Federal and state returns are filed annually for the Foreign Corporation to report income received from sources within the U.S.. Income that is “effectively connected” with the business in the U.S., including income from gain, is taxed at regular corporation income tax rates which vary from 15% – 35%. State and local taxes and rules vary by jurisdiction.
Foreign corporations may also be subject to the branch profit tax (30% unless reduced by tax treaty).
The foreign corporation is required to have an Employer Identification Number (EIN), register with the Department of State, engage the services of a registered agent present in the state where trading and file an Annual Report.
This information is not intended to provide a recommendation on how to structure an interest in U.S. real property. The final decision must be based on what works best given the specific facts. Any decision must also take into consideration what is important to the investor(s), taking into account their different objectives, risk tolerances and sensitivities with respect to the various issues involving U.S. income tax, estate tax, confidentiality and domicile taxation. Additional treaty benefits may apply depending upon the domicile of the client. No purchase or investment structure should be implemented based solely on information provided in this article and, in addition, home country tax advice should also be obtained before selection of ownership structure.