Expanding into the US with a subsidiary: getting profits home and posting staff, country by country

Most European companies enter the American market through a US corporation owned by the company at home. How well that structure works comes down to three questions: what the US keeps when profits go home, how your home country treats those profits, and how long your people can stay in the home social security system. Here are the answers for Norway, Sweden, Denmark, Finland, the United Kingdom, Ireland, the Netherlands and Switzerland.

The structure: a US corporation under your home company

The classic route into the American market is a US corporation owned by the parent company at home. The subsidiary pays US federal corporate income tax of 21% of its taxable income. Three questions then decide how efficient the structure is, and the answers differ from one home country to the next:

• how much US tax is withheld when the subsidiary pays a dividend to the parent, which the US income tax treaty with your home country caps;
• whether your home country exempts that dividend, and whether its CFC rules could tax the subsidiary's profits before they are distributed;
• how long an employee sent to work in the US can stay in the home social security system under the totalization agreement.

A US LLC raises its own classification questions, and home countries do not all treat it the same way. Where it matters, the country sections below say how.

Norway: a single 15% rate and a two-year holding rule

The United States and Norway signed their income tax convention in Oslo on 3 December 1971, and it entered into force on 29 November 1972. A Protocol signed in Oslo on 19 September 1980 entered into force on 15 December 1981, and that Protocol shapes how dividends from your US subsidiary are taxed.

US withholding on dividends. A US corporation is a resident of the United States under the treaty (Article 3(1)(b)(i)). Article 8(2), as amended by the 1980 Protocol, caps US tax on dividends paid to a Norwegian resident at 15% of the gross amount, with no lower rate for a corporate shareholder. The original 1971 text allowed 10% for a corporation owning at least 10% of the voting stock. The Protocol deleted that paragraph and replaced it with the single 15% cap, so the treaty has no 5% or 0% rate. The treaty also has no modern limitation-on-benefits article. Instead, Article 20 denies the dividend, interest, royalty and capital gains articles to a corporation that enjoys special measures making its home tax substantially lower than the general corporate tax and that is at least 25% owned by persons other than individual residents of its state.

The participation exemption (fritaksmetoden). Under skatteloven § 2-38, a Norwegian company is exempt on gains and on lawfully distributed dividends from shares in corresponding foreign companies, and it cannot deduct losses on them. For a company outside the EEA, such as your US subsidiary, the conditions are stricter:

• dividends are exempt only if the Norwegian company owns at least 10% of the capital and holds at least 10% of the votes continuously for a two-year period that includes the date of the dividend;
• a gain on the shares is exempt only if the Norwegian company has owned at least 10% of the capital and votes continuously for the two years up to the sale;
• the exemption never covers shares in a company resident in a low-tax country outside the EEA as defined in § 10-63, and this exclusion has no treaty carve-out, so a US subsidiary taxed at less than two thirds of the Norwegian level falls outside the exemption;
• 3% of exempt dividends is still taxable income for the Norwegian company, an effective 0.66% at the 22% rate. The group exception from this 3% rule is extended expressly to dividends from companies resident in the EEA, and the statute does not name companies outside the EEA.

Where Norway does tax a dividend from a US corporation in which a Norwegian corporation owns at least 10%, Article 23(2)(c) of the treaty gives an indirect credit for the US corporate tax on the underlying profits, provided the credit is grossed up as income.

CFC rules (NOKUS). Skatteloven §§ 10-60 to 10-68 tax participants on their share of the profit of a Norwegian-controlled company resident in a low-tax country, whether or not the profits are distributed. Norwegian control exists where Norwegian taxpayers directly or indirectly own or control at least half of the shares or capital at both the beginning and the end of the income year. A country is low-tax where the ordinary income tax on the company's total profit is less than two thirds of the tax it would have paid as a Norwegian resident. The Norwegian rate on ordinary income for companies for 2026 is 22.0%, so the test compares the foreign tax with about 14.67% of a profit computed the Norwegian way.

NOKUS does not apply, however, where the company is covered by a Norwegian tax treaty and its income is not mainly passive (§ 10-64 a). An operating US C corporation is therefore outside NOKUS whatever the rate comparison shows; only a US company with mainly passive income can be caught. The separate carve-out in § 10-64 b for companies with real economic activity in an EEA state does not cover the United States.

