Peter and Harriet were invited to speak at an event hosted by Dentons law firm for Belgium investors interested in expanding their business on U.S. soil.

1. Cross Border CorporateCross Border Corporate
and Individual Tax Planningand Individual Tax Planning
Rowbotham
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l l p
October 30, 2014October 30, 2014
Peter Trieu, J.D., LLMPeter Trieu, J.D., LLM
Rowbotham and CompanyRowbotham and Company
ptrieu@rowbotham.comptrieu@rowbotham.com
415-433-1177415-433-1177

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Doing Business in the U.S.Doing Business in the U.S.
 Physical presence in the U.S.Physical presence in the U.S.
 Directly or Through Partnership / LLCDirectly or Through Partnership / LLC
 SimpleSimple
 Potentially no tax if treaty applicablePotentially no tax if treaty applicable
 May require filing U.S. tax returnMay require filing U.S. tax return
 Exposure to Branch Profits taxExposure to Branch Profits tax
 Exposure to State income taxExposure to State income tax
 Using a U.S. corporationUsing a U.S. corporation
 No Branch Profits taxNo Branch Profits tax
 No State income taxNo State income tax
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3. 33
Foreign Branch
Employees and U.S. Activities
• Federal Tax Rates
• State Tax Rates
• Potential Branch Profits Tax
(1) Business Activities Taxed in U.S
(2) Branch Profits Tax
(3) Complicated Allocations of Income and Expense
• §864 – Activities that Create U.S. Tax Nexus
• Income Tax Treaty – Article 4
• Residency
• Permanent Establishment
Foreign Corporation

4. 44
1. Foreign Parent Objective: Avoid “PE” status
2. EXAMPLE: excerpt from U.S.-Belgium Income Tax Treaty
Article 5 – Permanent Establishment
The term “permanent establishment” includes especially:
(a) a place of management;
(b) a branch;
(c) an office;
(d) a factory;
(e) a workshop; and
(f ) a mine, an oil or gas well, a quarry, or any other place
of extraction of natural resources;
Foreign Corporation – Permanent Establishment

5. 55
Limited Liability Company
Foreign Corporation
U.S. Activities
• Federal Tax Rates
• State Tax Rates
• Potential Branch Profits Tax
(1) Business Activities Taxed in U.S
(2) Branch Profits Tax
(3) Complicated Allocations of Income and Expense
• §864 – Activities that Create U.S. Tax Nexus
• Income Tax Treaty – Article 4
• Residency
• Permanent Establishment
LLC

6. 66
Partnership
U.S. Activities
(1) Foreign Owner Considerations
(2) Impact of Partnership
(3) Withholding Taxes at Source: §1446
• Presence in U.S. – §864
• Tax Treaty Considerations – Same as Before (Permanent
Establishment)
• Does It Create U.S. Permanent Establishment?
Partnership
Foreign or U.S. OwnersForeign Owner

7. 77
Hybrid Structure
Foreign Owner
LLC
or
Foreign Company
(1) Basis Step-Up
(2) Foreign Owner Considerations
(3) Impact of Partnership
(4) Withholding Taxes at Source: §1446
• Presence in U.S. – §864
• Tax Treaty Considerations – Same as Before (Permanent
Establishment)
• Does It Create U.S. Permanent Establishment?

8. California Unitary Tax
Operating in CA
(1)
Doing Business through Foreign Company
U.S. Operation
(2)
Doing Business through U.S. Inc.
Outcome Calculate Worldwide Income
Calculate CA Tax
Pro-Rate CA / Worldwide
Factors
• Sales
• Wages
• Property
[Water Edge Election]
Calculate U.S. Taxable Income
Calculate U.S. Tax
Pro-Rate CA / U.S. Inc. Factors
• Sales
• Wages
• Property
Foreign
Owner
U.S. Inc.
Foreign
Owner
Branch

9. Cost to Incorporate
Legal or
Cost Accounting
(1) Form Delaware Corporation
- Online process $500 $1-2,000
- Can do same day
(2) Obtain a federal tax identification number
- Form SS-4 -0- $150
- www.irs.gov
(3) With (1) and (2), open a U.S. bank
account. Know your customer [KYC] -0- -0-
rules can take several weeks.
(4) California – apply to Secretary of State to
Qualify Delaware company to conduct
business in California
- Takes two to four weeks $1,000 $3,000
- Accelerated approval $2,000
Doing business
in California
Delaware
Inc.

