Foreign Investment in US Entities: Creative Solutions Bring Large Financial Rewards

Penny Banks, Frisco tax partner, had a British client who wanted to lend $800,000 to a closely-held United States corporation which promised him a 15% return on his investment. Normally, earnings on loans to American enterprises by foreign citizens are subject to a 30% flat tax. However, Penny knew that any interest earned by a foreigner from a bank deposit is tax-free. Because of GHB's good relationship with banking sources, Penny introduced her client to a banker who loaned the $800,000 in funds to the corporation, secured by her client's certificate of deposit (CD) for the same amount. The bank guaranteed Penny's client a 13% return. Penny's client's liability was 0% as opposed to 30%, and his cost was only 2%, a net increase to the client of 2.5%.

If you want to know more about the rules of taxation for foreign investors, or you need an accountant with creative solutions that maximizes your profits, send Penny an email.