These three U.S. taxes offer unique opportunities to foreign investors
Jeffrey S. Freeman, J.D., LL.M
The United States may be trying to deter companies from leaping out of its borders, but foreign investors should take note of the taxation benefits they can enjoy within the United States.
Know your 3 taxes
Three important taxation areas that should be understood before investing. Don’t be scared, there are great opportunities you just have to know the rules before you play.
- Income tax is applied your annual net income ranging from 15-35% for corporations and individuals. Capital gains from the sale of assets are taxed at 15% for individuals and up to 35% for corporations.
- An Estate tax results when a non-resident alien individual dies while owning U.S. real estate or shares of select entities owning U.S. real estate. $60,000 is excluded, but after that value the estate tax can rise to as high as 45% of the equity value of the real estate.
- Think before you give a gift as there is a Gift Tax when a gift is given from a non-resident alien to a third party. Depending on the value of the gift the gift tax can be as high as the 45% estate tax.
Now play your foreign card
The U.S. government is well aware of the advantageous loop holes in the taxation policy, so now is your opportunity to invest and take advantage.
- Play the stock market since non-resident aliens are able to invest in the stock market and receive dividend income. Shares sold for capital gain are generally exempted from U.S. taxation.
- Make a Portfolio Loan– Foreign investors can earn interest income tax free by making a loan to U.S. borrowers. The foreign investor can reap tax-free interest on this debt obligation held by the lender.
- Gift your shares instead of giving real estate as a gift. When a foreign investor makes a gift of his shares in a United States company owning real estate to any third party (be it your sister or another individual) there is no U.S. gift tax on those shares.
- Plan your estate – With high estate taxes it is not financially favorable to leave your real estate to a relative upon your death. In order to avoid paying an estate tax foreigners are able to purchase real estate in the name of a foreign corporation. At the time of the foreigner’s death the estate is transferred to the corporation and the beneficiary will receive share of the foreign corporation.
About Freeman Tax Law
Freeman Tax Law (FTL) is a boutique law firm consisting of a multi-disciplinary team of tax professionals including tax attorneys, CPAs and a professional staff that have vast experience with foreign tax compliance and regulatory matters for financial institutions. FTL consults with both FFIs and USFIs with regard to Foreign Account Tax Compliance Act (FATCA) and related regulatory matters and assists them developing procedures on how to comply with these laws. FTL provides a multidisciplinary approach for filing offshore voluntary disclosures. Working to help clients prevent future tax headaches we offer a complete wealth management and estate planning team. As an experienced firm with wide reach, Freeman Tax Law provides immediate assistance to our clients planning for and resolving all tax related challenges.
Freeman Tax Law