We all know that the United States Code Title 26 (income tax) code is spider's web of laws and regulations that capture the unwary and sometimes those that are very wary. It's so complicated that no one really knows what's going on. A lot of people think, if you live overseas, you can reduce taxes by setting up a foreign business entity (S.A., Limitada, EIRL, IBC, Trust, etc., you get the picture) except DON'T! If you think the domestic tax policy is complicated, you won't believe what the international side looks like. Some international tax professionals state the rules are "insanely" complicated. That's on a good day. Some "entities" can be designated as "pass through" and, thus, simplify your life. Others can't be. For instance, Chile has an S.A. (Sociedad Anonima) and that particular entity isn't allowed the "pass-through" election. This means, depending on the exact numbers, if you own a piece of that action, you will be required to file such nasty forms as 5471. If you don't, you have to pony up US$ 10,000 in fines the IRS WILL levy. Not only that, the IRS has the authority to "deem" a Limidata to be a foreign corporation unless you file a form electing to be a "pass-through" within 75 days of creating the Limitada. These are just two examples. There are many others. I can't count the number of times I've been asked to help with a Limitada only to find it had been created the year before. There's not much that can be done for relief at that point. So, the moral of the story is, if you want to set up a legal business entity in a foreign country, talk to a tax adviser first. At least get all the information before you move. Maybe you'll decide an S.A. is the best way to go. OK, if you make the decision with all the information. There'll be no surprises and in business we all know we don't want surprises. Tune in again as I detail some other issues that may concern you.
Oh yeah, ABOLISH THE IRS!! WRITE YOUR CONGRESSMEN AND SENATORS!!
Later.
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