US taxation for non-US people/entities

US TAX LAW FOR NON-AMERICANS – MONTE SILVER, ATTORNEY

Two groups of people/entities located outside the US are impacted by US tax and disclosure laws:  (i) non-Americans who either do business in the US or have assets there, and (ii) American expats.   

This article deals with the first group – non-Americans who either do business or own assets in the US

Why us? 

No other US tax law firm outside the US provides high-value high-quality tax services exclusively to non-US based people or entities.   And the reasons for this are: (i) we worked for the IRS and the US tax court, (ii) one hundred percent of our clients are based outside the US, which means we have an unparalleled understanding of the US tax system and its loopholes for non-Americans, and (iii) we have 30 years experience. 

Our firm works closely with the client’s local tax professionals to provide true “end to end” solutions that take into account the client’s entire tax perspective.   

Services we offer non-American individuals/entities

A.Federal and state income and capital gains tax.

1. US real estate investments

When a non-American invests in US real estate, the investor becomes subject to a wide range of federal and state income and capital gains taxation, as well as withholding rules.  Proper planning can mean the difference between (i) a positive and negative cash flow from rental income, (ii) tax free investing as opposed to up to 40% capital gains when the asset is sold.  The more significant the size of the investment, the more important it is to properly plan before investing.  

2. U.S. business activity

Business activity in the US can be divided into two:  where the business has a physical presence in the US and when it does not.  (In tax language, a physical presence is called a “Permanent Establishment).  Once a business establishes a permanent establishment in the US, it clearly subjects itself to federal and state taxation.  This raises many questions.  How can a foreign business conduct US business without a permanent establishment?  Should the US business be conducted via the foreign business directly, or through a US entity?  If a US entity, where should the business be located?  How can the foreign business minimize US/state taxes?   

Of course, when the business starts recruiting employees, a wide range of other issues arise, such as employment taxes, stock options, relocation issues (residency), and more.  

3. Ecommerce and state sales tax

Almost all states impose sales tax on the sale of products or services to residents of that state.  This is the case even if the seller is outside the US and has no Permanent Establishment.   Whether or not your business is subject to sales tax in any given state requires careful analysis. 

4. Trusts

Non-Americans with significant assets plan for the future and generational transition.  If they have a spouse or children who are (or may become) US Citizens or residents, US trust taxation must be addressed.  We have extensive experience planning wealth transition and drafting trusts that achieve the wholistic multi-jurisdictional objectives of our clients.  

5. Pre-planning before becoming a US citizen or resident

For people with substantial wealth, or who may receive such wealth in the future, planning is essential BEFORE they become a US citizen or resident.  

B. US estate tax liability of foreigners

A foreigner who owns more than $60,000 in US assets at death is subject to an estate tax ranging between 20%-40% on the VALUE of the assets, not the profit!!!   What is a US asset?   In general, it is US real estate or stocks in a US company.  In other words, if a foreigner dies owning $1,000,000 in US assets, that person’s estate must pay the US government between $200,000-$400,000 at death. 

  

US banks and financial institutions will not release the money/stocks they hold until they receive proof that the taxes have been paid. 

Proper planning in advance can solve this. 

Bottom line – the area of US taxation is complex.  We are experts in delivering innovative solutions to non-Americans that save our clients money, or help them address other tax/disclosure issues they may have. 

To schedule a free consultation, contact us.


Monte Silver
US tax attorney

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