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Foreign Personal Holding Company Income
Foreign Personal Holding Company Income (“FPHC income”) is a major type of subpart F income. Generally, it consists of passive income such as interest, dividends, annuities, net gains from sales of property that do not generate active income, net commodities gains, net foreign currency gains, and certain rents and royalties.
An exclusion exists for certain dividends, interest, rents, and royalties received from related corporations where the payor corporation is organized and operating in the same foreign country as the recipient. This exclusion, often colloquially referred to as the “same country exception,” is subject to various exceptions. Another exclusion exists for rents and royalties received from unrelated persons in the active conduct of a trade or business.
For the calendar years 2006-2008, there is a special rule which excludes certain dividends, interest, rents, and royalties from FPHC income, even if the paying entity is not incorporated in the same country as the recipient.
Foreign Base Company Sales Income
Foreign Base Company Sales Income is income attributable to related-party purchases and sales made through a CFC if the country of the CFC’s incorporation is neither the origin nor the destination of the goods and the CFC is not “manufacturing” these goods. For a simplified version of the complex branch regulations click Section 954 Branch Regulations.
Foreign Base Company Services Income
Foreign Base Company Services Income includes income from services performed by a CFC for a related party where the services are performed outside the country of the CFC’s incorporation.
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