10. For regular income tax purposes, a system of graduated marginal tax rates
is applied to all taxable income, including capital gains
Federal Corporate Tax Rates
Taxable Income ($) Tax Rate
0 to 50,000 15%
50,000 to 75,000 $7,500 + 25% Of the amount over 50,000
75,000 to 100,000 $13,750 + 34% Of the amount over 75,000
100,000 to 335,000 $22,250 + 39% Of the amount over 100,000
335,000 to 10,000,000 $113,900 + 34% Of the amount over 335,000
10,000,000 to 15,000,000 $3,400,000 + 35% Of the amount over 10,000,000
15,000,000 to 18,333,333 $5,150,000 + 38% Of the amount over 15,000,000
18,333,333 and up 35%
This rate structure produces a flat 34% tax rate on incomes from $335,000 to $10,000,000, gradually
increasing to a flat rate of 35% on incomes above $18,333,333.

11. Corporate Taxation - Federal Tax
Second Level Taxation
Dividends - 30%
Lower Treaty Rate
Net Profits
First Level Taxation
Federal Tax Rates - 35%
Foreign
Owner
U.S. Inc.

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Income SourcingIncome Sourcing
 Federal- tFederal- the source of income rules are largely codified by income category
 Interest income- generally is an individual debtor's place of residence and a corporate debtor's place of
incorporation. IRC §§861(a)(1) and862(a)(1).
 Dividend income- generally is the place of the paying corporation's incorporation. IRC §§861(a)(2)(A)
and 862(a)(2).
 Income from personal services- generally is the place where services are performed. IRC §§861(a)(3)
and 862(a)(3).
 Rentals and royalties- sourced either to the geographic location of the property or the place of permitted use
of the property. IRC §§861(a)(4) and 862(a)(4).
 Income from a disposition of a U.S. real property interest- determined according to the situs of the property.
IRC §§861(a)(5) and 862(a)(5)
 Income from the sale of inventory is sourced to the place of sale. IRC §§861(a)(6) and 862(a)(6).
 Income from the sale of other property- generally sourced by the residence of the seller. IRC §865(a)
 California-California- Income from sources within CA includes income from real or tangible personal property located in CA;
income from a business, trade, or profession carried on within CA; compensation for personal services
performed within CA; and income from stocks, bonds, notes, bank deposits and other intangible personal
property having a business or taxable situs in CA; and rentals or royalties for the use of, or for the privilege of
using in this State, patents, copyrights, secret processes and formulas, good will, trade-marks, trade brands,
franchises, and other like property having a taxable or business situs in CA. CCR 17951-2
 Intangible personal property has a business situs in CA if it is employed as capital in this State or the
possession and control of the property has been localized in connection with a business, trade or profession
in CA.
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13. 13
U.S. Taxation of Residents

14. 1414
• The Substantial presence test met if taxpayer is:
- Present in the U.S. at least 31 days in the current year; and
- Present in the U.S. for 183 days according to a formula:
Year days multiplier
2014 120 1 120
2013 120 1/3 40
2012 120 1/6 20
180
• Exceptions:
- Taxpayer has a closer connection to a foreign country
- Treaty tie breaker test
Substantial Presence
• Treaty does not exempt person from foreign reporting requirements

15. Estate & Gift Taxation: Domicile
• Residents are Subject to Tax on Worldwide Assets
• Nonresidents for Gift/Estate Tax Purposes are Subject to Tax on Only U.S. Assets
• For Gift/Estate Tax Purposes, Residents are Defined by One’s Domicile
- Gift Tax – §2501, Reg. §25.2501-1
- Estate Tax – §2101, Reg. §20.0-1
- Facts and Circumstances
- Permanent Home
- Intent
Examples:
• U.S. Citizen Living Abroad – Domicile = U.S., Subject on Worldwide Assets
• Green Card Holders Living in U.S. – Domicile = U.S.
• Green Card Holder Living Outside U.S. – Domicile = Uncertain.
Possibly Non-Domiciled in U.S.
• Visa Holders Living in U.S. – Domicile = Uncertain. Likely Non-Domiciled in U.S.

