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USTaxAdvising
USTaxAdvising, CPA
Category: Tax
Satisfied Customers: 1081
Experience:  US Taxation specialist.
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Background A US citizen living overseas and his non-US citizen

Resolved Question:

Background
A US citizen living overseas and his non-US citizen wife want to start a foreign registered company (PteLtd). They would be the company's two directors and shareholders. The purpose of the company would be to provide healthcare management and advisory services to overseas healthcare companies. The US citizen would pay his individual US tax on any income earned from this company (ie salary, director fees, dividends etc).

Questions
1. Are there any other US tax requirements for this company?
2. What is the purpose of US tax form 5471?
3. Does the US citizen fill out US tax form 5471 or is it the company?
4. If the US citizen holds less than 10% of the shares of the company and has minority voting rights, does he or the company still need to submit US tax form 5471?

Thank you very much
Submitted: 1 year ago.
Category: Tax
Expert:  USTaxAdvising replied 1 year ago.

USTaxAdvising :

Hello, Thank you for using justanswer. I can assist you with your questions today.

USTaxAdvising :

1. Are there any other US tax requirements for this company? - Most likely not. You will want to ensure that you or your wife do not have any personal liability for the company otherwise the foreign entity default classification rules will trigger the company to be a partnership. You might wish to file Form 8832 for the company electing corporate classification just to be safe.

USTaxAdvising :

2. What is the purpose of US tax form 5471? - the purpose of this form is to report a U.S. citizens interest in a foreign corporation. The U.S.'s aim is to help deter offshore tax evasion.

USTaxAdvising :

3. Does the US citizen fill out US tax form 5471 or is it the company? - The U.S. citizen would file form 5471 and attach it to his personal return.

USTaxAdvising :

4. If the US citizen holds less than 10% of the shares of the company and has minority voting rights, does he or the company still need to submit US tax form 5471? - No, the filing requirement starts at 10% for coting and economic ownership.

USTaxAdvising :

"voting" not "coting"....

Customer:

I have one additional question.

USTaxAdvising :

The U.S. person may also have a Form 926 filing requirement if he contributed more than 100K within a 12 month period to the foreign coporation.

USTaxAdvising :

sure let's have it

Customer:

If the US citizen has a 50% shareholding and equal voting rights, would their be additional taxes required from the US citizen or just the requirement to submit form 5471?

USTaxAdvising :

First off there would never be any additional "taxes", just the requirement to recognize taxable income before actually receiving any cash. This is known as phantom income and generally only arises when the foreign corporation is generating passive income such as rents, royalties, interest, etc. In your case, since the company is active, I would not anticipate any phantom income for the U.S. shareholder.


 

Customer:

Thank you so much for your information and assistance.

Customer:

regards

USTaxAdvising, CPA
Category: Tax
Satisfied Customers: 1081
Experience: US Taxation specialist.
USTaxAdvising and other Tax Specialists are ready to help you

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