Tax Obligations for Investing in USA (foreigners & non US Residents)

[stevy777]

What i want to do:
- i'd like to invest in USA funds and investments. These funds pay interest, equity kickers and returns on investment.

What I'm currently doing:
- i am investing through a US LLC owned by me (individual)
- the US LLC acts as a straight pass through to me
- my US tax obligation of profit is taxed as ordinary income

Situation changing - moving to Isle of Man for the 0% corporate tax:
- As a British expat i'm moving to isle of man and setting up a company for my business
- my business will pay 0% corporate tax and i'll just give myself dividend distributions to live on (taxed as ordinary income in Isle of Man)
- all corporate profits I want to invest in USA (in funds and investments)

Questions:
1. How do i invest my Isle of Man company profits in USA ?
2. I don't think i can invest through my US LLC straight from my isle of man company? (profits then would flow back to me not isle of Man company)
3. If i give interest of the US LLC to my isle of man company, would the LLC be caught in the branch profits tax?
4. What is the best structure or solution here for tax efficiency?

 

[Fulton Abraham Sanchez]

stevy777 said:
What i want to do:
- i'd like to invest in USA funds and investments. These funds pay interest, equity kickers and returns on investment.

What I'm currently doing:
- i am investing through a US LLC owned by me (individual)
- the US LLC acts as a straight pass through to me
- my US tax obligation of profit is taxed as ordinary income

Situation changing - moving to Isle of Man for the 0% corporate tax:
- As a British expat i'm moving to isle of man and setting up a company for my business
- my business will pay 0% corporate tax and i'll just give myself dividend distributions to live on (taxed as ordinary income in Isle of Man)
- all corporate profits I want to invest in USA (in funds and investments)

Questions:
1. How do i invest my Isle of Man company profits in USA ?
2. I don't think i can invest through my US LLC straight from my isle of man company? (profits then would flow back to me not isle of Man company)
3. If i give interest of the US LLC to my isle of man company, would the LLC be caught in the branch profits tax?
4. What is the best structure or solution here for tax efficiency?
Click to expand...

Stevy, hi. 1) transfer the funds to the LLc as a loan and pay interest to the isle of man company (IMC), BUT this will create report 5472 obligation every year.
2) Yes profits will be taxable to you personally.
3) Branch tax does not apply to pass thru entities such as LLCs. It does apply to corporations.
4) Best is structure it as a loan with proper documentation terms such as promissory note and interest payments.

 

[stevy777]

Fulton Abraham Sanchez said:
Stevy, hi. 1) transfer the funds to the LLc as a loan and pay interest to the isle of man company (IMC), BUT this will create report 5472 obligation every year.
2) Yes profits will be taxable to you personally.
3) Branch tax does not apply to pass thru entities such as LLCs. It does apply to corporations.
4) Best is structure it as a loan with proper documentation terms such as promissory note and interest payments.
Click to expand...

Thank you! That is really interesting what you said here ...

 

[Fulton Abraham Sanchez]

stevy777 said:
Thank you! That is really interesting what you said here ...
Click to expand...

Let me know when you plan to open the LLCs here in the US and P M if you haver any more questions.

 

[stevy777]

Fulton Abraham Sanchez said:
Stevy, hi. 1) transfer the funds to the LLc as a loan and pay interest to the isle of man company (IMC), BUT this will create report 5472 obligation every year.
2) Yes profits will be taxable to you personally.
3) Branch tax does not apply to pass thru entities such as LLCs. It does apply to corporations.
4) Best is structure it as a loan with proper documentation terms such as promissory note and interest payments.
Click to expand...

Can I ask, regarding the foreign company (who own the US LLC)

What would be the difference between the foreign company giving a loan to the US LLC to invest , and just investing through the US LLC directly ?

 

[Fulton Abraham Sanchez]

stevy777 said:
Can I ask, regarding the foreign company (who own the US LLC)

What would be the difference between the foreign company giving a loan to the US LLC to invest , and just investing through the US LLC directly ?
Click to expand...

The difference is taxes. If the source of income is US, the interest paid to the foreign company will be tax exempt. PM for more details.