Premium Essay

Foreign Persons Us Trade/Business

In: Business and Management

Submitted By mikiafik
Words 1041
Pages 5
Under present law, a foreign person or foreign corporation is taxed at a flat rate of 30% on his gross income on his US –source income that is not “connected” with US trade or business.
The questions are:
• Whether the foreign person is engaged in a US business
• If a tax treaty is in effect between the US and the country of the foreign person.
If there is an existing tax treaty, the income will not be subject to US tax unless the income is from “permanent establishment” in the US.
Trade or Business – Taxpayer engaged in the marketing of goods or services on a regular, continuous and considerable business activity in the US.
1. Performance of personal services- de minimis- foreign persons who is present in the US not more than 90 days during the tax year and receives no more than $3000.
2. Trading in stocks, securities or commodities- through a US broker will not be taxed by US . Congress created several “safe harbor” for trading on the US market and avoid taxes in order to attract foreign investors.
A broker, dealers will be taxed because they are regularly engaged in the purchase and sale of stocks for profit or if he maintain an office or other fixed place of business in the US.
3. Other Situation-
A. Effect of agency arrangements-
b. Partnership, trusts and estates
c. Banking- Not all lenders are commercial banks. It will be determined if a foreign person conducting a business by one or more of the activities of: Receiving deposits, making personal loan to the public, purchasing, selling for the public checks, bills etc. and issuing letters of credit to the public.
d. Management of real property- The ownership and rental of real property does not create a business. If the foreign person has a management that managed on his behalf, it doesn’t not considered to be a business if its not regular, continuous (day to day) and considerable (opposite than

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