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What are the some tax considerations in Mike’s case? 

A: Usually, a partnership is taxed in the ratio of the place in which their income is generated. In the present case Mike has a partnership in retail distribution which has its location in OK, USA, therefore hi partnership in the business will be taxable according to the tax laws of both OK and USA, regardless of Mike not residing in USA. In view of the fact that there is no existing tax treaty between US and Costa Rica, Mike’s share of revenue might also be taxable in Costa Rica. Mike will eventually not find any relief from double taxation of his income. Ultimately, Mike will not be able to declare his income tax credit earned from foreign sources because of the fact that his income is not derived from a non U.S. partnership.

What are advantages and disadvantages of the new entity in Costa Rica?

A: The advantages of relocating the new entity to Costa Rica are:

  1. Mike will be able to take the income tax credit earned through foreign sources to his business income.
  2. As far as Mike sells his goods to US consumers and gets it shipped from Costa Rica, his partnership business will not be taxable under the US tax laws.due to the fact that his business will not be connected to US in any way.

But at the same time mike’s products will be produced or imported from within US which will indirectly connect his partnership business to US business and Mike will fall back to the starting point itself. This will prove to be major disadvantage for his business. Secondly, he will fall under the US import taxes and will have to bear the additional costs associated with importing the goods through the US ports.

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What are xxxxxxx some tax xxxxxxx in Mike’s xxxxxxx xxxxxxx /> A: xxxxxxx a partnership xxxxxxx taxed in xxxxxxx ratio xxxxxxx xxxxxxx place in xxxxxxx their income xxxxxxx generated. xxxxxxx the present xxxxxxx Mike has xxxxxxx partnership in xxxxxxx xxxxxxx which xxxxxxx its location xxxxxxx OK, USA, xxxxxxx hi xxxxxxx xxxxxxx the business xxxxxxx be taxable xxxxxxx to the xxxxxxx laws of xxxxxxx OK and xxxxxxx regardless of xxxxxxx xxxxxxx residing xxxxxxx USA. In xxxxxxx of the xxxxxxx that xxxxxxx xxxxxxx no existing xxxxxxx treaty between xxxxxxx and Costa xxxxxxx Mike’s share xxxxxxx revenue might xxxxxxx be taxable xxxxxxx xxxxxxx Rica. xxxxxxx will eventually xxxxxxx find any xxxxxxx from xxxxxxx xxxxxxx of his xxxxxxx Ultimately, Mike xxxxxxx not be xxxxxxx to declare xxxxxxx income tax xxxxxxx earned from xxxxxxx xxxxxxx because xxxxxxx the fact xxxxxxx his income xxxxxxx not xxxxxxx xxxxxxx a non xxxxxxx partnership.

  • As xxxxxxx xxxxxxx Mike xxxxxxx his goods xxxxxxx US consumers xxxxxxx gets xxxxxxx xxxxxxx from Costa xxxxxxx his partnership xxxxxxx will not xxxxxxx taxable under xxxxxxx US tax xxxxxxx to the xxxxxxx xxxxxxx his xxxxxxx will not xxxxxxx connected to xxxxxxx in xxxxxxx xxxxxxx style="margin-left:18.0pt;">But at xxxxxxx same time xxxxxxx products will xxxxxxx produced or xxxxxxx from within xxxxxxx which will xxxxxxx xxxxxxx his xxxxxxx business to xxxxxxx business and xxxxxxx will xxxxxxx xxxxxxx to the xxxxxxx point itself. xxxxxxx will prove xxxxxxx be major xxxxxxx for his xxxxxxx Secondly, he xxxxxxx xxxxxxx under xxxxxxx US import xxxxxxx and will xxxxxxx to xxxxxxx xxxxxxx additional costs xxxxxxx with importing xxxxxxx goods through xxxxxxx US ports.

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