[johnderidderr]

I have been able to secure a line of credit with an European bank. If I bring any of that money here in the USA, will I be taxed on that?
I have all the normal paperwork, such as a copy of the application, approval document from the bank and what looks like a normal promissory note, indicating minimum back payment dates, interest rate and an all due and payable date.
I would draw monies from that line of credit and have it wired to my local bank.
Thank you

John DeRidder

[excon]

Hello J:

There's no tax on borrowed money.

excon

[wnhough]

QUOTE," If I bring any of that money here in the USA, will I be taxed on that?"---No. That is your money(borrowed) that you didn't earn(revenue) in the US or overseas. As you can see, The US is the world's largest recipient of foreign direct investment. Anyone can bring unlimited amounts of money into the United States.
But if the amount of money coming into the US from abroad via wire transfer( into your bank account) exceeds or equal to $10,000 , then your bank will report the amount to the Fed. Or IRS( US Treaury Dpt).That doesn't mean to pay any form of taxes on the money transferred into the US from overseas.Federal law requires that all banks report any cash deposits made in excess of $10,000 in the hopes of discouraging money laundering, rather than tax evasion. "wires" from abroad require the same information.

[mack20007]

It should be noted that if you are a US citizen or US resident, and have interest earned on a foreign bank account, the interest does go on your US tax return.

Additionally, you may need to complete form TDF 90-22.1 information return to report the earnings, see instructions for that form(10k). And if you don't use normal bank transfer procedures in moving it to or from the US, you'll need to complete the Form Fincen 105, depending on the amt.see instr.

[wnhough]

Right! The provision is an FBAR is a Report of Foreign Bank and Financial Accounts. Any US citizen/ resident alien, a green card holder, must report accounts he/she holds in foreign banks and other financial institutions if his/her total balance is $10,000 or greater by filing thr form of TD F 90-22.1 by June 30 of the year following the year that the account holder meets the $10,000 threshold.

[IntlTax]

If you reside in the U.S. the interest you pay to the foreign bank will be subject to the 30% tax under section 881, unless a treaty applies to reduce the tax. You would need to get a W-8BEN from the bank in order for you to avoid withholding under a treaty. See sections 1441 and 1442.

[mack20007]

I'm not understanding your position Intltax. The interest he has to "pay", is not "income". He took out a loan/line of credit he has to pay back. Loans a person receives is not income. Only if its cancelled by the lender. He's has
A loan with interest repayments.

There are no income tax, and no withholding requirements on the part of the lender. Lenders don't withhold on loans they make to people
As its not income to that person.

F W-8ben and the withholding rules do not apply.

[wnhough]

The W-8BEN form (entitled Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding) is used in the United States to certify the lender's non-American status. The form, issued by the Internal Revenue Service, establishes that the bank( lender) is a non-resident alien performing work outside the United States to claim tax treaty benefits( to avoild higher tax rate of 30%), such as a lower tax withholding amount from dividends paid by U.S. corporations.
The W-8BEN form should be given to the withholding person, the interest payor!!

[IntlTax]

The interest is income to the foreign bank. Sec. 881. The payor of the interest has the obligation to withhold the tax. Sec. 1441/1442.

This situation is similar to an employer paying a salary to an employee. The salary is not income to the employer but it is income to the employee. However, the employer has the obligation to withhold tax on behalf of the employee.

The rule for payment of interest to foreign banks is not well known, even by the IRS. I bring it up so that you are aware of your obligation to withhold the tax. If a treaty applies to reduce the tax rate to zero, my recommendation would be to ask the foreign bank for a W-8BEN where it claims treaty benefits. Then you don't have to withhold. Otherwise, my recommendation would be to borrow in the U.S. and pay off the loan from the foreign bank.

[wnhough]

Good deal~~~

[mack20007]

If the only thing the foreign bank is doing is making available credit through its bank, lets say on the internet. I don't believe the foreign bank is subject to withholding.
I don't see the withholding on interest on a personal loan, it doesn' quite make sense.
You may be correct however Intel, I would look at the law more carefully.

I just looked at pub 519, p. ; and it states that certain portfolio interest, and interest from bank deposits by nonresidents, for example, are not subject to wihholding.

Because I'm not certain at this time, I won't dispute your position.

[wnhough]

QUOTE," I have been able to secure a line of credit with an European bank. If I bring any of that money here in the USA, will I be taxed on that?"---No! Never. That is your money( lineo fcredit) that you have borrowed from the bank overseas, not your income(revenue) that you earned overseas. If it is revenue that you earned overseas, then you are subjected to US tax(as a US resident, citizen , you are subject to USincome taxes on both US source income and workdwide income. But when the money( if the amount of the lineof credit exceeds $10,000) comes into your bank acccount via wire transfer , then your bank reports the amount to the IRS. As said before,That doesn't mean to pay any form of taxes on the money transferred into the US from overseas.Federal law requires that all banks report any cash deposits made in excess of $10,000 in the hopes of discouraging money laundering, rather than tax evasion. "wires" from abroad require the same information.
"I don't believe the foreign bank is subject to withholding."--No, but the foreignbank needs to file W-8BEN used in the United States taxation system by (a)foreign person(s) (in this case the foreign banl lending you the line of credit) to certify their(its) non-American status. The form, issued by the Internal Revenue Service, establishes that one is a non-resident alien or foreign national performing work outside the United States to claim tax treaty benefits, such as a lower tax withholding amount from dividends paid by an US entity, you.

[mack20007]

Thank you for that correction Wnhough.

I'm not sure the foreing bank even needs to file a W8-Ben, for a line of credit.

But I'm not going to go further on this issue.

[wnhough]

QUOTE,"I'm not sure the foreing bank even needs to file a W8-Ben, for a line of credit."--- For the foreign bank, the interest incoem on the LOC is not US source income."Bankwill not issue W-8BEN"Foreign bank in a foreign country has nothing to do with the U.S. taxes."
"but the foreignbank needs to file W-8BEN.. . " --Sorry for the post!