DC owns UKLLC which is treated as a hybrid entity How is the

DC owns UK-LLC, which is treated as a hybrid entity. How is the UK-LLC treated for tax purposes by the US? by the UK?

DC pays interest to UK-LLC. Does DC withhold on the interest it pays to UK-LLC?

Can UK-LLC use the treaty to claim reduced withholding?

Solution

Treatment of UK-LLC by the UK

It is taxed according to the distributions of profit made by the LLC. It is not taxed according to the income of the LLC as it arises.

Treatment of UK-LLC by the US.

On the profits made by the LLC, if tax is paid in the US, that tax is regarded as underlying tax and credit relief is available on it if the UK company holds, directly or indirectly at least 10% voting power in the LLC.