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Intercompany loan

Technical topics regarding tax preparation.
7-May-2014 1:13pm
DC Metro
Pros, I hope everyone is well. I have a client who is a C (corp. It is 100% owned by a UK parent company. Both companies have not shown a profit yet. They develop an online software. There is an intercompany loan from the UK parent to the US corp. One point is there is no interest set on the intercompany loan. We are going to suggest there be one (maybe not if we dont need to). Is there a requirement to withhold any tax though on the interest expense or is there a treaty between the US and UK which does not require withholding to be done on intercompany loans. Ideally there would be no interest at all since the US company is not profiting and these are related parties. For sure, we would not want to withhold tax on an interest expense (1099-INT) as well since there is no profit and it would lower cash for no reason since these are related entities. Any insight on what to do here would be great. Thank you.

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