TAX 9869 Lecture Notes - Lecture 48: Withholding Tax, Foreign Corporation, Wdiv-Tv

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17 Jul 2020
Part II
Foreign individuals and corps doing biz in the US- FDAP income (and how it can be
ECI), wholding tax, real ppty, interest and portfolio interest exception, ECI- how
determined, exceptions
Situation: foreign corp doing biz in the US
o Certain things to consider in the context
o Not only issue of foreign corp being subject to tax, but also branch profits tax
o You have a foreign corp doing biz in US, how would it be doing biz in US? Could
have US trade/biz, US LLC (its biz), since it’s its biz, the foreign corp treated as
doing biz in US
Could have ECI^
The foreign corp then has to pay tax on its income- ECI income= net income amt
(income- deductions @graduated rates) diff from withholding tax on gross amount
Doing biz in US as a foreign corp is fine; problem= additional tax that could kick in=
branch profits tax
o Any trade/biz foreign corp has in the US is its USTB and the Foreign Corp pays
US tax
o There may be profits earned in US LLC- those profits may be removed out of the
US LLC back into the foreign corporation
Branch profits tax similar to dividend- when you pull profits out, taking $
out of biz, similar to a dividend
o View any op in US as standalone thing, it has income, makes $, but then may
distribute $ out, foreign corp should be treated as though it received a div
No diff than if foreign corp owns US corp and then US corp pays div out
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