This article is accompanied by a video on The Lehman Tax Law Library at
Website: https://thelehmantaxlawlibrary.com/
Youtube Channel: https://www.youtube.com/channel/UCTH1JITaiKhUSC3MTxFVXYg
These videos are a short-cut to understanding the most important tax law changes resulting from the Trump legislation, but a more thorough review may be required to fully understand the content.
The major new tax issue for foreign investors in the US is how the Trump Tax bill affected tax rates for nonresident individuals and foreign corporations. These tax rates have been greatly reduced and present a very favorable new tax regime. The tax rates for foreign investors in the US that are investing in corporate form could amount to a single tax of only 21%. Individual investors may have a US tax on US source income of less than 20% on their taxable income.
In order to take advantage of the multiple tax benefits that the US has to offer, the foreign investor will need to be aware of the fact that it is possible to pay just a single tax in the US on personal and corporate income and to avoid any US death taxes or gift taxes in their entirety. However, careful planning in advance of making U.S. investments is important.
America today is one of the lowest tax jurisdictions in the modern world. Not only are tax rates lower, in addition business deductions that also result in lower taxes have been increased for many U.S. industries.
The number of available tax benefits and tax efficient investment and business vehicles and ways of doing business in the US today are a model for a capital-generating machine. These are rates being accomplished by many taxpayers.
This generous new tax regime is extended to foreign investors who not only have almost all of the benefits of the U.S. taxpayer, but who in addition may enjoy tax benefits that are not extended to the American taxpayer. Often the foreign investor in the U.S. can pay much less in taxes than U.S. citizens and residents.
The foreign investor in the United States can still buy stock and sell it at a profit in almost every type of business (except real estate oriented U.S. corporations), without paying a single tax on “capital gains.”
The foreign investor in the United States may continue to make “portfolio loans.” These are unique loans that will permit the nonresident alien investor to enjoy tax-free interest income and not be subject the U.S. estate and/or gift tax so long as the foreign investor does not own 10% or more of the U.S. investment, which is the object of the loan.
The foreign investor can continue to invest in U.S. bank deposits without taxation on U.S. interest income and without being subject to the U.S. estate tax (“death tax”) if the nonresident alien passes away owning U.S. bank deposits.
The foreign investor can still invest in the United States and deduct all of the expenses related to the United States investment.
The United States of America today is the investor’s dream. However, realizing the benefits of this reduced tax environment often depends on highly skilled professionals to navigate the U.S. tax maze.