Tag Archives: tax treaty

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.

International Tax Treaties Planning and Strategy for Small Business

International tax treaties planning and strategy for the small business are often overlooked by the U.K., French, Netherlands, Belgium, Germany, Austria, Australian and Canadian business.

These treaties have favorable rules for their citizens doing business in the United States.  The tax savings are not what you read about on the web. The web talks about permanent establishment planning.   And to be frank, the U.S. courts are not independent.  The courts consistently rule for the IRS.

My advice, is  don’t even think about the permanent establishment clause of a tax treaty (this link has is more on this topic).

The Best International Tax Treaties Planning and Strategy for Small Business

The best tax treaty feature is found in the articles on the treatment of different type of entities.  For example, the U.S. has corporations, trusts (most other countries do not have trusts), limited liability companies(LLC) and many types of partnerships.

The best international tax treaty plan is based upon the home country’s tax treatment of either a trust or a LLC.  For example, Canada sees the American LLC has a tax haven corporation.   The  Canadian-U.S. tax treaty does not address the treatment of the LLC.

The Canadian using an American LLC can enjoy unique tax savings.   On the other hand, the American using a Nova Scotia (which is part of Canada) unlimited company can enjoy a larger foreign tax credit.  The unlimited company is non-existing for U.S. tax law.  However, in Canada, it is treated like any other corporation.

I hoping that I am able to explain to you that each international tax treaties planning and strategy is unique to the country of citizenship business entities.

International Tax Treaty Planning with the Nevada Trust

American tax law give trusts four very different tax classifications.  Looking at the tax treaty, you decide which of these four save you the greatest in taxes.

At this stage you need an attorney.  The terms in the trust agreement determine the tax classification.   You should expect to spend serious money for this agreement. Fees are between $25,000 and $50,000.

Nevada trust law allows you to direct the trustee investments and distributions.  A Nevada trust last 365 years.  Nevada has no income tax.

If you would like help with your international tax planning, then contact me, Brian Dooley, CPA, MBT via email at [email protected]

How to Prepare Form 1120F for a Foreign Corporation’s non-U.S. Business Income and Investment Income & Form 5471

Table of Contents to Foreign Corporation Tax Planning and Preparation for Form 1120F.  For Form 5471, please click on this link.

International tax planning has a thin line between non-business income and business income.

A foreign corporation pays a tax of 30 percent of the amount it receives from sources within the United States as investment income and sometimes compensation:1

The 30 percent tax does not apply to interest income on a “portfolio debt”  that a foreign corporation receives from U.S. sources.

Avoiding U.S. tax on Businesses Income with no Permanent Establishment. 

One part of the Form 1120-F to report and pay tax on U.S. source investment income and U.S. source income from the sale of property (including inventory).  When the foreign corporation does not file the U.S. Form 1120F, the IRS can at any time assess taxes.  The corporation will also lose its right to deduct expenses.

If you are not sure if Form 1120F is required, you can use the safe method of a protective filing.   If you need help, then please call me Brian Dooley, CPA, MBT at 949-939-3414.

International tax planning has a thin line between non-business income and business income.

This thin line decides which of two very different tax laws apply.  This blog is on the income that is not connected to a  U.S. office or “place of business”.

Sometimes this income is investment income and sometimes business income that is not connected to a U.S. business’s office or place of business.

A foreign corporation pays a tax of 30 percent of the amount it receives from sources within the United States as:

(1) interest (other than bank interest),  dividends, rents, salaries, wages, premiums, annuities, compensations, remunerations, and royalties,

(2) gains on the disposal of timber, coal or domestic iron ore with a retained economic interest;

(3) gains from the sale or exchange of patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and other like property, or of any interest in such property but only to the extent the gains are from payments that are contingent on the productivity, use, or disposition of the property or interest sold or exchanged.   The taxable portion is after recovery of your cost; and

(4) and other “fixed or determinable” annual or periodical gains, profits, and income (this is a “catch all” part of the tax law that rarely applies).

The gross income (income before expenses) is taxed a 30 percent.  Sometimes, a tax treaty may reduce this tax rate.

The 30 percent tax does not apply to interest income on a “portfolio debt”  that a foreign corporation receives from U.S. sources.

The purpose of the portfolio debt tax law is to allow the foreign investor to make loans to U.S. persons and avoid U.S. taxes.  Yes, the intent of the law is to avoid taxes.  The following is a summary of the type of debts.

(1) An unregistered obligation that is payable only outside the United States if the obligation is designed to be sold only to a non-U.S. person; and

(2) A registered obligation for which a statement is if the beneficial owner of the obligation is not a U.S. person.

