US tax question

by Merlot Daruwala Wed Apr 03, 2013 9:04 am

Do the dividends you get from your holdings in India-listed companies get treated as Qualified Dividends i.e. dividends from Qualified Foreign Corporations?

by Propagandhi711 Wed Apr 03, 2013 10:24 am

it depends on the indian companies themselves. they usually list the dividend amount in their tax forms as qualified/un-qualified. I dont know if india has the tax treaty with US as well which is also required. in short, this is a meaningless response.

by Merlot Daruwala Thu Apr 04, 2013 2:33 am

Propagandhi711 wrote:it depends on the indian companies themselves. they usually list the dividend amount in their tax forms as qualified/un-qualified. I dont know if india has the tax treaty with US as well which is also required. in short, this is a meaningless response.

Haha..India does have a tax treaty with the US. But dividends are not taxed in the hands of shareholders in India, so I fail to see why they should qualify for a lower rate in the US.

Gah..where is Desichatter when you need him??

PS: Do I assume from the lack of responses to this question that y'all have not been reporting your dividend earnings in India to the US taxman??

by Guest Thu Apr 04, 2013 3:03 am

MD, dividends are taxed in india by the company paying dividends. would they not be exempt from tax in the US then?

by Captain Bhankas Thu Apr 04, 2013 3:03 am

does your question pertain to only dividends or all income in india (interest on deposits, rental income etc.)? any reason why you think dividends are treated any differently than other sources of income in india?

by Merlot Daruwala Thu Apr 04, 2013 3:53 am

Huzefa Kapasi wrote:MD, dividends are taxed in india by the company paying dividends. would they not be exempt from tax in the US then?

True. So my question still stands: are India-listed companies Qualified Foreign Corporations (as per IRS) on account of the tax treaty between India and the US, and can dividend income received from India-listed companies be reported as Qualified Dividends?

by Merlot Daruwala Thu Apr 04, 2013 3:59 am

Captain Bhankas wrote:does your question pertain to only dividends or all income in india (interest on deposits, rental income etc.)? any reason why you think dividends are treated any differently than other sources of income in india?

My question is solely over whether dividends given by India-listed companies can be reported as Qualified Dividends.

Dividends get preferential tax treatment over other sources of income in most capitalistic tax regimes.

by Guest Thu Apr 04, 2013 7:33 am

The only two things about foreign income my tax person asked me if there are any bank accounts with more than $10k value, and any land with over $25k value. Dividends, I think she asked only about the ones here.

by Propagandhi711 Thu Apr 04, 2013 8:49 am

Merlot Daruwala wrote:
Captain Bhankas wrote:does your question pertain to only dividends or all income in india (interest on deposits, rental income etc.)? any reason why you think dividends are treated any differently than other sources of income in india?

My question is solely over whether dividends given by India-listed companies can be reported as Qualified Dividends.

Dividends get preferential tax treatment over other sources of income in most capitalistic tax regimes.

in addition to the tax treaty between india and us, indian company should be able to pay qualified dividends.

by Merlot Daruwala Thu Apr 04, 2013 8:55 am

Arre that is circular logic. "Qualified Dividend" is purely IRS terminology and has nothing to do with Indian companies or the Company Law here.

A company is a qualified corporation if it is incorporated in an American possession or in a country with which the US has a tax treaty. Dividends paid by such a company are "qualified" dividend per IRS.

On the face of it, the second condition seems to suggest any Indian company's dividends will be "qualified". But I want to know for sure. Hence the query.

by Propagandhi711 Thu Apr 04, 2013 8:56 am

Merlot Daruwala wrote:
Propagandhi711 wrote:it depends on the indian companies themselves. they usually list the dividend amount in their tax forms as qualified/un-qualified. I dont know if india has the tax treaty with US as well which is also required. in short, this is a meaningless response.

Haha..India does have a tax treaty with the US. But dividends are not taxed in the hands of shareholders in India, so I fail to see why they should qualify for a lower rate in the US.

Gah..where is Desichatter when you need him??

PS: Do I assume from the lack of responses to this question that y'all have not been reporting your dividend earnings in India to the US taxman??

I havent reported a lot of things to unkil sam. will be an international fugitive in near future

by Captain Bhankas Thu Apr 04, 2013 9:00 am

Propagandhi711 wrote:I havent reported a lot of things to unkil sam. will be an international fugitive in near future

worry not. uppili will find a workaround. let's give him half a day to come up with an ingenious solution.

by Propagandhi711 Thu Apr 04, 2013 9:55 am

Captain Bhankas wrote:
Propagandhi711 wrote:I havent reported a lot of things to unkil sam. will be an international fugitive in near future

worry not. uppili will find a workaround. let's give him half a day to come up with an ingenious solution.

I am hoping he'll have a simple solution that broadly involves running away in a 1989 corolla with mismatched doors and eating bread dressed with pace picante sauce and tacobell hot sauce packets for rest of my life on the lam.

by Marathadi-Saamiyaar Thu Apr 04, 2013 10:05 am

Captain Bhankas wrote:
Propagandhi711 wrote:I havent reported a lot of things to unkil sam. will be an international fugitive in near future

worry not. uppili will find a workaround. let's give him half a day to come up with an ingenious solution.

yES..YES..OF COURSE...

