How to Determine the Tax on a U.S. Partnership Interest of a Foreign Person
By Anthony Diosdi Foreign investors generally have the same goals of minimizing their income tax liabilities from their business investments, as do their U.S. counterparts, although their objective is complicated by the very fact that they are not U.S. persons. That is, foreign investors must be concerned not only with income taxes in the United States, but also income taxes in their home country. Further, the United States has a special income tax regime that is applicable to foreign persons. Specifically, if the foreign investor derives certain types of passive income, it is typically taxed at a flat 30% rate (without allowance for deductions), unless an applicable U.S. tax treaty reduces this statutory rate. In contrast, if the U.S. activities of the foreign investor rises to the level of constituting…