Staff sent to the US. The US-Norway social security agreement signed in Oslo on 30 November 2001 has been in force since 1 September 2003. It replaced an earlier agreement that had entered into force on 1 July 1984. An employee sent by an employer with a place of business in Norway to the United States stays only under Norwegian compulsory coverage if the assignment is not expected to last more than 5 years, and an accompanying spouse and children are covered the same way while not employed in the US. For a worker sent from Norway, the rule applies only if the person is on a Norwegian payroll as determined by Norwegian legislation. Coverage is proved by a certificate: for posted workers it is issued by NAV's national office for social insurance abroad in Oslo, and the US employer needs it to establish the exemption from US Social Security contributions. Self-employed people are covered only by the country where they reside.

Where a career spans both systems, periods can be combined. With at least three years of Norwegian coverage (or one year if covered while working in Norway), US quarters count towards Norwegian disability, survivors and old-age pensions, with four US quarters equal to one Norwegian year. On the US side, Norwegian credits count towards a partial US benefit only if the person has at least six US credits.

Sweden: a 0% treaty rate and no CFC exposure for a US company

The Sweden-US convention was signed in Stockholm on 1 September 1994 and entered into force on 26 October 1995. Sweden applies it to income derived on or after 1 January 1996. A Protocol signed in Washington on 30 September 2005 entered into force on 31 August 2006, and Swedish law gives the convention force of law in the wording that results from it.

US withholding on dividends. Article 10 sets three levels:

• 0% where the beneficial owner is a Swedish company that has owned shares with 80% or more of the voting power for the 12 months ending on the date entitlement is determined, and that meets specified tests of the limitation-on-benefits article (Article 17): it is publicly traded or at least 50% owned by publicly traded companies, it passes the ownership and base erosion test together with the active business condition, it qualifies for derivative benefits, or the competent authority so determines;
• 5% where the beneficial owner is a company owning shares with at least 10% of the voting power of the paying company;
• 15% in all other cases.

Every treaty benefit runs through Article 17: a resident is entitled to treaty benefits only to the extent that article provides.

Dividends at home. Sweden exempts dividends on a näringsbetingad andel, a business-related share in an aktiebolag or ekonomisk förening owned by, among others, a Swedish limited company that is not an investment company (Income Tax Act chapter 24, section 32). The share must be a capital asset and either unlisted, or represent 10% or more of the votes, or be held for the business of the owner or a closely connected company. Unlisted shares, which is what shares in your US subsidiary will usually be, qualify with no minimum holding and no holding period. The exemption has limits:

• a dividend from a company resident in another state is taxable to the extent the paying company can deduct it as interest or similar;
• for listed shares, the dividend becomes taxable if the share is sold or stops being business-related within one year.

The treaty adds its own exemption: under Article 23(2)(c), dividends paid by a US-resident company to a Swedish-resident company are exempt to the extent they would be exempt if both companies were Swedish, provided the profits were subject to the normal US corporate tax.

CFC rules. The Swedish CFC rules in chapter 39 a apply to a holder that, alone or with related persons, holds at least 25% of the foreign legal person's capital or votes at the end of the holder's tax year. Income is low-taxed if it is untaxed or taxed more lightly than Swedish tax on 55% of it as business income of a Swedish limited company. With the Swedish state income tax for legal persons at 20.6%, that threshold works out at about 11.3% of a profit computed the Swedish way. Even when the 55% test is failed, income is not low-taxed if the company is resident and liable to tax in a jurisdiction listed in annex 39 a and not covered by the exceptions listed there. The annex lists the United States without any income exception, so a US corporation resident and liable to tax in the United States is outside the Swedish CFC rules. The separate carve-out for genuine establishments in an EEA state does not cover the United States, but with the annex listing it does not need to.

A US LLC. For income through an entity that is fiscally transparent under either state's law, such as a US LLC that has not elected corporate treatment, the treaty treats the income as derived by a resident only to the extent that state's tax law treats it as a resident's income (Article 1(6)).

Staff sent to the US. The US-Sweden social security agreement was signed in Stockholm on 27 May 1985 and entered into force on 1 January 1987; a Supplementary Agreement signed on 22 June 2004 entered into force on 1 November 2007. An employee sent by an employer with a place of business in Sweden to the United States for a period not expected to exceed 60 months stays only under Swedish law, and the Swedish text sets the same limit. An employer and its affiliated or subsidiary company count as one employer, provided the work would have been covered in Sweden without the agreement, which matters when the US subsidiary rather than the Swedish parent formally employs the person. The posting is proved by a certificate issued in Sweden by the National Social Insurance Board or its authorised delegate. Self-employed people who would be covered in both countries are covered only by their country of residence.