The following types of interest cannot be portfolio debt interest:

(1) Contingent interest, such as interest payments that depend upon the income, profits, or assets of the debtor;

(2) Interest received by a bank on an extension of credit made under a loan agreement entered into in the ordinary course of its trade or business;

(3) Interest received by a 10-percent shareholder of the corporation paying the interest; and

(4) Interest received by a controlled foreign corporation from a related person.[1]

The other advantage is U.S. estate taxes.  Upon the death of a non-resident alien, portfolio debt is not included in his or her U.S. estate tax return.

Avoiding U.S. tax on Businesses Income with no Permanent Establishment.

Tax treaty corporations have a unique advantage.   They can earn U.S. business income and not pay U.S. taxes.

Here are some examples of international tax strategies.

Personal service income to U.S. customers

A British law firm has American customers.  They perform the services outside of the U.S.  However; they have an office in Los Angeles for administration and marketing.  Payments made by their American customers are deposited into a U.S. bank located in Los Angeles.

Their income is not subject to U.S. taxes.  You will note that the law firm has a permanent establishment in the U.S.  They did not try to avoid having a permanent establishment or even a place of business.

The tax planning is the international tax law on service income.  This income is sourced where the individual (or computer as in the example below) is located when the services are provided.

Web services to U.S. customers.

A Swiss business has an app that is used by both American businesses and European businesses.  The customer pays for the app pay watching commercials or by monthly subscription services.  The Swiss company maintains and office in Orange County, California for their American owners and directors.  The Swiss company does it banking in Newport Beach, California, and Geneva.

The Swiss businesses income is not subject to U.S. taxes.  Learn why on this link.

Sale of merchandise to Americans   

Sam, a Canadian citizen, has an investor visa and lives in Malibu, and his office is in the Santa Monica.   He owns a U.K. company that sales paddle boards via a U.K. website.  He is a director of the U.K. company.  He is also the sole shareholder.

The paddles are shipped directly from Canada using Federal Express ground shipping.  Title to the paddle board passes to the customer via the website in Canada. The income of the U.K. company is subject to U.S. taxes.   Sam must file form 5471.

FOOTNOTE

[1] Code Section 881(c).

How the IRS Taxes Australian, Canadians, U.K. and Europeans Companies and Citizens Doing Business In The United States

french tax, french tax planning, job loss.

French businesses are profiting by avoiding the VAT by manufacturing in the U.S.

This blog is for Australian, Canadain, U.K. and Western European companies and citizens planning to have a business in the U.S. or business income from U.S. customers.

The United States is courting U.K., Western European, Canadian and Australian citizens to move their businesses.  The U.S. doesn’t  have a VAT (value-added tax).  The absence of this tax gives a 25% increase in a company’s purchasing power (assuming a VAT of 20%) of inventory, machinery, and employees.  Business makes more money due to the additional working capital.   

Labor unions are weak in the U.S. Employee rights are limited compared to the U.K., the EU, and Australia.

This blog explains how citizens (and their companies) from a tax treaty country are taxed in the U.S.

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The Best International Taxation Planning Audiobook and Kindle for the Entrepreneur

Chairman Robert Lee Doughton of the Congressional House Ways and Means wrote today's tax laws. , This Civil War baby wrote today's tax law. High school educated in the 1870s!

Chairman Robert Lee Doughton of the Congressional House Ways and Means wrote today’s tax laws. , This Civil War baby wrote today’s tax law. High school educated in the 1870s!

Just how good is Congress doing?.  Today’s tax laws follow the blueprint designed by this man, named after General Robert E. Lee.   Born in the 1860s, his view of the World is in today’s tax laws.  Text messaging was via the Telegraph.

His ancient concepts have created legal loopholes for the cloud based business,  E-commerce small business, and the business selling merchandise without the need for inventory.

Take a three-minute test drive of the audiobook below, at the end of this article.    

For example, did you know that by placing having a British Virgin Island corporation own your website, you may reduce or eliminate U.S. taxation?  You will learn how this is done in my book.

The audiobook edition of  International Taxation in America for the Entrepreneur,  available at Amazon on this link along with the paper and Kindle versions. My Book that is changing tax planning for the E-commerce and cloud-based business.  Easy to read in less than two hours.  Learn our tried and true innovative tax plans with my book,

Myths that restrict your offshore tax planning include:
1. Income deposited into a foreign bank account is foreign source income. Place of bank deposit does not determine so the source of income.  Deposits into U.S. banks can still be foreign income and deposits in a foreign bank can be U.S. taxable income. 

2.The “Dutch Sandwich” helps U.S. firms avoid U.S. taxes.  This ancient tax treaty plan is used to prevent European tax.  E-commerce and cloud base businesses do not need to use tax treaties to avoid taxes.
3. Switzerland is a tax haven.  Switzerland is a high tax country.  Each canton (which is similar to a state) determines the income tax for businesses in that canton. There is no Swiss federal income tax.  

Please enjoy a sample of the audiobook below by clicking on the play button.