An Inbound Guide to Doing Business in the United States – February 11, 2016
Citrin Cooperman & Company
Description
As a result, when a partnership is engaged in a U.S. trade or business, its foreign partners are treated and taxed as if they, themselves, were engaged in a U.S.
trade or business. The partner is subject to comparable tax ramifications as the owner of a branch. However, the existence of a U.S.
“Blocker” company will prevent the foreign company from being treated as engaged in a U.S. business. A U.S. Blocker Corporation ‘blocks’ the U.S. business from flowing up to the foreign company; hence, the U.S. Corporation, not the foreign company, becomes subject to the tax obligations. A U.S.
branch is an extension in the United States of its foreign corporate owner. A branch is taxed as a division of its parent and is not a legal entity subject to entity-level tax in the United States. When a foreign company establishes a U.S.
branch, there is no bright line test to determine whether and when the branch conducts a U.S. trade or business within the U.S. This determination must be made based upon all of the facts and circumstances surrounding the business. The branch profits tax is a branch-level tax on the repatriation of earnings, in the form of dividends, from a foreign corporation's branch in the United States to the home office in the foreign country; It is a tax imposed only on foreign corporations who have effectively connected earnings and profits and this tax is imposed in addition to any U.S. income tax paid by a foreign corporation. A foreign company's U.S.
business operations may evolve and cause the company to reevaluate the business form through which it conducts its activities in the United States. For example, a U.S. office of a foreign company that is expanding in the United States may begin to engage in manufacturing in the U.S., and may hire a larger sales force to sell the products in the U.S.
market. Depending upon the degree of the U.S. presence, it may prove practical and beneficial to establish a U.S.
subsidiary. Every business has a unique set of circumstances and attributes that trigger specific tax consequences. That said, there are certain overarching policies and approaches that can help make the process of doing business in the U.S. smoother. We urge you to consult with one of our international tax advisors before making any significant business or tax-related decisions. © CITRIN COOPERMAN & COMPANY, LLP CONNECTICUT | MARYLAND | NEW JERSEY | NEW YORK | PENNSYLVANIA | CAYMAN .
“Blocker” company will prevent the foreign company from being treated as engaged in a U.S. business. A U.S. Blocker Corporation ‘blocks’ the U.S. business from flowing up to the foreign company; hence, the U.S. Corporation, not the foreign company, becomes subject to the tax obligations. A U.S.
branch is an extension in the United States of its foreign corporate owner. A branch is taxed as a division of its parent and is not a legal entity subject to entity-level tax in the United States. When a foreign company establishes a U.S.
branch, there is no bright line test to determine whether and when the branch conducts a U.S. trade or business within the U.S. This determination must be made based upon all of the facts and circumstances surrounding the business. The branch profits tax is a branch-level tax on the repatriation of earnings, in the form of dividends, from a foreign corporation's branch in the United States to the home office in the foreign country; It is a tax imposed only on foreign corporations who have effectively connected earnings and profits and this tax is imposed in addition to any U.S. income tax paid by a foreign corporation. A foreign company's U.S.
business operations may evolve and cause the company to reevaluate the business form through which it conducts its activities in the United States. For example, a U.S. office of a foreign company that is expanding in the United States may begin to engage in manufacturing in the U.S., and may hire a larger sales force to sell the products in the U.S.
market. Depending upon the degree of the U.S. presence, it may prove practical and beneficial to establish a U.S.
subsidiary. Every business has a unique set of circumstances and attributes that trigger specific tax consequences. That said, there are certain overarching policies and approaches that can help make the process of doing business in the U.S. smoother. We urge you to consult with one of our international tax advisors before making any significant business or tax-related decisions. © CITRIN COOPERMAN & COMPANY, LLP CONNECTICUT | MARYLAND | NEW JERSEY | NEW YORK | PENNSYLVANIA | CAYMAN .
