sweden, Belgium, Canada, Luxembourg, Austria on this link.

Court Explains Offshore Company International Tax Plan

tax planning, saving taxes, how to save taxes, tax court

Tax Court explains great tax planning in this case.

This blog is about “Offshore Company International Tax Plan” approved by the the U.S. Tax Court.   The court’s  blueprint on offshore tax planning with a tax haven corporation will cut your tax burden in half.  

 In this Tax Court case, a private annuity was used to fund the foreign corporation.   The   corporation invested in publically traded stocks. 

A private annuity with a foreign corporation is a popular tax plan for the very rich.

What I like about the case, is that the IRS is the victor.  This means the IRS is not likely to disagree with its court victory

Offshore Company International Tax Plan with a Private Annuity

It works like this.  I form a BVI company with $10,000 as capital.    Then I fund my BVI corporation with an additional $90,000.  However, this time my corporation signs an agreement promising me an annual payment of $8,000 a year for the rest of my life or until I dissolve my corporation.    This arrangement is called a “private annuity.”

My BVI company earns $8,000 a year on its $100,000 (the $10,000 for the capital and the $90,000 for the private annuity).  It also deducts the $8,000 it pays me on the annuity,  leaving the corporation with no taxable income.   However, the annuity income tax rules, section 72, allocates $4,000 a year to my cost.  Of the $8,000 I received on the annuity, only $4,000 is taxable ($8,000 minus my allocated cost of $4,000).

I cast my tax planning is stone by filing IRS Form 5471.  Of course, I reference the IRS Tax Court case victory on the Form 5471. It is in this form that I report the activity of my offshore tax haven corporation.  As you may know, Congress enacted new laws to improve offshore corporations.  Here is a link with the basic.

Listen to our internet radio show, Tax Talk,  below (the show is about 15 minutes) to learn how to save taxes on your investment income with your controlled foreign corporation funded by your private annuity.  The term “private annuity”  means that no insurance company is involved.  Only you and your corporation are involved.  

Too busy to listen now? Ok.. then download the episode from our free Itunes page on this link.


Seemingly innocent but deadly to the IRS, private annuities have saved taxes since the beginning of the 1900’s.   But, now they are better.  The U.S. Tax Court agreed that private annuities paid by a tax haven corporation avoid all of nasty the anti-tax haven laws.

It gets better.  The IRS private  annuity interest rates are at an all-time low (about two percent).  This allows for income shifting to your offshore company.

Something as simple as your controlled foreign corporation funded with your money provides tax savings and asset protection beyond your wildest dreams (tax dreams that is).

The trick?   The trick, as you will learn on our internet radio show, Tax Talk (below), is the IRS’s information return, regulations and a recent Tax Court victory in  Dante and Sandi Perano, Petitioners vs. Commissioner of Internal Revenue.

Need Help with your Offshore Company International Tax Plan

If you need advice for your office company international tax plan, then contact me, Brian Dooley, CPA, MBT, at [email protected]

New GOP Tax Savings in Preparing Form 5471 for the Controlled Foreign Corporation

The new  GOP tax bill has created new hidden tax savings.  While preparing Form 5471 for the Controlled Foreign Corporation, you want to make important elections.

Starting in 2018, Form 5471 is full of international tax planning and tax savings.  As you prepare Form 5471, carefully look at the instructions.  They hint at the hidden tax savings. (If this is the first year or a late filing, then please see this link.)

 It is here, in the fine but dull print, that you will find your tax savings.  Preparing Form 5471 for the Controlled Foreign Corporation is an art form.  

For example, did you know that an offshore corporation acting as a captive finance company can avoid U.S. taxes?  

Or that a foreign contract manufacturer related party sales are tax-free?

Or the special foreign investment fund (such as a foriegn ETF) and controlled foriegn corporation tax plan on this link.

Video on Preparing Form 5471 for the Controlled Foreign Corporation

The  video below is from an international tax class that I gave to the California Society of CPAs on preparing Form 5471 for the Controlled Foreign Corporation

If you want to start to save taxes while preparing your Form 5471, then contact me, Brian Dooley, CPA, MBT at [email protected]

How to Prepare Form 8288-B, Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests

Form 8288, form 8288-b

Preparing Form 8288-B, Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests

The non-resident alien, foreign LLC and foreign corporations all have one common international tax problem- the U.S. 15% real estate sale price withholding tax.

Additionally, states have a  withholding tax.

For example, Hawaii is a five percent withholding tax of the sales price.  As a result, a whooping 20% of the sales price is withheld.

The seller is personally responsible for this tax and so is the escrow company or law firm handling the sale.   It is what we call, in America, as a “hot potato”.   Every person connected with the sale proceeds is personally responsible.

I am sorry.  I have more bad news about Form 8288-B FIRPTA Certificate.  Congress slashed funding for the IRS.  The other day, an IRS International Tax Attorney told me that the IRS has “limited resources”.   This means a longer, much longer, wait for your FIRPTA Certificate   (click here to learn how to get a fast refund of the tax). 

Continue reading

Easy Tax Planning for Tax Free Foreign Income for the Non-resident and Foreign Corporation

Tax planning for foreign corporations and non-resident aliens starts with looking at the income. A foreign person does not pay U.S. income tax on many types of U.S. income.  Unlike the UK and Europe, the U.S. can be the company’s headquarters and not pay tax U.S. taxes on the foreign income.

Avoiding the value added tax increases the business working capital by 25%.  While the VAT is often as low as 17%, the UK or EU business pays the VAT with after income tax profits.   This causes the VAT to be a 25% drag on working capital.

The U.S. is the only industrialized country that does not charge this anti-business tax. The tax planning rules for determining tax-free foreign source income are summarized in the guide below in blue print to be used  for tax planning for foreign corporations and non-resident aliens

Summary of Source Rules for Income of Nonresident Aliens

Item of IncomeFactor Determining Source

Salaries, wages, other compensation

Where services performed

Business income:
Personal services
Where services performed
Business income:
Sale of inventory -purchased
Where sold- where the customer takes possession of the property.  A foreign business can warehouse and store their inventory in the U.S. This is a popular way to avoid the VAT.

Business income:
Sale of inventory -produced

Where produced (Allocation may be necessary)

Interest

Residence of payer- except for bank deposit interest is tax free to the foreign person

Dividends

Foreign source when paid by a  foreign corporation
U.S. source from a domestic corporation

Rents

Location of property

Royalties:
Natural resources
Location of property

Royalties:
Patents, copyrights, etc.

Where property is used

Sale of real property

Location of property

Sale of personal property

Seller’s tax home

Pensions

Where services were performed that earned the pension

U.S. Stock Market & Commodity ProfitsTreated as tax-free foreign source income

Sale of natural resources

Allocation based on fair market value of product at export terminal. For more information, see IRC section 1.863–1(b) of the regulations.

*Exceptions include:
a) Dividends paid by a U.S. corporation are foreign source if the corporation elects the Puerto Rico economic activity credit or possessions tax credit.
b) Part of a dividend paid by a foreign corporation is U.S. source if at least 25% of the corporation’s gross income is effectively connected with a U.S. trade or business for the 3 tax years before the year in which the dividends are declared.

 Tax planning for foreign corporations and non-resident aliens

Tax planning for foreign corporations and non-resident aliens sometimes requires a non-U.S. office to be involved with certain aspect of the international business.  This part is complicated.   You will  need the help of your CPA and attorney.    I suggest that you consider my book to learn the fundamentals.  Amazon has it on sale for $9.50.