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Reporting RequirementsReporting Requirements
 Non-U.S. Trust & GiftNon-U.S. Trust & Gift 35203520 35% of distribution35% of distribution
 Non-U.S. TrustNon-U.S. Trust 3520A 5% per month up to 25%3520A 5% per month up to 25%
 Non-U.S. PartnershipNon-U.S. Partnership 88658865 $10,000/ year per entity$10,000/ year per entity
 Non-U.S. Disregarded EntityNon-U.S. Disregarded Entity 8858 $10,000/ year per entity8858 $10,000/ year per entity
 Non-U.S. CorporationNon-U.S. Corporation 54715471 $10,000 / year per company$10,000 / year per company
 Transf. to a non-U.S. corp.Transf. to a non-U.S. corp. 926926 25% of value up to $10,00025% of value up to $10,000
 Non-U.S. Financial AssetNon-U.S. Financial Asset 89388938 $10,000/year up to $50,000$10,000/year up to $50,000
 Non-U.S. Bank AccountNon-U.S. Bank Account FinCEN 114 50% of highest balance/yearFinCEN 114 50% of highest balance/year
Potential PenaltiesPotential Penalties
IRS FormIRS Form for Non-compliancefor Non-compliance

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Peter Trieu, Tax PartnerPeter Trieu, Tax Partner
Peter Trieu is the Tax Partner at Rowbotham & Company. His practice focuses on
advising clients regarding domestic and international tax planning and compliance. He
also assists clients with their estate plans. His clients include entrepreneurs, multi-
national families, high net-worth individuals and businesses. Prior to joining the firm, Mr.
Trieu worked for several years as a Trusts and Estates attorney.
Mr. Trieu has been a guest lecturer at the Haas Business School at the University of
California, Berkeley, and has been a speaker for several U.S. and international tax
planning organizations. He has also written numerous articles including some published
in CalCPA magazine.
Mr. Trieu is an attorney licensed to practice law in the State of California. He
earned a Bachelor of Arts in Business-Economics with a minor in Accounting from
University of California, Los Angeles. He graduated cum laude from University of
California, Hastings College of Law, where he had a concentration in taxation,
and earned a Master of Laws (LL.M.) in Taxation, with honors, at Golden Gate University.

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Harriet Leung, Audit PartnerHarriet Leung, Audit Partner
Harriet Leung, Partner of Advisory Services at Rowbotham & Company, heads the firm’s
substantial Asia practice of high net worth individuals and works with many technology
startup companies in multi-media gaming and social media. Ms. Leung also advisesMs. Leung also advises
companies in the financial due diligences, audit and business advisory areas. She hascompanies in the financial due diligences, audit and business advisory areas. She has
substantial experience servicing companies that were seeking listings on both foreignsubstantial experience servicing companies that were seeking listings on both foreign
and U.S. stock exchange markets. She has successfully represented and worked withand U.S. stock exchange markets. She has successfully represented and worked with
companies in Asia completing reverse mergers into the U.S. public companies.companies in Asia completing reverse mergers into the U.S. public companies.
Ms. Leung has spoken at various tax and financial conferences in China, Hong Kong,
Thailand and the U.S. Ms. Leung serves on the Board of Directors for the Hong Kong
Association of Northern California where she recently organized and chaired a highly
successful event on tax and immigration planning
Ms. Leung is originally from Hong Kong, and moved to the U.S. in 1991. She has a
Bachelor’s degree in Accounting and an MBA in Finance with honors from Golden Gate
University, and is a Certified Public Accountant in California.

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ROWBOTHAM &
C o m p a
n yAccountants and International Tax Consultants
www.rowbotham.com