Is it better to take profits out as a dividend or a loan repayment?
There is no general answer, because the character decides three separate things: the withholding rate at source, whether the paying company obtains a deduction, and whether your own country will give you credit for the tax withheld. A route that looks cheap on the withholding rate can be the expensive one once the deduction and the credit are counted. The test that matters is whether both countries characterise the outflow the same way. Where they do not, one seeing a repayment of capital and the other a distribution, the tax is charged in one system and relieved in neither, whatever the headline rates say.
Will I pay tax twice on profits I bring home?
Not necessarily, but relief is mechanical rather than automatic. A credit generally requires the same person to be taxed on the same income, and often on income of the same character, in both countries. Where the profits were taxed in the subsidiary's hands and the distribution is taxed in yours, the person differs, so the relief has to come from whatever the domestic rules and the treaty provide for that situation rather than from a straight credit. Establishing which mechanism applies, and what evidence it needs, is the work, and it belongs before the outflow rather than at the return.
Can I charge a management fee instead of declaring a dividend?
Only if the services are real and the charge can be supported. A fee is deductible to the payer and often carries a different withholding treatment from a distribution, which is exactly why it attracts attention. What supports it is an agreement predating the services, evidence that the work was actually done and by whom, and a pricing basis documented on the same footing as any other related-party charge. Without that, the fee is liable to be recharacterised as a distribution, and the consequence lands twice: the deduction goes, and the withholding that attaches to a distribution arrives.
What is a return of capital and how does it differ from a dividend?
A return of capital gives back what was subscribed rather than distributing profits, so it reduces the shareholder's investment instead of producing income. Each country keeps its own measure of how much capital is available to be returned, and that measure is a tax history rather than a balance sheet caption: it follows the shares through issues, reorganisations and earlier returns. If the traced amount does not support the transfer, the excess is treated as a distribution with the withholding that carries. Trace the capital before the transfer is arranged, because the tracing cannot be improved afterwards.
Why was tax withheld on money I considered my own capital?
A paying company or bank applies the treatment its documentation supports, and in the absence of anything else that is the default domestic rate on a distribution. It is not making a judgement about your capital account. It is protecting itself against a liability that falls on it if it withholds too little. The way to change the outcome is to put the character and the treaty position in the payer's hands, with the certifications it needs, in advance of the transfer. Recovering an over-withheld amount afterwards is a separate claim, on a different timetable, and usually more work than the original documentation.
When should we decide how profits will eventually come home?
At funding, before the structure is in place. The routes available later are set by decisions taken at the start: how much of the investment is share capital and how much is debt, what the loan terms say, whether there is a services agreement, and which country the holding entity sits in. Each of those fixes what can be paid out and how it will be characterised. Deciding at the point the cash is needed limits you to whatever the existing paperwork supports, and changing the paperwork at that stage invites the question of why it changed.
What is Form 5471 and who has to file it?
The information return a US person files about a foreign corporation they own or control, in one of several filer categories that determine which schedules apply. It is not a tax computation, which is exactly why it gets missed — and why the penalty regime is severe. The consequence people underestimate is that a missing 5471 can keep the limitation period open on the whole return, not merely on the foreign company's figures. See Form 5471.
How many days can I spend in a country before I become tax resident?
It depends on the country, and a day count is only ever the start. Many use a threshold in a tax year, some also look at averages across several years, and some have no day test at all and decide on where your home and life are. Two countries can both conclude you are resident, which is what the treaty tie-breaker exists to settle. Counting days without checking the tie-breaker is how people end up filing as resident nowhere. See the residency tie-breaker.
