Class 14: July 27, 2020
Common situation:
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- Foreign Pship and have multiple foreign investments that can all be PFICS
- So when FP gives you a k-1 equivalent or k-1 and ur a US guy that owns 1%
- It should give you info about ach PFIC and say here’s what u need 2 make an election
Income tax treaties
- Designed to reduce or eliminate double taxation
- Covers income tax (no other tax)
- Has weight within the law as a treaty
- Binding law
- Whenever conflict in law: rule is always look to last in time (later in time enacted follow THAT)
- You can have sec. of IRC from 1986 or 2010 and have inc tax treaty ratified in 2018 and bc its later in
time u would follow that over the tax provision/law bc treaty = law
- Pres. signs income tax treaty
- Special arm of govt that will go negotiate inc tax treaty w/ diff countries
- But the senate has to approve it//ratify it and pres. signs it
- Should not be confused w/ other types of treaties:
- Estate + gift tax treaty
- Tax Information exchange agrmt
- Social security treaties =totalization (if a US person and go work abroad in france; don't pay tax
in 2 locations)
FATCA treaty/agrmt
- Even if subj to tax in both locations then @ a reduced rate
- US tax rate on withholding = 30%
- Treaty can override code sec (or could say does not override code sec)
- When its written; sometimes things need to change
- Countries will enter into a protocol= amending an income tax treaty
- Look @ effective date of treaty
- May find that treaty is there bc it was discussed but hasn’t been entered into force
- Means its enforceable and exists under the law
- Treaty somewhere in CCH- there bc that is what was discussed b/wcountries, may not be
entered into force- make sure you’re looking@latest treaty w/protocol, entered into force, exists
under law
- Certain countries don’t have, but exists in Web, discussed, want to draft something, couldn’t
agree
- US doesn’t have many with Latin Am countries= Brazil
- Also not with HK, Singapore
- Many countries, but not all
- Not only does US treaty have, others can with other- Singapore and China, China and India,
etc.
- We’ll talk about what you might insert entities to take advtg- two people don’t have, can’t stick
someone in middle, not allowed
- Treaty shopping^ doesn’t work