Periods in both countries are added together where Swedish periods are insufficient, with four US quarters counting as one Swedish year. Totalization does not apply to the three years of residence in Sweden required for the guarantee pension, and the guarantee pension is not exported to the United States under the agreement. On the US side, Swedish periods count only for a person with at least six quarters of US coverage.

Denmark: a 10% shareholding, a passive-income CFC test and a three-year posting

The Denmark-US income tax convention was signed on 19 August 1999, entered into force on 31 March 2000, and took effect for withholding taxes from 1 May 2000 and for other taxes from 1 January 2001. The protocol signed on 2 May 2006 entered into force on 28 December 2007. Skattestyrelsen records its effect from 1 February 2008 for withholding taxes and from 1 January 2008 for other taxes.

US withholding on dividends. Under Article 10 as replaced by the 2006 protocol:

• 0% where the beneficial owner is a Danish company that has owned 80% or more of the voting power for the 12 months ending on the date entitlement is determined, and that meets one of the limitation-on-benefits tests of Article 22 named there: the listed-company tests, the ownership and base-erosion test combined with the active trade or business test, the derivative-benefits test, or a competent authority determination;
• 5% where the beneficial owner is a company holding directly at least 10% of the paying company's share capital, with no minimum holding period before the dividend is paid;
• 15% in all other cases.

Dividends at home. Dividends a Danish company receives from a company resident abroad are excluded from taxable income when the recipient is the beneficial owner (selskabsskatteloven § 13, stk. 1, nr. 2). The exclusion covers only dividends on subsidiary shares and group shares, and does not apply to the extent the paying company deducts the distribution. Subsidiary shares are shares owned by a company holding at least 10% of the subsidiary's share capital. A foreign subsidiary qualifies only if it is liable to corporate tax without exemption in its state of residence and that state's competent authority must exchange information with Denmark under a tax treaty or other agreement. Article 26 of the US convention obliges the competent authorities to exchange information relevant to the convention and to domestic tax law, which meets that condition. Where Danish tax does fall on US income, Denmark gives a credit for the US income tax paid, capped at the Danish tax attributable to that income (Article 23(3)).

CFC rules. Selskabsskatteloven § 32 applies to a Danish parent that, alone or with related persons, directly or indirectly controls more than 50% of the votes, owns more than 50% of the capital or is entitled to more than 50% of the profit. It applies only if the subsidiary's CFC income exceeds one third of its total taxable income for the income year. CFC income is a list of passive items:

• interest, and gains on claims and financial contracts;
• income from intangibles, with a substance carve-out;
• taxable dividends and share gains;
• financial leasing, insurance, banking and other financial income;
• income of invoicing companies.

None of the conditions in § 32, stk. 1 refers to the subsidiary's tax rate, so the 21% US federal rate does not by itself keep a US company outside the rule. What keeps an operating US C corporation outside is that its CFC income is one third or less of its income. Where CFC income is included, the parent gets a reduction for the subsidiary's Danish and foreign taxes under ligningsloven § 33.

A US LLC. Skattestyrelsen cites the binding ruling SKM2013.361.SR, in which the Tax Council confirmed that a US LLC was fiscally transparent under Danish rules. That is a ruling on its own facts, and classification follows Danish entity criteria. The treaty treats income through a transparent entity as derived by a resident to the extent that state taxes it as a resident's income (Article 4(1)(d)).

Staff sent to the US. The US-Denmark social security agreement was signed on 13 June 2007 and has been effective since 1 October 2008. Its posting limits are asymmetric. A person resident and employed in Denmark who is sent by a Danish employer to the United States stays only under Danish social security law if the assignment is not expected to exceed three years. A US employee sent to Denmark stays only under US law for an assignment not expected to exceed five years. The exemption from US Social Security contributions is proved by a certificate of coverage, which for workers sent from Denmark is requested from Udbetaling Danmark, International Pension & Social Security, Hillerød. Self-employed people are covered only by the system of the country where they reside. Unless the agreement provides otherwise, a person who does not reside in Denmark is not subject to Danish social security laws, and workers exempted from Danish coverage under the agreement pay no Danish social security taxes for the other Danish programmes either and generally cannot receive those benefits.

