About the Author
John Anthony Castro, J.D., LL.M., is the Managing Partner of Castro & Co., the author of International Taxation in Plain English as well as International Estate Planning in Plain English, an esteemed graduate of Georgetown University Law Center in Washington DC where he earned a Master of Laws in Taxation, an OPM Fellow at Harvard Business School, and an internationally recognized tax attorney with offices in New York, Los Angeles, Miami, Chicago, Dallas, and Washington DC. Mr. Castro has been covered in Forbes, Tax Analysts, Entrepreneur, International Business Times, Nevada Law Journal, Sydney Morning Herald, and the SMSF Adviser. This International Tax Online Law Journal has been recognized by NYU Law Library as a reputable and authoritative legal source.
What Is a Per Se Corporation?
A per se corporation is a foreign corporation that, under the U.S. entity classification regulations, is automatically deemed to be a corporation and is ineligible to elect U.S. federal income tax treatment as anything else on IRS Form 8332; also known as the check-the-box option.
A U.S. Corporation is a corporation created or organized in or under the law of the United States or any State. IRC § 7701(a)(3)-(4); Treas. Reg. § 301.7701-2(b). A U.S. Corporation is also any entity that makes an election to be taxed as a Corporation in accordance with the Entity Classification Regulations; also known as the "check-the-box" regulations since you make the election by checking a box on IRS Form 8832. Treas. Reg. § 301.7701-3.
A Foreign Corporation is any business entity formed or created under foreign law. Entities specifically listed by country in Regulations are known as Per Se Corporations. Treas. Reg. § 301.7701-2(b)(8)(i).
In the world of international tax planning, a per se corporation is a company that is organized under the laws of a foreign country and, because of distinctive corporate features, is mandatorily taxed as a C Corporation with no eligibility to elect otherwise in accordance with the Entity Classification Regulations.
Before we review this list of per se corporations, it is important to note our firm's position on the default classification of foreign entities for U.S. tax purposes. It is our firm's position that the foreign equivalent of LLCs are actually flow-through disregarded entities by default: read here.
This legal position is extremely beneficial to someone with either Section 965 exposure (we can lawfully avoid exposure) or someone receiving income from a foreign entity in a non-treaty jurisdiction (we can covert the income into effectively tax-free income by claiming a credit for taxes paid by the company).
List of All Per Se Corporations
Here is a list of all per se corporations in the world as listed under Treas Reg. § 301.7701-2(b)(8)(i):
- American Samoa, Corporation
- Argentina, Sociedad Anonima
- Australia, Public Limited Company
- Austria, Aktiengesellschaft
- Barbados, Limited Company
- Belgium, Societe Anonyme
- Belize, Public Limited Company
- Bolivia, Sociedad Anonima
- Brazil, Sociedade Anonima
- Bulgaria, Aktsionerno Druzhestvo.
- Canada, Corporation and Company
- Chile, Sociedad Anonima
- People's Republic of China, Gufen Youxian Gongsi
- Republic of China (Taiwan), Ku-fen Yu-hsien Kung-szu
- Colombia, Sociedad Anonima
- Costa Rica, Sociedad Anonima
- Cyprus, Public Limited Company
- Czech Republic, Akciova Spolecnost
- Denmark, Aktieselskab
- Ecuador, Sociedad Anonima or Compania Anonima
- Egypt, Sharikat Al-Mossahamah
- El Salvador, Sociedad Anonima
- Estonia, Aktsiaselts
- European Economic Area/European Union, Societas Europaea
- Finland, Julkinen Osakeyhtio/Publikt Aktiebolag
- France, Societe Anonyme
- Germany, Aktiengesellschaft
- Greece, Anonymos Etairia
- Guam, Corporation
- Guatemala, Sociedad Anonima
- Guyana, Public Limited Company
- Honduras, Sociedad Anonima
- Hong Kong, Public Limited Company
- Hungary, Reszvenytarsasag
- Iceland, Hlutafelag
- India, Public Limited Company
- Indonesia, Perseroan Terbuka
- Ireland, Public Limited Company
- Israel, Public Limited Company
- Italy, Societa per Azioni
- Jamaica, Public Limited Company
- Japan, Kabushiki Kaisha
- Kazakstan, Ashyk Aktsionerlik Kogham
- Republic of Korea, Chusik Hoesa
- Latvia, Akciju Sabiedriba
- Liberia, Corporation
- Liechtenstein, Aktiengesellschaft
- Lithuania, Akcine Bendroves
- Luxembourg, Societe Anonyme
- Malaysia, Berhad
- Malta, Public Limited Company
- Mexico, Sociedad Anonima
- Morocco, Societe Anonyme
