Tag: Tax and Treaty Considerations

By Anthony DiosdiIf a foreign person conducts a trade or business in the United States, the net income effectively connected with the U.S. business activity will be taxed at the usual U.S. marginal tax rates. This regime taxes the foreign person’s net income derived from the U.S. trade or business (effectively connected gross income minus allowable deductions attributable to the U.S. trade or business). The rules for allocating and apportioning deductions are used to determine which of the foreign person’s potential deductions are attributable to the U.S. trade or business.In the case of a foreign corporation that conducts a U.S. trade or business through a U.S. branch, an additional 30-percent tax (called the “branch profits tax”) may apply when a foreign corporation’s U.S. trade or business earnings are not reinvested…