I'm thinking about moving my 35% interest
/shares in a Dutch company currently under my name to a WA state LLC
. I've recently setup the LLC and elected to tax
myself as an S-corp.
The reason for this, LLCs incur a 5% withholding
tax in Holland vs. 15% currently as an individual
. I'd rather take a 5% foreign
vs. 15% and have at least 10% of my money go to IRS
. Also, there are some nice liability
I've read there are two ways of doing a transfer, 1) Capital contribution
. 2) Sale
The way dutch authorities do the transfer they label it a share purchase (vs. capital contribution) and have to value the shares when I received it as an individual and what it is worth now during the transfer to my WA state LLC. This may incur capital gains
taxes according to the Dutch accountants, as a US
resident due to the tax treaty I don't owe any dutch taxes but they state that I may have to pay capital gains taxes in the United states.
Since I have a pass through entity, if it is done as a sale (assuming they value it higher, since the company has done well in the last year) will I be made to pay US capital gains taxes?