Tax treaties provide lower withholding tax rates on dividends, interest, and royalties derived from sources within a treaty county. Tax treaties can also be very important residency cases. The international tax attorneys at Diosdi Ching & Liu, LLP have advised a number of green card holders and aliens regarding residency and nonresidency for U.S. tax purposes. The concept of “resident” can be critical in determining whether an alien will be subject to U.S. federal income tax on foreign investments. One way an alien working in the U.S. on a temporary basis may avoid being classified as a resident for U.S. federal income tax purposes is through the application of a treaty “tie-breaker” rule. The international tax attorneys at Diosdi Ching & Liu, LLP have advised individuals if it is possible to avoid U.S. taxation on worldwide income through the application of the treaty “tie-breaker” rule. A treaty tie-breaker is contained in many tax treaties. In one case, the international attorneys at Diosdi Ching & Liu, LLP advised a Bermuda resident to utilize a Hungarian company to invest in a U.S. corporation. Using this approach, rather than being subject to a 30 percent U.S. withholding tax, dividends paid to the Bermuda resident was subject to a five percent U.S. withholding tax.
The international tax attorneys at Diosdi Ching & Liu, LLP have significant experience advising individuals and businesses regarding international tax treaties to reduce global tax liabilities. Contact us now for a consultation!