International Taxation - Foreign Persons Trade/ Business and U.S. - Sourced Income - Research Paper Example

The rules and the tax implication to the foreign investors who invest in US companies will be reviewed with rational judgment throughout this research study. Research Objective The objective of this research is to identify the rules related to investment by foreign persons in the US companies and assess the tax implications for the foreign investors in investing in US companies. Literature Review Foreign investment in the US is an attractive destination for the foreign investors due to the favourable political, social and economic conditions in the country.

The foreign investors get the benefits of tax incentives, comparatively lower wages and favourable rule for foreign investment in US. The investment by the foreign investors in the automobile sector is also subject to rules and regulations of the Federal government. The Committee on Foreign Investments in US decides on the proposal of foreign investments and also looks at the feasibility and security aspect of the investments. The rules are governed by the committee for foreign investment in the US (Jacobs and Duke, 2006).

The foreign companies willing to invest in US are required to voluntarily submit a proposal to the committee which is reviewed by them within a period of 30 to 45 days for the necessary sanction. The rules governing the foreign investors include a check on the regulatory compliance risk of the companies. The necessary documents like the financial records, proposals on foreign investment in US are required to be submitted by the foreign investor. The filing and disclosure requirements are emphasized in the laws of foreign investment in US.

The necessary approvals from the US Congress and the federal government are required for foreign investments. The foreign investor would be classified as a non-resident alien for investing in the US automobile sector. The tax implications for the foreign investor suggest that the foreign investor should not hold a green card and should not have resided in US for more than 183 days in the past three years. The foreign investor would be subjected to no taxes for capital gains in US. The foreign investor would, however, need to pay tax on account of capital gains in his own country.

The short term capital gains and earnings are subject to payment of tax by the foreign investors. Research Methodology The research methodology adopted for this research is secondary method of research. The required data collected for the purpose of research is secondary data. The information on the rules of foreign investment in US and tax implications of the investment by the foreign client on the start up company in the automobile sector has been collected through secondary data sources like electronic sources, available data on the policies and regulations on foreign investment by the US government.

The rules on foreign investment in US and the tax implications on the US-sourced earnings have been interpreted for suggesting the foreign client. The various types of investments and the US-sourced incomes that are subject to the impact of taxes in US have been analyzed. The ways in which the foreign client could avoid the tax implication through investment in foreign securities have been derived through this research paper. Analysis and Findings The three types of investments that are likely to attract more taxes and least value of taxes could be determined from the tax policies on investment in US