Can a “Leveraged Lease or License” Avoid the New Anti-Conduit Regulations Revisited with a Touch of Hungarian Spice
By Anthony Diosdi Recently, the Internal Revenue Service (“IRS”) and the Department of Treasury (“Treasury”) issued a number of regulations and proposed regulations (the Proposed Regulations) that will restrict foreign persons’ ability to minimize U.S. tax through “conduit” financing arrangements. See REG-106013-19; 85 F.R. 19858-19873. The new final regulations and Proposed Regulations potentially impact a number of types of structures used by foreign persons for financing into the United States, and therefore these structures should be reevaluated. The discussion below first presents a brief overview of the 30 percent withholding tax as well as the “anti-conduit” rules, then describes if a properly structured “leveraged lease” is entitled to an exemption U.S. withholding tax. The 30 Percent Withholding TaxNon-U.S. taxpayers are subject to U.S. federal income taxation on a limited basis.…