On the Danish side the agreement covers the folkepension and the ATP. With at least six US quarters of coverage, Danish coverage and Danish residence periods with work count towards a pro rata US benefit. US credits are not counted for the ATP pension, which can be earned with as little as one month of ATP coverage.

Finland: the treaty does the exempting

The Finland-US convention on taxes on income and on capital was signed in Helsinki on 21 September 1989 and entered into force on 30 December 1990, with general effect from 1 January 1991. The amending protocol signed in Helsinki on 31 May 2006 has been in force since 28 December 2007, and the IRS shows it with a general effective date of 1 January 2008.

US withholding on dividends. Under Article 10 as replaced by the protocol:

• 0% where the beneficial owner is a Finnish company that has owned 80% or more of the voting power for the 12 months ending on the date entitlement is determined, and that meets one of the limitation-on-benefits tests of Article 16 named there: the listed-company tests, ownership and base erosion plus active business, derivative benefits, or a competent authority determination;
• 5% where the beneficial owner is a company owning directly at least 10% of the voting stock;
• 15% in all other cases.

Dividends at home. Under Finnish domestic law (EVL 6 a §), dividends a Finnish company receives from companies other than Finnish companies, EU Parent-Subsidiary Directive companies and qualifying EEA companies are taxable income, and that covers a dividend from a US company. The treaty overrides this: dividends paid by a US company to a Finnish company that directly owns at least 10% of its voting stock are exempt from Finnish tax (Article 23(1)(b)). Where Finland does tax US income, it gives a credit for the US tax, capped at the Finnish tax attributable to that income (Article 23(1)(a)).

CFC rules. The Finnish CFC Act (1217/1994) applies to a foreign entity in which the Finnish taxpayer, alone or with related parties, directly or indirectly holds at least 25% of the votes, capital or profit entitlement. The second condition is low taxation: the entity's effective tax level in its jurisdiction must be below three fifths of the tax level of a company resident in Finland. With the Finnish corporate income tax rate at 20%, that threshold equals an effective rate of 12%. A US C corporation whose effective tax level is at or above that is not a CFC under this test; the federal rate alone is 21%.

A further carve-out covers an entity outside the EEA if its jurisdiction was not on the EU list of non-cooperative jurisdictions, exchanges tax information with Finland adequately and in practice, and the entity's income comes mainly from industrial production, comparable production or services, shipping, or sales and marketing serving them. Where CFC income is taxed, the foreign income taxes the CFC paid on the same income are credited, up to the Finnish tax on that income.

A US LLC. Income through an entity that is fiscally transparent under either state's law is treated as derived by a resident to the extent that state taxes it as a resident's income (Article 1(6), added by the protocol).

Staff sent to the US. The US-Finland social security agreement was signed on 3 June 1991 and has been effective since 1 November 1992. An employee sent by an employer with a place of business in Finland to the United States stays only under Finnish law if the posting is not expected to exceed 5 years, or longer if the competent authorities agree in a particular case. An employer and its affiliated or subsidiary company are treated as one and the same employer. The exemption from US contributions requires a certificate of coverage, requested from the Finnish Centre for Pensions (Eläketurvakeskus). A self-employed person who would be covered in both countries is covered only in the country of residence, and the SSA states that self-employed workers who transfer their business to the other country for one year or less stay covered in the country they came from.

A person is covered by the Finnish national pension and general survivors' pension schemes only while resident in Finland. On the Finnish side the agreement covers those schemes, the employment pension schemes (including the self-employed, public-sector and seamen's schemes) and employer contributions. With at least six US quarters of coverage, Finnish periods count towards a pro rata US benefit. For Finnish employment pensions, US periods count only where a disability or death case fails the residence or 360-day coverage condition; otherwise Finnish law alone applies.

The United Kingdom: an excluded territory for CFC purposes

The US-UK convention was signed in London on 24 July 2001 and amended by a protocol signed on 19 July 2002. It entered into force on 31 March 2003, and the IRS shows a general effective date of 1 January 2004.

