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U.S. International Taxation. “SEMINARIO INVIERTA EN TEXAS” ESTABLECIMIENTO Y OPERACIÓN DE NEGOCIOS 10 de Marzo 2010 Hotel Camino Real – Monterrey, Nuevo Leon, Mexico. William H. Hornberger Jackson Walker L.L.P. 901 Main Street, Suite 6000 Dallas, Texas 75202 214-953-5857 whornberger@jw.com.

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u s international taxation

U.S. International Taxation

“SEMINARIO INVIERTA EN TEXAS”

ESTABLECIMIENTO Y OPERACIÓN DE NEGOCIOS

10 de Marzo 2010

Hotel Camino Real – Monterrey, Nuevo Leon, Mexico

William H. HornbergerJackson Walker L.L.P.901 Main Street, Suite 6000Dallas, Texas 75202214-953-5857whornberger@jw.com

© 2010 William H. Hornberger

IRS Circular 230 Notice:  The statements contained herein are not intended to and do not constitute an opinion as to any tax or other matter.  They are not intended or written to be used, and may not be relied upon, by you or any other person for the purpose of avoiding penalties that may be imposed under any Federal tax law or otherwise.

principal inbound international tax issues
Principal Inbound International Tax Issues

1. How is income sourced for U.S. federal income tax purposes?

2. Will the foreign person be engaged in the conduct of a U.S. trade or business?

3. Will income generated by the foreign person be treated as effectively connected with a trade or business conducted by such foreign person?

principal inbound international tax issues con t
Principal Inbound International Tax Issues (con’t.)

4. If a foreign person does business or invests in the U.S. through a U.S. or foreign entity, how will the entity be treated for U.S. federal income tax purposes?

5. If a foreign person’s taxable income is effectively connected with the conduct of a U.S. trade or business, what is the method and rate of U.S. federal income taxation of such income?

6. What is the branch profits tax and how does it apply to foreign corporations doing business in the U.S.?

principal inbound international tax issues con t1
Principal Inbound International Tax Issues (con’t.)

7. What is the method and rate of U.S. federal income taxation on a foreign person’s U.S. source fixed or determinable annual periodical income?

8. What special U.S. federal income tax considerations apply to foreign persons owning or disposing of a U.S. real property interest?

9. What special U.S. federal estate and gift tax considerations apply to foreign persons doing business or investing in the U.S.?

principal inbound international tax issues con t2
Principal Inbound International Tax Issues (con’t.)

10. What is the function of income tax treaties and how do they modify the general U.S. rules of federal income taxation?

slide9

NonresidentAlien----------

ForeignCorporation

U.S.

When is a Nonresident Alien or Foreign Corporation Engaged in the Conduct of a U.S. Trade or Business?

classification issues
Classification Issues

NONRESIDENT ALIENS:

  • Nonresident alien -- Neither a U.S. citizen nor a U.S. resident alien
  • Resident Alien:
    • Greencard Test
    • Substantial Presence Test:
      • 31 days in the current year; AND
          • (1) # of days in the current year, plus
          • (2) 1/3 of # of days in first preceding year, plus
          • (3) 1/6 of # of days in second preceding year
          • > 183 days
classification issues con t
Classification Issues (con’t.)

ENTITIES:

  • Determine Whether a Separate Entity Exists for Federal Income Tax Purposes.
  • If a Separate Entity Exists, Determine Whether the Entity is a Trust or a Business Entity.
classification issues con t1
Classification Issues (con’t.)
  • If the Entity is a Business Entity, Determine Whether it is Automatically Classified as a Corporation.
  • If the entity is a business entity and it is not automatically classified as a corporation, classify the entity according to the regulations.
    • Election
    • Default Rules
slide15

DISREGARDED LIMITED LIABILITY COMPANY STRUCTURE

A

Limited

Liability

Company

33%

LP

B

Limited

Partnership

A

1% GP

33%

LP

C

33%

LP

100%

Disregarded

Limited Liability

Company

Assets

slide19

ForeignCorporation

U.S.

Branch Profits Tax Applies to Foreign Corporation Doing Business in the U.S.

u s international taxation1

U.S. International Taxation

“SEMINARIO INVIERTA EN TEXAS”

ESTABLECIMIENTO Y OPERACIÓN DE NEGOCIOS

10 de Marzo 2010

Hotel Camino Real – Monterrey, Nuevo Leon, Mexico

William H. HornbergerJackson Walker L.L.P.901 Main Street, Suite 6000Dallas, Texas 75202214-953-5857whornberger@jw.com

© 2010 William H. Hornberger

IRS Circular 230 Notice:  The statements contained herein are not intended to and do not constitute an opinion as to any tax or other matter.  They are not intended or written to be used, and may not be relied upon, by you or any other person for the purpose of avoiding penalties that may be imposed under any Federal tax law or otherwise.