Transfer of ownership from foreign subsidiary


E

explorart

Hello all. I have two related questions:

1. We have 100% ownership in a foreign subsidiary based in Latin America.
There is one piece of equipment valued at 50K that we are going to transfer
from the Latin America Subsidiary to the parent company in the USA. Now,
since we own 100% of the subsidiary, technically that piece of equipment
belongs to the US company, now how do we do the transfer of ownership? We do
not want to 'pay' for it, and we do not want to pay taxes on its purchase.
Would a simple 'transfer of ownership statement' be enough? or if it is
necessary for us to 'purchase it' can we do so for $1 given that we own the
company who has possession of the equipment? Within the books of the US
company, the net worth of the balance sheet would not change since the value
of the gear will simply change from 'investment in Latin subsidiary' to
'equipment'.

2. When shipping the equipment through fedex to the US, we do not want to
pay import taxes since this is not an import. The gear was manufactured and
purchased here in the US and now is being sent back. In addition, we are not
technically 'purchasing' this piece (or at least we do not want to) since we
own it. Can this be done?

Can someone give us some feedback. Thanks.
 
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D

David Jensen

Hello all. I have two related questions:

1. We have 100% ownership in a foreign subsidiary based in Latin America.
There is one piece of equipment valued at 50K that we are going to transfer
from the Latin America Subsidiary to the parent company in the USA. Now,
since we own 100% of the subsidiary, technically that piece of equipment
belongs to the US company,
No, the subsidiary belongs to the US company. The equipment belongs to
the sub.
now how do we do the transfer of ownership? We do
not want to 'pay' for it, and we do not want to pay taxes on its purchase.
I don't know how this will be treated because I don't have enough
information, but if the item is subject to tarriffs if imported into the
United States, you'll have to pay tarriffs. If there are tax
consequences for the transfer of assets, either for the sub or the
parent corp, you may have to pay taxes for one or the other country.
Would a simple 'transfer of ownership statement' be enough? or if it is
necessary for us to 'purchase it' can we do so for $1 given that we own the
company who has possession of the equipment?
You are required to follow the tax laws of both countries for such
sales. Many tax lawyers do quite well for themselves keeping their
clients compliant. The general rule is that these sales have to be at
market. Please check with your tax advisor for the proper handling of
this particular transaction.
Within the books of the US
company, the net worth of the balance sheet would not change since the value
of the gear will simply change from 'investment in Latin subsidiary' to
'equipment'.
GAAP doesn't really treat it that way.
2. When shipping the equipment through fedex to the US, we do not want to
pay import taxes since this is not an import. The gear was manufactured and
purchased here in the US and now is being sent back.
Do you have proper documentation to show that it was previously exported
and that any taxes due at that time were paid?
In addition, we are not
technically 'purchasing' this piece (or at least we do not want to) since we
own it. Can this be done?
I highly recommend that you talk with a professional who can give you
specific tax advise in this area. Without such advice, it becomes easy
to allow a perfectly legal attempt to properly avoid taxes turn into
criminal tax evasion.
Can someone give us some feedback. Thanks.
Don't make business decisions based on tax allergies only.
 

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