- Netherlands, Naamloze Vennootschap
- New Zealand, Limited Company
- Nicaragua, Compania Anonima
- Nigeria, Public Limited Company
- Northern Mariana Islands, Corporation
- Norway, Allment Aksjeselskap
- Pakistan, Public Limited Company
- Panama, Sociedad Anonima
- Paraguay, Sociedad Anonima
- Peru, Sociedad Anonima
- Philippines, Stock Corporation
- Poland, Spolka Akcyjna
- Portugal, Sociedade Anonima
- Puerto Rico, Corporation
- Romania, Societate pe Actiuni
- Russia, Otkrytoye Aktsionernoy Obshchestvo
- Saudi Arabia, Sharikat Al-Mossahamah
- Singapore, Public Limited Company
- Slovak Republic, Akciova Spolocnost
- Slovenia, Delniska Druzba
- South Africa, Public Limited Company
- Spain, Sociedad Anonima
- Surinam, Naamloze Vennootschap
- Sweden, Publika Aktiebolag
- Switzerland, Aktiengesellschaft
- Thailand, Borisat Chamkad (Mahachon)
- Trinidad and Tobago, Limited Company
- Tunisia, Societe Anonyme
- Turkey, Anonim Sirket
- Ukraine, Aktsionerne Tovaristvo Vidkritogo Tipu
- United Kingdom, Public Limited Company
- United States Virgin Islands, Corporation
- Uruguay, Sociedad Anonima
- Venezuela, Sociedad Anonima or Compania Anonima
It's important to note that the IRS has allowed for the use of a Type F Tax-Free Corporate Reorganization to purge the per se corporate entity type, which will then permit “check-the-box” planning. PLR 201152015.
Validity of the Per Se Corporation Regulations
In 1935, the U.S. Supreme Court created a 5-factor approach for determining whether a non-corporate entity would be taxed as a corporation. See Morrissey v. C.I.R., 296 U.S. 344 (1935). This 5-factor test, known as the Resemblance Test, classified entities as corporations if they possessed more of these factors than not. Nevertheless, Treasury promulgated the per se corporations regulation as well as the check-the-box regulations permitting taxpayers to make an election with regard to how their entity would be taxed. In essence, Treasury’s regulations purport to overrule the U.S. Supreme Court’s holding in Morrissey. See Gregg D. Polsky, Can Treasury Overrule the Supreme Court?, 84 B.U. L. Rev. 185, 186 (2004). In 2007, the U.S. Court of Appeals for the Sixth Circuit, in a case that pre-dated the U.S. Supreme Court’s decision in Home Concrete, upheld the validity of the check-the-box regulations as a valid exercise of Treasury’s mandate to provide clarity where there is ambiguity. See Littriello v. U.S., No. CIV.A.3:04CV-143-H (W.D. Ky. 2005), aff'd, 484 F.3d 372 (6th Cir. 2007). However, Littriello did not resolve the particular concern that Congress did not permit Treasury to classify all foreign entities by default as a corporation without considering either the legal structure or actual characteristics; the Morrissey standard. In 2008, the U.S. Court of Appeals for the Federal Circuit held that Treasury regulations are invalid as a matter of law to the extent they are inconsistent with a statute's or treaty's purpose and intent. See Nat’l Westminster Bank, PLC v. U.S., 512 F.3d 1347 (Fed. Cir. 2008). In 2011, the U.S. Court of Appeals for the Fifth Circuit held that a finding of statutory ambiguity was a prerequisite to Treasury’s exercise of its gap-filling regulation promulgating power. See Burks v. U.S., 633 F.3d 347 (5th Cir. 2011). In 2012, the U.S. Court of Appeals for the Federal Circuit held that Treasury regulations are invalid as a matter of law to the extent they exceed Congressional intent. See Dominion Res., Inc. v. U.S., 681 F.3d 1313 (Fed. Cir. 2012). That same year, the U.S. Supreme Court held that regulations are invalid if the conflict with the plain meaning of any terms in the statute. See U.S. v. Home Concrete & Supply, LLC, 132 S. Ct. 1836 (2012).
The time has come for a legal challenge to the validity of these regulations. These regulations are invalid as a matter of established case law.
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About the Author
John Anthony Castro, J.D., LL.M., is the Managing Partner of Castro & Co., the author of International Taxation in Plain English as well as International Estate Planning in Plain English, an esteemed graduate of Georgetown University Law Center in Washington DC, an OPM Fellow at Harvard Business School, and an internationally recognized tax attorney with offices in New York, Los Angeles, Miami, Chicago, Dallas, and Washington DC.
Bluebook Citation: John Anthony Castro, Worldwide List of Per Se Corporations, Int’l Tax Online Law Journal (Mar. 6, 2018) url.