That means the top marginal rate of 39.6% applies to overseas passive income because the general tax rate deductions and the new participation exemption rules reductions do not extend to Passive income and gains. (See pages 4501 and 1297)
Both changes to participation exemption and carried interest give reason for a Clean Nominee Bank Account structure for:
- Private Equity because they could be caught by the carried interest definition and three year tax holiday; which means they could suffer to pay tax on money not yet received
- Captive Insurance Passive income solution
- Hedge Fund specific solution to continue deferral of carried interest.
Summary of additional solutions for the 2018 overseas tax problems:
- Pre-tax income contributions and accumulations increases yield
- Governments approved privacy and secrecy in a foreign financial account
- There are no limits to pre-tax contribution amounts
- There are no time limits to a tax holiday
- Extend the tax holiday on private equity, hedge funds and stock options
- Tax free loan to finance Company operations
- Captive insurance dividend excluded from passive foreign income tax
- Pre-tax income to purchase shares in own business
- Block the forced repatriation of overseas earnings
To learn how to enact the 2018 Tax Solution for Offshore Private Equity contact us today.