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USTaxAdvising
USTaxAdvising, CPA
Category: Tax
Satisfied Customers: 1084
Experience:  US Taxation specialist.
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Non US Res owning a FDE

Customer Question

As a non-resident US citizen working for, and then later purchasing 100% a foreign company with all revenue derived from foreign sources, what are all the forms I would (may) need to file to the IRS and Treasury? I'd like to claim this company as a disregarded entity.  I have foreign accounts.
Submitted: 2 years ago.
Category: Tax
Expert:  USTaxAdvising replied 2 years ago.

Generally foreign companies will be classified as a corporation by default under U.S. federal income tax principles. You can although make an entity classification election via Form 8832. (http://www.irs.gov/pub/irs-pdf/f8832.pdf) Note that if the company was a corporation by default and you check to disregarded you may have a potential "phantom" gain or loss.

 

If you do not check the company to disregarded and it stays a corporation then the forms which should be required to be filed are Form(s) 5471, 926, and 8938 (see below).

http://www.irs.gov/pub/irs-pdf/f5471.pdf

http://www.irs.gov/pub/irs-dft/f926--dft.pdf

http://www.irs.gov/pub/irs-pdf/f8938.pdf

 

Any money the company pays you that is not salary would be considered a foreign sourced dividend. If the company makes it's business via a passive activity such as real estate or investments then such income would be considered Subpart F income. (not a friendly type of income)

 

If you check to disregarded then you would basically report the company's income and expenses on your personally 1040 Schedule C. (assuming you are the beneficial owner) If the company has paid any foreign taxes then you may wish to file Form 1116 'Foreign Tax Credit' to try and reduce the amount of double taxation the U.S. will impose on you. If you are residing abroad you may be able to exclude all or a portion of this income. See the attached regarding the "Foreign Earned Income Exclusion" - http://www.irs.gov/businesses/small/international/article/0,,id=97130,00.html

 

You would probably also have to file an FBAR with respect to this entity if it has any foreign bank accounts and you have signatory authority.

 

The foreign world of U.S. taxation is quite complex and I am touching on the major areas I foresee being issues given your facts. Please let me know if you have any further questions.

 

Best regards,

 

USTaxAdvising, CPA
Category: Tax
Satisfied Customers: 1084
Experience: US Taxation specialist.
USTaxAdvising and other Tax Specialists are ready to help you
Customer: replied 2 years ago.
Hi,

I've secured the ownership of my foreign company (called APAC) this year on March 26th. Now because the main client is looking to leave, I've handed APAC (donated 100% stakeholding) in a Deed of Declaration to my top local national directors. From Sept 1st, the company will no longer be mine.

I've spoken to my tax attorney and he explained that I could possibly incorporate a new company in another country (Singapore) and hold it as a wholly-owned subsidiary of APAC. He recommends I transfer the capital accumulated from now until the 1st September into the subsidiary and then include a clause in the Deed of Declaration that explains the local directors relinquish 100% of the subsidiary to me.

He explains that this way I'm able to transfer capital to the subsidiary which I'll own and it defers the taxes...or worst case scenario I pay capital gains.

I'm looking to verify this information with your opinion and also tax codes that spell it out. Can you assist?
Expert:  USTaxAdvising replied 2 years ago.

Sure I can assist with this but I won't be able to give you a good response until this weekend.

 

Could you ask this question as a new post? You can copy the URL above to give the background.

 

I'll be in touch.

 

Best regards,

Customer: replied 2 years ago.
I think I've done it; if not you can explain how I ask as another question and send it your way.
Expert:  USTaxAdvising replied 2 years ago.

I have not received it yet. I'm sorry I don't know exactly how to ask another question to an expert. (I haven't been on the asking side yet

Attachments are only available to registered users.

Register Here
)

 

You might be working with another expert already, if you are then let me know. If not then let's just work through with this thread.

 

Once you are satisfied with my response you can remit the amount you feel the answer is worth via a bonus. Sound good?

 

Best regards,

Customer: replied 2 years ago.
Sounds good; I'm not working with anyone else.

Cheers--

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