US withholding on dividends. Article 10 sets three levels:

• 0% where the beneficial owner is a UK company that has owned shares representing 80% or more of the voting power of the payer for a 12-month period ending on the date the dividend is declared, and that also held 80% before 1 October 1998, or is a qualified person under the listed-company test of Article 23(2)(c), or is entitled to the benefits under the derivative benefits rule (Article 23(3)) or a competent authority determination (Article 23(6));
• 5% where the beneficial owner is a company holding directly or indirectly at least 10% of the voting power of the payer;
• 15% in all other cases.

A company passes the listed-company test if its principal class of shares is listed on a recognised stock exchange and regularly traded, or if at least 50% of its voting power and value is owned by five or fewer such listed companies.

Dividends at home. The UK exempts most dividends a parent receives, by different routes for small and larger companies:

• a small company's dividend is exempt if the payer is resident only in the UK or a qualifying territory, it is not a non-dividend distribution of a listed kind, no foreign deduction is allowed for it, and it is not part of a tax advantage scheme. A qualifying territory is one with double taxation arrangements in effect that contain a non-discrimination provision, and the US-UK convention has one (Article 25(1));
• a dividend received by a company that is not small is exempt if it falls into an exempt class, is not a listed non-dividend distribution and is not deductible abroad. Distributions from a company that the recipient controls are an exempt class, which covers a dividend from your controlled US subsidiary.

CFC rules. The United States is listed in Part 1 of the Schedule to the Controlled Foreign Companies (Excluded Territories) Regulations 2012 (SI 2012/3024), which makes it an excluded territory. For a CFC resident in the United States, as for Australia, Canada, France, Germany and Japan, the income threshold and IP conditions of section 371KB(1)(b) and (c) do not have to be met. The exemption still requires that:

• at no time in the accounting period does the CFC carry on business through a permanent establishment outside its territory of residence;
• at no time in the accounting period is the CFC involved in an arrangement whose main purpose, or one of whose main purposes, is to obtain a tax advantage.

There is also a separate tax exemption: a CFC is exempt if the tax paid in its territory on its local profits is at least 75% of the corresponding UK corporation tax. The UK main rate is 25% for profits above GBP 250,000, and the US federal corporate income tax is 21% of taxable income.

A US LLC. HMRC's list of foreign entity classifications treats a US Limited Liability Company, including a New York LLC, as opaque. HMRC says the list gives only a general view and its view of a specific entity may vary.

Staff sent to the US. The US-UK social security agreement was signed on 13 February 1984 and entered into force on 1 January 1985, except Part III on benefits, which entered into force on 1 January 1988. A supplementary agreement signed on 6 June 1996 has been in force since 1 September 1997. An employee sent by the employer from the UK to work in the United States stays covered only by the UK if the posting is not expected to exceed 5 years, or a longer period agreed by the competent authorities. To be exempt from US Social Security contributions, the employer or self-employed worker requests a UK certificate of coverage from HMRC. A self-employed person is covered only by the country where he or she ordinarily resides. A person with at least six US quarters of coverage who lacks enough for US entitlement has UK periods counted by the US.

Ireland: a participation exemption and a narrow CFC charge

The Ireland-US convention, with protocol and exchanges of letters, was signed in Dublin on 28 July 1997 and entered into force on 17 December 1997. Revenue lists it as effective for corporation tax from 1 January 1998. An amending convention signed in Washington on 24 September 1999 entered into force on 13 July 2000, and the IRS shows it with a general effective date of 1 September 2000.

US withholding on dividends. US tax on dividends is capped at 5% where the beneficial owner is a company owning at least 10% of the voting stock of the payer, and at 15% in all other cases. Article 10 provides no lower rate. A resident is entitled to treaty benefits only if it is a qualified person under the limitation on benefits article (Article 23(1)).

Dividends at home. Ireland's participation exemption exempts from corporation tax a relevant distribution made by a relevant subsidiary to a parent company on or after 1 January 2025, where the parent holds a qualifying participation:

• a qualifying participation is at least 5% of the subsidiary's ordinary share capital, held continuously for at least 12 months including the distribution date;
• the subsidiary must be resident in a relevant territory, meaning an EU or EEA country or a country with which Ireland has a double tax treaty, excluding countries on the EU list of non-cooperative jurisdictions;
• for distributions from 1 January 2026, the subsidiary must have been Irish resident, or resident in a relevant territory and not generally exempt from foreign tax, throughout the preceding three years.

