If you are considering investing in or having an overseas business here is a tip about international perfected foreign trusts from tax attorney Carlos Kepke. This tip on international perfected foreign trusts is of considerable interest as it deals with reducing U.S. income tax.

International Perfected Foreign Trusts Tip

“There are few international vehicles left that can help defer U.S. tax, but international perfected foreign trusts in certain circumstances can.

“Let me first explain that international perfected foreign trusts are those that have a foreign relative as a grantor (the person who formed the trust) or a U.S. citizen or resident who has died. Under U.S. tax law non U.S. grantors of non U.S. trusts never have a U.S. tax liability. However if a U.S. person grants a foreign trust, they remain responsible for income earned by that trust as long as they live. The beneficiary is not responsible for tax on the income. Thus when the grantor passes, so to does U.S. tax liability. Once this trust is perfect it essentially is free from U.S. tax.

“Such international perfected foreign trusts can, in some instances, be used to help reduce United States (“U.S.”) income tax of a U.S. corporation.

“An example of this could take the form of a U.S. corporation contracting with a foreign corporation (“F.C.”) owned by a perfected foreign trust for the F.C. to undertake a feasibility study concerning the business activities of the U.S. corporation (e.g., a study as to the feasibility of the U.S. corporation opening new markets outside of the U.S.). The U.S. corporation would pay F.C. handsomely but fairly for the study and take a U.S. income tax deduction for such payment. F.C. would receive the payment and pay no tax on it. F.C. could subcontract out the performance of the study at a price ensuring a healthy profit for F. C.

“The keys to this international perfected foreign trusts tax tip are:

#1: The feasibility study must actually be performed.

#2: The international perfected foreign trusts that owns F.C. must in law be deemed unrelated by ownership to the ownership of the U.S. corporation. [This can usually be accomplished by being sure that the foreign trust is perfected.]”

This international perfected foreign trusts tip is very general in nature and if you feel that it applies to you, you should consult your legal consul or contact Carlos Kepke at carloskepke@webtv.net

Until next message may all your international business and investing be good!


P.S. Learn more about offshore trust tax tips in the correspondence course International Business Made EZ at GaryScott.com

tax deferral  strategies

Real international business is fun and can bring tax advantages and asset protection. Gary and Merri Scott gain tax advantages as they enjoy developing their healing center in Ecuador

International Perfected Foreign Trusts
was written by June 5, 2003