1) If you report the earnings, simply go by the instructions and don't try to be a smart aleck.

2) If you don't report, then take your chances. Beware, if they audit you for WHATEVER reason, they have a right to dig up 10 years of your stuff and do an Al Capone on you.

Worse, when India implements its "word-wide income policy" you could be busted by the Indian Revenue Service and that will be a much deeper pit from which you may never come out.

My view is never ever mess with IRS and INS (or anything that ends with "Service"), and consult a Tax Attorney. All you rich Indians: spend some money to safeguard your money. Don't be stingy... Razz

by Maria S Thu Apr 04, 2013 10:06 am

If it's a serious question- FYI:

http://www.irs.gov/instructions/i1099div/ar02.html#d0e105

Excerpt:

For a list of income tax treaties of the United States that (a) are comprehensive, (b) include an information exchange program, and (c) have been determined by the Treasury Department to be satisfactory for this purpose, see Notice 2011-64, 2011-37 I.R.B. 231, available at www.irs.gov/irb/2011-37_IRB/ar07.html.

If the foreign corporation does not meet either 1 or 2 above, then it may be treated as a qualified foreign corporation for any dividend paid by the corporation if the stock associated with the dividend paid is readily tradable on an established securities market in the United States. See Notice 2003-71, 2003-43 I.R.B. 922, available at www.irs.gov/irb/2003-43_IRB/ar10.html, for more information on when a stock may be considered to be readily tradable. For additional requirements that must be met, see Notice 2006-3, 2006-3 I.R.B. 306, available at www.irs.gov/irb/2006-03_IRB/ar11.html.

*If you are mega-rich..good tax attorneys, CPAs and a lot of other people in the US and India can help to "legally" do this:

http://www.huffingtonpost.com/2013/04/03/offshore-companies-politicians_n_3008426.html

by FluteHolder Thu Apr 04, 2013 10:19 am

Marathadi-Saamiyaar wrote:
Captain Bhankas wrote:
Propagandhi711 wrote:I havent reported a lot of things to unkil sam. will be an international fugitive in near future

worry not. uppili will find a workaround. let's give him half a day to come up with an ingenious solution.

yES..YES..OF COURSE...

1) If you report the earnings, simply go by the instructions and don't try to be a smart aleck.

2) If you don't report, then take your chances. Beware, if they audit you for WHATEVER reason, they have a right to dig up 10 years of your stuff and do an Al Capone on you.

Worse, when India implements its "word-wide income policy" you could be busted by the Indian Revenue Service and that will be a much deeper pit from which you may never come out.

My view is never ever mess with IRS and INS (or anything that ends with "Service"), and consult a Tax Attorney. All you rich Indians: spend some money to safeguard your money. Don't be stingy...

I am kind of concerend about the things my CPA does on my returns. Though he gets my refunds$, I am not sure he does 100% accurate. I hope IRS will go after him only, if they find anything missing/wrong:) Ofcourse my CPA guarantees and if any penalty from IRS he says he will pay and fix!

by Marathadi-Saamiyaar Thu Apr 04, 2013 10:41 am

FluteHolder wrote:
Marathadi-Saamiyaar wrote:
Captain Bhankas wrote:
Propagandhi711 wrote:I havent reported a lot of things to unkil sam. will be an international fugitive in near future

worry not. uppili will find a workaround. let's give him half a day to come up with an ingenious solution.

yES..YES..OF COURSE...

1) If you report the earnings, simply go by the instructions and don't try to be a smart aleck.

2) If you don't report, then take your chances. Beware, if they audit you for WHATEVER reason, they have a right to dig up 10 years of your stuff and do an Al Capone on you.

Worse, when India implements its "word-wide income policy" you could be busted by the Indian Revenue Service and that will be a much deeper pit from which you may never come out.

My view is never ever mess with IRS and INS (or anything that ends with "Service"), and consult a Tax Attorney. All you rich Indians: spend some money to safeguard your money. Don't be stingy...

I am kind of concerend about the things my CPA does on my returns. Though he gets my refunds$, I am not sure he does 100% accurate. I hope IRS will go after him only, if they find anything missing/wrong:) Ofcourse my CPA guarantees and if any penalty from IRS he says he will pay and fix!

I have had my Taxes done by CPA only twice in my life. Both times, I ended up getting a smaller return. I decided that I with the Taxcut or TurboTax is a much better expert than these Gumasthas. A couple of times, I was called in by IRS, I had such an easy time with them (knock wood), they would tell me the easy way to just get over and close the file. But, then I never mess with the IRS..

I follow Maulana Rashmunullah's patented Rashmun Methodology: I never hide anything, if I did, I did not know, If I did and now that I know I never really meant it. If I did meant it, I did not understand that correctly, if I did that with full understanding, I would never ever do it again....I never had to use more than my first 2 conditions.

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