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Foreign Corporations and Taxation Savings

Posted by Rachel Santana Posted on May 31 2013

We recently had a client with a unique situation. 

In the case where a US Shareholder was partnered with a foreign partner in a business venture.  The foreign partner was required to have 39.6% withheld on all of his earnings even though the earnings were not generated in the US nor was he a US resident. 

While there was no difference in the taxes paid by the US Partner as all worldwide earnings by US Citizens are subject to taxation in the US, there was a huge difference to his foreign partner.  By opening a corp in another country that does not tax income generated outside of that country even if the corp is housed there, we are able to pass the foreign partner his earnings at gross and then they are simply subject to taxation in his country of residence.

We always learn thru experiences and circumstances surrounding clients, and this resulted in huge tax savings.  We will continue to build on this knowledge looking for ways to implement these tax saving strategies into situations that our clients face. 

Rachel Santana