Investing into a US Limited Liability Company – NZ tax consequences (WITHDRAWN)
These 5 rulings and the accompanying commentary set out the income tax treatment and availability of foreign tax credits for NZ investors in a US LLC that is taxed on a fiscally transparent basis as a partnership in the US, but as a foreign company in NZ. The Rulings demonstrate the different treatment depending on whether the interest in the US LLC is classified as under the FIF threshold, or as a FIF, or as a CFC. It then explores the impact for different categories of FIF (AFIM/other methods/non-attributing active FIF) and CFC (attributing/non-attributing active). There is also an analysis of the operation of the relevant fiscal transparency and double tax relief provisions (arts 1(6) and 22) in the NZ/US DTA.
Tax Information Bulletin Vol 32 No 7 - August 2020
BR PUB 20/01: Dividends derived by New Zealand resident investor in a United States limited liability company that is a foreign investment fund where the NZ investor holds foreign investment fund interests of $50,000 or less
BR PUB 20/02: Foreign investment fund income derived by a New Zealand resident investor in a United States limited liability company
BR PUB 20/03: Attributed foreign investment fund income derived by a New Zealand resident investor in a United States limited liability company
BR PUB 20/04: Controlled foreign corporation income derived by a New Zealand resident investor in a United States limited liability company
BR PUB 20/05: Dividends derived by a New Zealand resident investor in a United States limited liability company that is either a non-attributing active foreign investment fund or a controlled foreign corporation
2014 Delaware Code, § 18-503
Double Taxation Relief (United States of America) Order 1983, arts 1, 22
Income Tax Act 2007, ss BD 3, CB 1, CD 1, CD 3 to CD 20, CD 36, CQ 1, CQ 2, CQ 4, CQ 5, CW 9, CX 57B, EX 28 to EX 37, EX 37B, EX 38 to EX 42, EX 42B, EX 43, EX 44, EX 46, EX 50, EX 51, EX 59, HG 2, LJ 1, LJ 2, LJ 4, LK 1, LK 4, K 5 subpart OE, YA 1 (“company”, “foreign company”, “partnership”, “share”)
Internal Revenue Code (US), §§ 701, 703
Limited Liability Company Act (Delaware), §§ 18-201, 18-502, 18-701
Partnership Act 1908, s 4
Tax Administration Act 1994, s 93C
Alliance Group Ltd v CIR (1995) 17 NZTC 12,066 (HC)
Anson v Commissioners for HMRC [2015] UKSC 44
CIR v Albany Food Warehouse (2009) 24 NZTC 23,532 (HC)
Mills v Dowdall [1983] NZLR 154 (CA)
Mr Swift v Commissioners for HMRC [2010] UKFTT 88 (TC)