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I'm a non-US resident and I'm the owner of a Delaware C-corp Inc. I also own a company (equivalent to LLC) in the EU.

Although I could "sell" or transfer ownership of my EU company to my US company for a dollar without any tax consequences in the EU, will there be any tax consequences in the US?

Also, does it matter if my US company buys my EU company for a price much lower than its actual value?

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I used to work in transfer pricing for 5 years so I know a bit about international tax (I am not an international tax expert by any means). Tax authorities don't generally care about transactions unless they're adversely impacted. US tax laws are usually written to say that intercompany transactions should happen at an arm's length price (i.e. fair market value).

If you sell your EU company to your US company for $1, the US tax authorities will be happy. The US taxes worldwide income, so the income of your EU company will become taxable in the US forevermore, all for the low price of $1.

Companies typically shift intellectual property from high tax jurisdictions (e.g. the US) to low tax jurisdictions (e.g. Ireland). Shifting IP to the US at below market prices is the opposite of what companies like Google does to minimize taxes.

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  • We anticipate all the income in the US anyways, plus the IP will all be owned by the US company. As we are a startup planning to raise funding in the US, this is a definite must. However, I wasn't aware of the US company taxing the income of its EU company... May 26 '15 at 16:40
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You can definitely do that, however if you decide to sell the portion that is now in the European LLC, your US corporation will pay income taxes on proceeds over $1. At corporate rates.

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  • I am aware of that now - "Unlike that of most other developed nations, the U.S. tax code imposes income tax on the profits of American corporations' foreign subsidiaries." - Wikipedia. Powers answered first, so I'll award him the answer. Thanks! May 26 '15 at 17:56
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    @MartinHerman: This is rather a different point that the one Powers made. This one concerns capital gains; the other, income.
    – Ben Voigt
    May 26 '15 at 23:11

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