U.S. companies are increasingly electing or appointing non-U.S. tax residents to serve on their boards of directors. When doing so, it is important to understand the U.S. and foreign tax obligations and issues that can arise.
Compensation paid to a director who is not a U.S. tax resident is subject to U.S. federal withholding and specialized tax reporting requirements that differ from those applicable to U.S. tax resident directors.
Additional complexities may arise in determining the portion of board compensation subject to U.S. tax, identifying tax obligations in the director’s home country, and assessing the availability of treaty-based exemptions. In some cases, the type and structure of board compensation may need to be reevaluated – particularly where deferral arrangements commonly used for U.S. directors may be ineffective or problematic for directors subject to foreign tax regimes.
Read our latest white paper for a comprehensive primer on the key considerations U.S. companies should consider when appointing a non-U.S. tax resident to the board of directors.