The exemption is an alternative to a double tax credit. Once claimed, it applies to all relevant distributions from all relevant subsidiaries for that accounting period, so the choice is made for the whole group's dividends that year.

CFC rules. Part 35B TCA 1997 implements the ATAD CFC rules and applies from 1 January 2019. It attributes to the Irish controlling company the undistributed income of a CFC arising from non-genuine arrangements put in place for the essential purpose of avoiding tax, where significant people functions are carried out in Ireland. Control broadly means direct or indirect ownership of, or entitlement to, more than 50% of the CFC's share capital, voting power or distribution amount. No charge arises where Irish transfer pricing has applied, where the arrangements are at arm's length, or where an exemption applies. The exemptions include:

• a CFC with accounting profits under EUR 750,000 whose non-trading income is under EUR 75,000, and any CFC with accounting profits under EUR 75,000;
• a CFC whose accounting profits are less than 10% of its relevant operating costs;
• profits may come within the charge only where the CFC's tax (including any foreign QDTT) is less than half the tax it would have paid as an Irish resident. The US federal corporate income tax is 21% of taxable income.

A US LLC. Revenue's classification factors for foreign entities are not a conclusive list, and each entity is considered on its own characteristics. Under section 1009A TCA (Finance Act 2025), a foreign body corporate that is substantially similar to an Irish partnership is taxed, with its members, in the same way as a partnership and its partners.

Staff sent to the US. The US-Ireland social security agreement and administrative arrangement were signed in Washington on 14 April 1992 and entered into force on 1 September 1993. An employee sent by an employer from Ireland to the United States for a temporary period stays covered only by Ireland if the employment is not expected to exceed five years, or a longer period agreed by the competent authorities. An employer and its affiliated company are treated as one employer. The certificate proving exemption from US coverage is issued in Ireland by the body named in the administrative arrangement, the Scope Section of the Department of Social Welfare, and the SSA directs requests to the PRSI Special Collection Section in Waterford. A self-employed person who would be covered in both countries is covered only where ordinarily resident. Workers exempted from Irish coverage pay no Irish social security contributions for other programmes and generally cannot receive those benefits.

The US counts Irish periods towards US entitlement for a person with at least six US quarters of coverage. Ireland combines US and Irish periods for a person with at least 52 Irish contribution weeks who lacks enough for Irish entitlement.

The Netherlands: a 5% participation threshold and a short CFC list

The Dutch Ministry of Finance lists the US treaty as signed on 18 December 1992 and in force from 31 December 1993, with protocols signed on 13 October 1993 (in force 30 December 1993) and 8 March 2004 (in force 28 December 2004). The IRS shows general effective dates of 1 January 1994 for the treaty and 1 January 2005 for the protocol.

US withholding on dividends. Under Article 10 as substituted by the 2004 protocol:

• 0% where the beneficial owner is a Dutch company that has owned directly 80% or more of the voting power for a 12-month period ending on the declaration date, and that held 80% before 1 October 1998, is a listed-company qualified person under Article 26(2)(c), is entitled under Article 26(3), or has a competent authority determination under Article 26(7);
• 5% where the beneficial owner is a company holding directly at least 10% of the voting power of the payer;
• 15% in all other cases.

A company is a listed-company qualified person if its principal class of shares is listed on a recognised stock exchange and regularly traded, unless it has no substantial presence in its state of residence.

Dividends at home. Under article 13 of the Wet op de vennootschapsbelasting 1969, benefits from a participation, and the costs of acquiring or disposing of it, are left out of taxable profit. A participation exists where the taxpayer holds at least 5% of the nominal paid-up capital of a company whose capital is divided into shares. The exemption does not apply to a participation held as an investment unless it is a qualifying investment participation, and an investment participation qualifies if the entity is subject to a profit tax resulting in a realistic levy by Dutch standards.

CFC rules. Under article 13ab, a Dutch taxpayer's profit includes the tainted income of a controlled entity, pro rata to its interest. Tainted income comprises interest, royalties, dividends and share disposal gains, financial leasing, insurance, banking and other financial income, and low-value invoicing income. The inclusion applies only to the extent that the year's tainted income is positive and has not been distributed before the end of that year. A controlled entity is one in which the taxpayer, with related parties, holds more than 50%, and only if it is established in a state designated by ministerial regulation because it levies no profit tax or a rate below 9%, or because it is on the EU list of non-cooperative jurisdictions.

