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What should a foreign investor consider in terms of tax advantages when deciding whether to invest via a joint venture?

I have heard that a joint venture partnership is not required to file taxes as a business entity. We are interested in minimizing our tax exposure. When one of the partners is a foreign entity, what happens with their portion of company profits and losses when it comes to their personal income tax return since the foreign partner does not necessarily pay personal taxes in the United States?

  • Managing Director, Regent Park Advisors
    January 31, 2018

    In most cases, since this sounds like an equity investment in a direct joint venture a foreign buyer/owner/JV partner's income is subject to withholding taxes/US taxes. You need a tax attorney to work through options.

  • SPC Advisors, LLC
    February 21, 2018

    As a starting point, a joint venture can be a partnership or a limited liability company, in which case, taxes will be imposed on the entity. It can also consist of two entities that will need an agreement between them to hold title jointly. That can be a tenancy in common, being a venture in which each entity owns an undivided interest in the property. Or, in the case of individuals, it can be a joint tenancy with rights of survivorship. That means that on the death of the first party, title to the entire property will vest in the other. The only places I see those structures used are syndications (usually of small interests), in the case of a tenancy in common. In the case of joint tenants, it is usually a family-owned structure. An owner of property will have to pay taxes on gains it receives from the ownership of the property. These may consist of distributions of cash flow from rents collected, refinancing proceeds or sale proceeds. You will want to make sure that any party with whom you co-own property follows U.S. laws and pays taxes, or a tax lien may be imposed. Before you start, you need to work with a sophisticated tax lawyer to create the best structure.