Tax benefits for direct investments in oil and natural gas conveyor systems
Under the applicable double taxation agreement between Germany, the United Sates and many other countries direct interest in a firm in general qualifies as commercial activity. Thus the resulting profits are subject to US income tax and therefore are considered tax-free in Germany and most other countries benefitting from the double tax treaty.
However, various countries apply a "cold progression taxation", i.e. the individual tax rate is being calculated under consideration of foreign income. In the USA, the share of profit is allocated directly to every individual participating partner. In principle each investor is committed to apply for a tax number (W/8ECI form) and to declare his income tax in the United States – exceptions may be applicable. However, for prospective investors the following description might be of interest.
A limited liability company (LLC) is not a separate tax entity like a corporation; instead, it is what the IRS calls a "pass-through entity", like a partnership or sole proprietorship. All of the profits and losses of the LLC "pass through" the business to the LLC owners (called members), who report this information on their personal tax returns. The LLC itself does not pay federal income taxes, but some states impose a small annual tax on LLCs. For further reference we recommend the following link of the US Internal Revenue Service:
When new oil drilling takes place all acquisition costs for an oil well will be divided into 70% initially wage and labor costs, which can be claimed immediately in the first year of origin. The remaining approximately 30% on material and devices can be depreciated over seven years. Adding to that there is an approximately extra personal tax allowance of US$ 4.050,00 in 2017.
Spouses, who work together on a project, can deliver a joint tax declaration, but only in the name of one partner with only one tax exempted amount. It should be determined on a case-by-case basis when splitting the participations of the two partners (each entitled to the full free amount) is useful.
For questions with regard to taxes in conjunction with our oil projects we can assist you with best knowledge and our experts will be happy to assist you with all relevant forms. Nevertheless we do strongly recommend seeking professional advice from a tax advisor according to your needs.