The United States is on neither designated list. The low-tax list names Anguilla, Bahamas, Bahrain, Bermuda, British Virgin Islands, Guernsey, Isle of Man, Jersey, Cayman Islands, Turkmenistan, Turks and Caicos Islands and Vanuatu. The non-cooperative list names the US Virgin Islands, American Samoa, Anguilla, Fiji, Guam, Palau, Panama, the Russian Federation, Samoa, Trinidad and Tobago and Vanuatu, but not the United States itself. The US federal rate of 21% is above the 9% threshold. On top of that, there is no controlled entity where income mainly consists of income other than tainted income, and the inclusion does not apply where the entity carries on a substantial economic activity.

Staff sent to the US. The US-Netherlands social security agreement was signed in The Hague on 8 December 1987 and amended by a protocol of 7 December 1989, both in force from 1 November 1990; a second protocol signed on 30 August 2001 entered into force on 1 May 2003. A person sent by an employer with a place of business in the Netherlands to work in the United States for a period not expected to exceed 5 years stays subject only to Dutch law. A Dutch resident who is employed or self-employed in the Netherlands is subject only to Dutch law for work in either country, unless the posting rule applies. Self-employed people are otherwise subject only to the law of the country where they reside. On request, the institution of the country whose law applies issues a certificate proving exemption from the other country's compulsory coverage.

Rules that restrict invalidity, old-age or survivors cash benefits because the person lives abroad do not apply to people living in the other country. The US counts Dutch periods towards US entitlement for a person with at least six US quarters of coverage, but not Dutch periods credited solely on the basis of residence in the Netherlands.

Switzerland: 5% withholding and the participation reduction

The Switzerland-US convention was concluded on 2 October 1996 and entered into force on 19 December 1997, when instruments of ratification were exchanged. A protocol signed in Washington on 23 September 2009 has been in force since 20 September 2019.

US withholding on dividends. US tax on dividends from the US subsidiary to a Swiss company holding directly at least 10% of the voting rights is capped at 5%, and at 15% in all other cases. Article 10 has no 0% rate for parent companies. Its exemption at source, as amended in 2009, is reserved for a pension fund, similar institution or individual retirement plan established in the other state and owned by a resident of it, subject to competent-authority recognition and not where it controls the payer.

Dividends at home. Switzerland does not exempt participation income outright; it reduces the profit tax instead. For the federal profit tax, a company holding at least 10% of the capital of another company, or 10% of its profits and reserves, or participations with a market value of at least CHF 1 million, gets a reduction of its profit tax in proportion to net participation income (LIFD art. 69). The mechanics:

• net participation income is the income less related financing costs and a 5% flat contribution for administration costs;
• capital gains on participations count only if the participation sold was at least 10% and held for at least one year;
• the federal profit tax on capital companies is 8.5% of net profit;
• the cantonal harmonisation law imposes the same reduction on cantonal and communal profit tax, so the cantons apply the same test (LHID art. 28 al. 1).

A US LLC. Under the treaty, a partnership, estate or trust, for example a US LLC taxed as a partnership, is a resident only to the extent its income is taxed in that state like the income of a resident, at entity level or in the hands of its members or beneficiaries.

Staff sent to the US. The US-Swiss social security agreement was signed in Bern on 3 December 2012 and entered into force on 1 August 2014, replacing the earlier agreement in force since 1 November 1980. An employee sent by an employer with a place of business in Switzerland to the United States for a period not expected to exceed 5 years stays only under Swiss compulsory coverage. The competent authorities may agree an exception or an extension of the 5-year period. A spouse and children living with the posted worker who are not themselves gainfully employed stay under the same system. The employer in Switzerland requests the certificate of coverage, form CH/USA 10, from the compensation fund that collects its Swiss contributions. A self-employed person is covered only by the country of residence.

Swiss periods are combined with US periods only for the Swiss disability pension, and only where the Swiss periods amount to at least one year; the amount is then based on Swiss periods alone. Benefits of one country are paid to nationals of the other living in a third country on the same terms as to its own nationals there.

Side by side: the four numbers that shape a US subsidiary

The table condenses each home country's rules into the four points that decide most expansion plans. The conditions behind each entry are set out in the country sections above.

Mount Bonnell Advisors can map these rules onto your group and set up the US subsidiary, its payroll and your postings with you.