Discussion:Foreign office of a US company
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Discussion Forum Index --> Tax Questions --> Foreign office of a US company
| 16 June 2007 | |
| Hi Everyone,
I have a US C corporation client doing business in the US. They want to open an office in Pakistan. I just want to know what additional forms will be required with the 1120 if any. Or if there are other things I should be aware of. Thank you! | |
| 16 June 2007 | |
| An office could be a "branch" of the US company or a "subsidiary" of a US company. Branch profits taxes apply to a branch and for a subsidiary any income deemed to be earned in the US will be taxable in the US. As well, reporting of foreign bank accounts is required in the US; as well as reporting on a US citizen who owns or controls a foreign corporation.
Find out if they want a branch of the US corporation or if they are going to incorporate in Pakistan and this corporation be owned by the US corporation.... | |
| 16 June 2007 | |
| Thanks Sandysea. From my discussion with him yesterday, it sounds like they want to do whatever is easiest. They don't expect income from the Pakistan office, it will be more for research and development. I think they are wanting more of a branch of the US corporation. | |
| 16 June 2007 | |
| Then you need to research branch profits taxes. If it is R&D, then this should not pose too big a problem, but this is the way IRS can triple tax distributions through a branch. | |
| 17 June 2007 | |
| A branch profits tax is imposed on the profits from a branch office in the United States if the branch is owned by a foreign corporation. Not sure that really applies here. See Internal Revenue Code ยง 884. | |
| 17 June 2007 | |
| Nope doesn't apply to the US owning a branch in a foreign country; my bad :) | |
| 17 June 2007 | |
| So it sounds like there really isn't anything that needs to be done in the US; only any Pakistan requirements. They aren't opening a foreign corp. so I don't think they'll have to file Form 5471. | |
| 17 June 2007 | |
| Yes, still if there is a branch then this income is taxed in the US on foreign income; they can take the foreign tax credit for taxes paid in Pakistan. As well, they will have filings on bank accounts, etc. But if it is not a CFC, then they will have no Subpart F income to report or a 5471. | |
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