Interesting International Tax Tip

by | Jan 9, 2006 | Archives

To celebrate the New Year and serve you better, Merri, David and I have improved our website and focused it on just five main areas. Today's message is linked to our “International Business Made EZ“.

I am always looking for interesting tax ideas to share at this site. For example I have just recently tied an investing idea with a business ideas with a financing idea and now with a tax idea that will bring some high profits with low tax. Plus learn here how to reach thousands of investors outside the U.S.

The investing idea comes from Ted Thomas who teaches investors how to invest in tax liens. The high return investments (up to 24% a year) are government guaranteed.

The business idea is to find investors abroad to invest in these liens. and the financing idea is to borrow US dollars at 3.375% to invest in these liens that return up to 24%.

Then recently our long time friend and tax attorney Carlos Kepke sent me this tax tip below.

“This Tax Tip demonstrates the use of income tax treaty planning. Positioning one's self to have a foreign corporation receiving passive income (rents, interest, royalties, dividends, etc.) from United States(“U.S.”) business operations or from U.S. investments would normally result in a U.S. withholding tax of thirty percent (30%) on such passiveincome.

“If the recipient foreign corporation were incorporated in a jurisdiction having an income tax treaty with the U.S. then, in certaincircumstances, it may well be that the payments of such passive income might be subject to a significantly less tax burden than thirty percent (30%). [For example, assuming other qualifications are met, payments of intellectual property royalties from the U.S. to an offshore corporation could be subject to as low as a five percent (5%) tax rate utilizing proper income tax treaty planning.]

“Having tempted the readers with the possibilities of income tax treatyplanning, I should add that in recent years the Internal Revenue Service has narrowed the planning opportunities in this area – but there are some left.” Carlos

I immediately began researching this further to see if tax treaties could reduce the tax for income earned from tax liens and asked Carlos and several other attorneys about this!

Here is Carlos' reply:

“I examined the income tax treaties between the United States ('U.S.”) and other countries relative to reducing the U.S. withholding tax rate (from thirty percent (30%)) on interest paid from U.S. sources to foreign payees.

“The income tax treaties address reducing the U.S. withholding tax rate with respect to two (2) types of interest payments – (i) interest paid by U.S. obligors in general and (ii) interest paid on real property mortgages. [There appears to be no reduced U.S. withholding tax rate on “penalties” associated with tax liens, but rather only with respect to the interest portion of such payments.]

“The income tax treaties reduce the U.S. withholding tax rate from thirty percent (30%) to varying lesser amounts down to zero percent (0%), with each income tax treaty having its own particular qualifying features.

“I think it fairly safe to say that we can find an income tax treaty that reduces the U.S. withholding tax rate of thirty percent (30%) to something significantly less provided that we are able to establish an offshore payee that does not have a U.S. “place of business” or a “permanent establishment” in the U.S.”

This makes the idea of helping overseas investors invest in tax liens even more powerful! Anyone who wants an international business, this could be it and in this year Merri and I plan to help a few business people take advantage of our lists of thousands of investors abroad.

For more information on the tax treaties, Carlos Kepke's email is

For more information on how to use our lists of overseas investors in this business send me a note to