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US International Tax Implications of Doing Business in Romania

US International Tax Implications of Doing Business in Romania. Charles T. Chongo, CPA January 13, 2011. Ownership of a Romanian Company. Key Tax Matters Withholding Tax Double Tax Treaty—IRS Form 8802 & Certificate of Fiscal Residence—Form 6166

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US International Tax Implications of Doing Business in Romania

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  1. US International Tax Implications of Doing Business in Romania Charles T. Chongo, CPA January 13, 2011

  2. Ownership of a Romanian Company Key Tax Matters • Withholding Tax • Double Tax Treaty—IRS Form 8802 & Certificate of Fiscal Residence—Form 6166 • Foreign Tax Credit (Direct Tax Credit/Indirect Tax Credit) • Controlled Foreign Corporation Rules & Passive Foreign Investment Companies • More than 50% US ownership by 10% US owners (Vote & Value) • Active Trade or Business Requirement • Subpart F (Foreign Personal Holding Company Income--Dividends, Interest, Rents & Royalties/Foreign Based Company Sales Rules)

  3. Ownership of a Romanian Company Practical Considerations • Qualified Dividends & Capital Gains (Stock Sales & Section 1248 Shareholders (10% or more ownership) • Cross Border Contracts (Services & Management Services Contracts—who owns what—where is the value?) • Transfer Pricing & Arm’s Length Standard (Cost Plus Arrangements) • Individual Liability to Romanian Tax (183 days rule) • Tax Compliance—Form 5471/Form 5472 Form 926, Section 351 Statements, Section 1.6038b Statements, FBARs (TD F 90-22.1) • IRS Voluntary Disclosure Program

  4. Holding Companies Holding Company Structures • General Overview • Requires Significant Business Commitment • Low Effective Rate of Tax • Good Tax Treaty Network • EU Parent-Subsidiary Directive, Royalties & Interest Directive • No Withholding Tax on Incoming and Outgoing Payments • No Taxation of share sales or asset sales • Cyprus, Luxembourg, Switzerland, Ireland, Netherlands, Bermuda/British Virgin Islands, Barbados • Intellectual Property Incubation/Active Trade or Business Requirements • US Inbound Structures

  5. Open Discussion—Q&A/Other Areas of Interest

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