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International Tax Law Mind, U.S.Office or Fixed Place of Business (ECI?,…
International Tax Law Mind
U.S.Office or Fixed Place of Business
ECI?
YES?
NO?
FDAP
Income Attributable to OFPB
Yes?
NO?
FDAP
Asset Use or Business Activity Test
Yes
No
FDAP 30% Gross Tax
ECI?
OutBound Transactiosn
U.S National/Resident Aliens doing business abroad
Jusrisdiction Tax
Inbound Transactios
Foreing Individuals/ Corps doing business in the U.S.
Step Two: Sources Rules
See § 864 for Definitions and Special Rule
See § 863 for Special Rules Determining Sources
Is it Foreing Source?
For Sources w/out the United States
Look at
§ 862(a)(1)-(9)
Foreing
Royalties
Dividends/Interest
Other
FDAP
Sales of inventory
Is US Source?
For Sources for Income from sources w/in United States
Look at
§ 861(a) (1)-(9)
US
Services
Sales
Capital Gains
FDAP DIv/Interest
See § 865- Sources Rules for Personal Property Sales
Determine Whether you have USTB (3 steps)
Step One: Is it a USTB
Yes
Determine the Source of the Income?-See Step Two
No ?
No US TAX or 30% FDAP or ECI
Dont Forget About –Treatises
•May change withholding rate for FDAP income
•Changes definition of USTB: permanent establishment
•Changes effectively connected income analysis: “profits attributable to”
•Special Rules
•Foreing Investment in Real Property Invest Act (FIRPTA)
IRC §897
•Branch Profits Tax: IRC §884
•New tax: BEAT
FDAP?
Fixable, Annual, Determinable, Periodic Income- Applies to US. Source Only
§ 871[individuals] imposes a 30% flat tax rate–subject to exceptions
871(h)- repeals tax on interest received from certain debt portfolio
§ 881 [foreing corporations]
Note: Whether tax applies depends on the character of the income which is not defined by U.S. International Tax.
ECI?
Effectively Connected Income?**
See IRC § 882
•US trade or business [not defined by Code and Regsother than personal services]
•Effectively connected income: IRC §864(c) analysis also depends on character + source
Non Resident Alien
Treaties
•May change withholding rate for FDAP income
•Changes definition of USTB: permanent establishment
•Changes effectively connected income analysis: “profits attributable to”
•Special Rules
•Foreing Investment in Real Property Invest Act (FIRPTA)
IRC §897
•Branch Profits Tax: IRC §884
•New tax: BEAT
Non Resident Aliens-2 Ways to Tax non-residen
U.S Person
Defined under
Sec 7701(a)(1)-(5),(30)as:
US Citizen or Resident
Domestic Corp
Domestic Partnership
Domestic Estate/Trust
Taxed on worldwide income, on a net basis, at graduated rates
--> Substantial Presence Test (183 days)
--> Government/Treaties solve dual residence/dual citizenship