27th Nov 2013

Buford & Associates has worked with many foreign entities that need to qualify to do business in the United States. There are many issues that need to be navigated when working on tax issues related to foreign companies.

One of the questions that we are often asked is, “When does a foreign company qualify for benefits under a United States income tax treaty?”

The Office of Chief Counsel of the Internal Revenue Service recently issued a tax opinion memorandum addressing a non-taxpayer specific situation. As you will see from a review of the full memorandum, the IRS tax counsel discussed a fictitious situation in which a U.S. taxpayer was claiming dividend income from a foreign-owned corporation. In this example the foreign holding company was based in Cyprus, but it had no Cypriot ownership.

The question under consideration was whether a Cypriot holding company with no Cypriot ownership can qualify for benefits of the U.S.-Cyprus income tax treaty and provide its U.S. shareholders with a reduced rate of tax on dividends from “qualified foreign corporations.”

In this instance, the IRS Chief Counsel determined that if the establishment, acquisition and maintenance of the company and the conduct of its operations did not have a as principal purpose obtaining benefits under the U.S. Tax Treaty, then it can qualify for benefits of the Treaty for purposes of section 1(h)(11).

If you would like to download and read the entire memorandum of the IRS Office of Chief Counsel, you can click here.

At Buford & Associates, we work with U.S. and foreign companies to ensure they are in compliance with the U.S. tax laws and regulations. If you are associated with a company that has not filed tax returns in several years or you are dealing with other tax issues with the IRS, or you are a wealthy individual in need of a professional and effective tax attorney, then you should call Sam Buford at Buford & Associates to discuss your tax related questions and legal issues.

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