Initial formation funds face a daunting array of US tax considerations when starting operations, from information disclosure considerations, to structuring concerns, to investor servicing issues. Certain US tax elections must be made within a limited timeframe once operations begin. KPMG can assist with the following areas that a Fund will commonly run into:

• Review of proposed structure to identify potential US and foreign tax issues for the Fund or its investors, and consideration of applicable US tax elections.
• Drafting or review of US tax section of Offering Memorandums.
• Review of partnership agreements to verify compliance with US tax requirements.
• Reviewing and commenting on investor side letters.
• Preparation of US entity classification (“check-the-box”) elections, and other first-year elections.

Investment Managers

Investment managers often face their own US tax issues where they have operations in the US (either through branches or affiliated companies) or have personnel deployed in the US , or traveling regularly to the US to perform certain services. KPMG can assist companies in assessing whether any of their US activities may expose them to tax in the US, and whether companies may have any US filing requirements.

Transaction Services

Often times a Fund will engage in a transaction that will impact the tax consequences of its US investors, whether the Fund is a flow-through entity or a corporation for US tax purposes. Reviewing the US tax consequences of these transactions before they occur can often provide an opportunity to structure the transaction in the most tax-efficient manner. KPMG can assist with these common analyses, and many more.

Acquisitions

KPMG can assist with reviewing potential acquisitions to determine the optimal structure to achieve low withholding tax on cross-border payments, while also ensuring that US investors in the Fund are not unduly burdened with phantom income for US tax purposes, as may occur with investments in certain debt and preferred stock.

PFIC/CFC Analysis

The US controlled foreign corporation (“CFC”) and passive foreign investment company (“PFIC”) rules are complex, and often catch a broad range of companies, even those companies that have active operations. The PFIC rules operate to either tax the US investors on the current income of a PFIC, or provide an onerous tax charge to US investors on dividends or dispositions. KPMG can assist by reviewing investments to determine whether they may be classified as PFICs or CFCs, and determine whether there may be any alternative structuring considerations.

Exit and Refinancing

Minimizing tax charges to US investors upon an exit or refinancing is a common objective for Funds. In the case of exit or refinancing of a US investment, the Fund itself may be subject to certain US withholding tax and/or return filing requirements. KPMG can assist with structuring a potential exit or refinancing and assessing the US tax costs to investors (and the Fund if applicable).

Typical Master - Feeder Structure