Michael

Most foreign dividends can be qualified for US tax purposes but depending on the foreign ETF, sometimes as little as 30% of the dividends are qualified.

Cook_County

What is an ETF in this context please

Michael

Exchange Traded Funds which are the same as indexed mutual funds but are traded instead of redeemed. Vanguard primarily uses indexed funds so therefore they offer the same funds as mutual funds and ETFs.

There are many advantages of ETFs over mutual funds since they are less restrictive, any amount can be invested, and are less likely to be hit with capital gains distributions at the end of the year.

Also many brokerages offer commission free ETFs such as TD Ameritrade with over 100 funds primarily from Vanguard and iShares.

http://research.tdameritrade.com/gri...issionfree.asp

Usually the only restriction is that you can't sell them in less then 30 days to be commission free.

Cook_County

Great - I know what a US domestic ETF is but was quite puzzled what this has to do with the question, as the OP asked about a UK limited company where she owns 100% of the shares and has not made a check the box election.

Michael

I just was referring to the fact that not all foreign corporations follow specific US accounting regulations to allow dividends to be qualified.

Usually for US corporations, all common share dividends are qualified if shares are held for 61 days but not necessarily preferred shares (some times preferred shares are classified as interest even though they are referred to as dividends). Therefore I'm not sure exactly what a corporation has to do to make the dividends qualified for US tax purposes.

Pulaski

Your posts on dividends are all well and good, but the stumbling block to declaring dividends even if the OP wasn't immigrating to the US, is the excessive withholding tax (ACT) on dividends paid by corporations in the UK. It is rarely advantageous for a small privately owned corporation in the UK to pay dividends to someone otherwise qualified to be paid through the payroll.

Michael

It seems more common for a 100% owned company in Britain to pay dividends than the US but it also appears to be a double whammy if moving to the US even if the US dividends are taxed as qualified. There must be some advantage to paying dividends in the UK since several people on BE were doing that.

Pulaski

My information appears to be out of date.

Lucybell33

Thanks all for your replies - there's a lot to take in! Definitely need that tax consult ASAP!!

JAJ

Long term, it's probably not a good idea to leave cash sitting in a foreign corporation if you are a U.S. resident. On the other hand, if you definitely intend to only remain U.S. resident for a short period, and not seek a green card and U.S. citizenship, then the strategy may be different.

If you decide to extract the cash (such as in the form of dividends), your choice may be simply to do so before becoming U.S. resident, or afterwards. There may be U.K. tax consequences either way. But really - don't leave it until after becoming U.S. tax resident before you start taking such advice because some options that are open now will likely be closed at that point.

If you don't want to wind up the company, it may be possible to leave it inactive - you'd still have to file form 5471 but it may not be a problem if the affairs of the company are simple.

Cook_County

Can't wait to hear if the person you speak with at Deloitte knows anything about the US and UK taxation of a CFC as you may possibly get just a more junior expat tax person still studying towards some accounting exams.

Pulaski

You may, but they work under close supervision of a manager and the personal responsibility of a partner to provide correct, and legally defensible, advice.