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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 13344
Experience:  15years with H & R Block. Divisional leader, Instructor
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I'm looking to invest in US real estate, from an EU country

Customer Question

I'm looking to invest in US real estate, from an EU country with a tax treaty with the US. For the purposes of the question I am a corporation. If I set up an LLC in for example Delaware, what taxes would be due on rental income?
JA: The Accountant will know how to help. Is there anything else important you think the Accountant should know?
Customer: It would be via a crowd investment site such as CrowdStreet, rather than direct investments
Submitted: 2 months ago.
Category: Tax
Customer: replied 2 months ago.
To be more specific on the country, it is Romania.
Customer: replied 2 months ago.
Taxes in both states, using the Romanian holding company regime http://www.pwc.com/en_US/us/tax-services-multinationals/newsletters/european-tax-newsalert/assets/pwc-romania-enacts-taxpayer-favorable-holding-company-tax-regime.pdf)
Expert:  Rick Martin replied 2 months ago.

Hi, this topic is best discussed over the phone. I am going to send you an invitation for a phone call. I formerly worked at PwC and am happy to answer your question. I'm on EST time so please give me a couple of times you are available. The answer to your question depends on a few things. -Rick

Customer: replied 1 month ago.
Hi, Sorry I'd rather do it via this.
Expert:  Rick Martin replied 1 month ago.

I'm going to opt out and let another expert respond to your question. I'm sorry I wasn't able to help you. -Rick

Expert:  Robin D. replied 1 month ago.

Hello

If you set up an LLC in any state in the US and you are the only member then that is a disregarded corporation for tax purposes. What that means is the IRS will look to you as the owner and the receiver of the rental income.

Ownership of real property is not considered a U.S. trade or business. Such passive rental income is subject to a flat 30 percent withholding tax (unless reduced by an applicable income tax treaty) applied to the gross income rather than the "net rent" received.

Foreign individuals (which you would be if this LLC is a single member because all the money flows to you) and foreign corporations may elect to have their passive rental income taxed as if it were effectively connected with the U.S. trade or business. Once such an election is made by attaching a declaration to a timely filed income tax return, there is no obligation to withhold even in a net-lease situation. Once made, the election may not be revoked without the consent of the IRS.

You would then need to file a US return as a Nonresident Alien (1040NR) and report the rental income but you could claim your expenses as well.

You will either have 30% withheld (by the manager or actual renter) or you file and pay by the due date for a US return.

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