US Tax on Foreign Source Investment Income
Many investors look outside of the USA for investment opportunities. Our focus in this article is to look at US tax on foreign source income. Before looking at specifics of US tax on foreign source income let us look at foreign investing. We are not talking about illegal tax havens here but rather smart ways to invest your money and perhaps legally reduce your tax burden when investing outside of the USA. Valid reasons for investing offshore include the following and many more:
• Diversification of an investment portfolio
• Taking advantage of growth in evolving offshore economies
• Foreign government sponsored investment opportunities
o For example a developing nation may wish to develop a given industry and will provide land at a low price, extended freedom from local taxation and other significant benefits to a specific type of foreign investment
• Low cost labor
• Proximity to attractive markets
• Likelihood of appreciation of the currency in which the investment will be made
• Legal means of reducing a tax burden
• Taking advantage of cheap investment opportunities with the likelihood of substantial growth
Some time back we wrote about Foreign Real Estate Investments. In the Panama section of the article we noted that
one can buy commercial real estate in growing market like Panama and collect rent checks as property values go up. Even in good markets there are business failures. Buying repossessed properties in a country like Panama can be lucrative if one has the services of a local firm that will scout out investment opportunities.
We also noted that
the rent checks from commercial property in Bogotá, or Buenos Aires can be banked in Colombia pesos or Brazilian reals.