¿Cómo grava Estados Unidos a los socios extranjeros en una sociedad estadounidense?
I am a foreign partner in a U.S. partnership with one other partner who is a U.S. citizen. Our partnership, STOLEWAY VENTURES, earned $500,000 in profit effectively connected with its U.S. business. Out of this, $400,000 was earned through our U.S. Permanent Establishment (PE). My share of the profit is $250,000, and $200,000 of it is derived through the U.S. PE. How will the U.S. tax my income if I reside in a non-treaty country like Brazil?
1. General Questions:
- a. How is a foreign partner’s income from a U.S. partnership taxed if the foreign partner resides in a non-treaty country?
- b. How does the U.S. tax income derived through a U.S. Permanent Establishment (PE)?
- c. If I reside in a treaty country, such as Finland, how would my taxation differ based on the U.S.-Finland tax treaty?
- d. What specific article of the U.S.-Finland Treaty impacts the taxation of business profits not attributed to the U.S. PE?
- e. Can you provide the Internal Revenue Code (IRC) sections that govern the taxation of foreign partners in U.S. partnerships?
Answers:
1. Example Scenario Breakdown:
- If you are a foreign partner residing in a non-treaty country like Brazil, the U.S. will tax you on your entire $250,000 share of STOLEWAY VENTURES’ U.S. business income. This includes both the $200,000 derived through the U.S. PE and the remaining $50,000 that is effectively connected with the U.S. business but not through the U.S. PE. The applicable IRC sections are 871(b) y 882, which require foreign persons to be taxed on income effectively connected with a U.S. trade or business.
2. Taxation of Foreign Partners in Non-Treaty Countries:
- a. A foreign partner residing in a non-treaty country, such as Brazil, is taxed on their entire share of U.S. business income. This includes any income effectively connected with a U.S. trade or business, regardless of whether it is derived through a U.S. PE. This is mandated by IRC sections 871(b) and 882.
3. Income Derived Through a U.S. Permanent Establishment (PE):
- b. The U.S. taxes income derived through a U.S. PE based on the income that is attributable to the activities of the PE. This is in accordance with IRC section 864(c), which defines income effectively connected with a U.S. trade or business, including income from a U.S. PE.
4. Taxation Under Treaty Countries:
- c. If you are a resident of a treaty country like Finland, the U.S. taxation of your partnership income may differ. Under Article 7(1) of the U.S.-Finland tax treaty, the U.S. will only tax the income attributable to the U.S. PE. Therefore, only $200,000 of your $250,000 share will be taxed by the U.S., with $50,000 being exempt.
- d. Article 7(1) of the U.S.-Finland tax treaty specifically impacts the taxation of business profits not attributed to the U.S. PE, exempting those profits from U.S. taxation.
5. Relevant Internal Revenue Code (IRC) Sections:
- e. The relevant IRC sections that govern the taxation of foreign partners in U.S. partnerships include:
- IRC §871(b): Tax on nonresident alien individuals.
- IRC §882: Tax on income of foreign corporations connected with U.S. business.
- IRC §864(c): Definition of income effectively connected with a U.S. trade or business.
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