Page 9 - U.S, International Taxation Inbound - Outbound Transactions_Neat

Inbound Transactions

(continued)

• Exemptions:
• Royalties
• Royalties paid to a foreign person that are effectively
connected with a trade or business in the U.S. are not
subject to the 30% withholding.
• Capital Gains
• Capital gains are generally unless they are
effectively connected with a conduct of a trade or business
in the U.S. or if they U.S. real property gains under IRC. Sec.
897, and the gain are incurred by a foreign person that
spends 183 days or more in the U.S. during the taxable year,
if the foreign person meets this test, is subject to the 30%
withholding tax as FDAP income.
• Tax Planning Tips:
• Rental real estate
• Foreign persons that own real property in the U.S.
and rent it out may be considered EBT if the activities related
to their investment are regular, continuous and substantial. If
the activities are limited to the receipt of rent and payment
of related expenses, the foreign person will generally not be
regarded as EBT. Any activity that extends beyond the
receipt of rent and payment of related expenses, such as
arranging for repairs of the property, will likely be enough for
the foreign person to be considered EBT (I. DeAmondio CA-
3; J.C. Lewenhaupt, CA-9; E.M.L. Neill, 46 BTA 197; A.R.E.
Pinchot, Exr, CA-2), a net lease will not be considered EBT.M