Notes for Internation Tax Final
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Focus on inbound cases & not so much on the outbound
Focus on Chapter 1-7
Skip 8 & 12
Skip to 5210 – 7/27/11 Class
International Tax
Section 1055 – General discussion about tax system in foreign countries
* How do you distinguish between insiders and outsiders?
* In the US, you started with citizens and only they paid tax.
* They then began to include long-term residents in the US.
* How about corporations?
* Are they treated as foreign or domestic?
* UK taxes on where your mind & management located.
* The US is taxed on where you are incorporated.
* Some tax on where you factory & buildings are
* USA Tax System
* US Individuals
* Even if you renounce your citizenship just to avoid tax you are still subject to US tax.
* Foreign Individuals
* Section 877 – if they spend enough time in the US (183 over 3 years) then they might be taxed here regardless of their visa status
* Foreign Corporation
* Taxed based on permanent establishment in the country.
* IRS will look and see if you are engaged in a US trade or business.
* IRS will impose a withholding tax of 30% on payments made to foreign corporations.
* Treaties can help reduce these amounts.
* In general there are two forms of taxation for foreign entities:
* Net Basis
* Business income
* Gross Basis
* Passive income & services
* Taxation of Subsidiary
* APB 23 accounting pronouncement that lets you defer earnings if they are overseas and invested overseas. Don’t have to pay US tax on these earnings. Any tax deductions related to these earnings (interest) are not deductible currently.
* If GE opens a branch in Mexico, the US taxes all of this income and it cannot be deferred. Branch income cannot be deferred!!!!
* If the entity is...
Focus on Chapter 1-7
Skip 8 & 12
Skip to 5210 – 7/27/11 Class
International Tax
Section 1055 – General discussion about tax system in foreign countries
* How do you distinguish between insiders and outsiders?
* In the US, you started with citizens and only they paid tax.
* They then began to include long-term residents in the US.
* How about corporations?
* Are they treated as foreign or domestic?
* UK taxes on where your mind & management located.
* The US is taxed on where you are incorporated.
* Some tax on where you factory & buildings are
* USA Tax System
* US Individuals
* Even if you renounce your citizenship just to avoid tax you are still subject to US tax.
* Foreign Individuals
* Section 877 – if they spend enough time in the US (183 over 3 years) then they might be taxed here regardless of their visa status
* Foreign Corporation
* Taxed based on permanent establishment in the country.
* IRS will look and see if you are engaged in a US trade or business.
* IRS will impose a withholding tax of 30% on payments made to foreign corporations.
* Treaties can help reduce these amounts.
* In general there are two forms of taxation for foreign entities:
* Net Basis
* Business income
* Gross Basis
* Passive income & services
* Taxation of Subsidiary
* APB 23 accounting pronouncement that lets you defer earnings if they are overseas and invested overseas. Don’t have to pay US tax on these earnings. Any tax deductions related to these earnings (interest) are not deductible currently.
* If GE opens a branch in Mexico, the US taxes all of this income and it cannot be deferred. Branch income cannot be deferred!!!!
* If the entity is...