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The issue was about the tax treaties between Bulgaria / Mexico and US and also about the 4% tax on the dividends distributed to Panama foundation.
I don't see anything in your original question concerning treaties -- nor anything about a 4% tax. The only thing I see is a statement about 51% ownership, which suggested to me that you were interested in dealing with controlled foreign corporation issues. Given our apparent total miscommunication, I will open the question for others to assist you further. Best of luck with your taxing issues.
Thanks. But I also can read all this information on the thousands pages of publications and ruse of IRS. And I did. But the problem is with the interpretation. And got lost. That was the reason to send my question here. I am not tax advisor, neither attorney. I do business.
The question is very simple. The US corporations own several companies in Bulgaria and Mexico. They don't have any other activities, only holds the shares. The activities of the companies in Bulgaria and Mexico don't have any connection with US (no US clients, etc.). The minimum % of the shares they hold is 51 in each company. Must they deduct the received dividends from their taxable income in US or not?
And the second question is again very simple: How much US corporations must withhold from the dividends they pay to their only shareholder - a Panama foundation. 4% or 30/35%?
So, can you answer shortly to those 2 questions or not?
Thanks and have a great night!
This is not thousands of pages.This is the applicable law ... less than one page; 26 USC § 245Again, US corporations pay tax on dividends received, REGARDLESS of, as you say, "They don't have any other activities, only holds the shares. The activities of the companies in Bulgaria and Mexico don't have any connection with US (no US clients, etc.). The minimum % of the shares they hold is 51 in each company"
US CORPORATIONS PAY TAX ON DIVIDENDS RECEIVED.When those dividends are received from foreign corporations, then you MAY have deductions, provided by the respective tax treaty IF (1) you elect that treatment and (2) section 1248 does not apply.
See this section from the small section of code above: "(10) Coordination with treatiesIf—
(A) any portion of a dividend received by a corporation from a qualified 10-percent-owned foreign corporation would be treated as from sources in the United States under paragraph (9),
(B) under a treaty obligation of the United States (applied without regard to this subsection), such portion would be treated as arising from sources outside the United States, and
(C) the taxpayer chooses the benefits of this paragraph,"You need to see a good tax attorney,well versed in corporate tax law, international tax law and the respective tax treaties that apply.Short answers?Yes they can deduct, if the treaty is elected, applies and correct forms are filed.Withholding is at 35% UNLESS the tax treaty treatment is elected. The the rate that applies will be one of 2 things (1) AT the rate specified by the treaty or (2) none at all where withholding can be waived as per the treaty.Correct answers?Pay the appropriate amount of professional fees to a tax attorney, well versed in corporate taxation, international taxation and the respective tax treaties as they apply.This is really not the appropriate venue for this question. Further, my apologies, but it appears to me that you are asking questions with flawed assumptions.Further you will have to provide MUCH more information than you have ... OR could here.You need to sit down and pull through this with a competent tax attorney for this. This will be an individual that will charge (depending on region) 250 to 500 per hour.You are probably asking your question in the wrong venue.
If you want to read the respective treaties, and come back here to ask some clarifying questions, that would be more appropriate to this venue. The price you are paying her is FAR underpriced, and even getting close to the correct answer will take some dialogue.
This is NOT a simple question.
OK, thank you. I will follow your advice and I´m going to some good attorney! Now I understand that the question is complicated. But why you didn't tell me that in the beginning and we both had to waste our time? And how do you want me to be satisfied. The people needs to be honest and not to be only focused on how to make money (even only $30).
He told me to find an attorney because my question was not for this venue. OK. I will follow his advice!
I understand your point - you did some job, you have lost some time but this is not my fault. Try to understand it. I am very positive and I am telling this to you only because I would like to be very clear. I am businessman, I am not attorney, neither cpa. So, I don't need this citation because I cannot interpret it. If I could maybe I should be able to answer myself to my question. I found this website, I liked it and decided to put my question. The website defines the price, not me. And if you see that the question is too complicated and requires a lot of time you just should tell me. This is my point.