U.S. Tax Planning Considerations for Investments in Foreign Portfolio Companies

Abstract

Foreign investment by U.S. funds is increasingly common. Foreign investment involves complex U.S. tax issues that differ from those encountered in the purely domestic context. This article provides a road map to help advisors and fund professionals better understand a number of the important considerations. The article is not written in technical “tax speak,” and is intended to be accessible to readers with a non-tax background. It provides an overview of the tax considerations involved in making and holding foreign portfolio investments, a description of the tax treatment of the various participants, and then applies the concepts to three simplified common investment structures.