Sadly, there is no US equivalent to Entrepreneurs’ Relief for the sale of UK businesses, so a gain that is subject to only 10% UK tax will most likely suffer an additional 10% US tax as well as NIIT at a flat 3.8%. That would give a global tax rate on a gain on the sale of a business asset of 23.8%. NIIT is not due on the sale of business assets, but it is due on the sale of shares, including those in privately owned companies.
With US tax reform in 2018 introducing significant changes to how US owners of foreign businesses are taxed, and new guidance still being introduced which affects the 2018 tax year onwards, advice should be sought to see how these changes affect US owners. You do have options - it may be that restructuring the business or making certain elections to tax the owner of the business differently is appropriate to ensure the global tax bill is minimised.
What should I do?
If you are a US owner of a foreign business you should consider the implications that the 2018 US tax reform has on your global tax bill. There are some additional tax considerations such as the Global Intangible low-Taxed Income tax, which may lead you to make an election for the company to be transparent, electing to be taxed as a US company, or using alternative tax mitigation techniques.
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We recommend that individuals seek professional advice where appropriate before taking any action, so please fill out the form below if you have any questions.