US Federal Income Tax Treatment of Odin UK Bare Trust SPVs
This information is provided to those investors who are “United States persons” within the meaning of the United States Internal Revenue Code of 1986, as amended and the regulations thereunder. It is not relevant to anyone who is not a United States person. This is not intended to be a comprehensive discussion of all of the U.S. federal income tax consequences relevant to a U.S. investor. You are encouraged to consult your own independent tax advisor regarding the U.S. federal, state and local tax consequences of this investment.
Odin intends to treat all Odin SPVs that operate using our UK Bare Trust / Nominee structure as constructive partnerships for US Federal Income Tax purposes.
Assuming that the investment is treated as a constructive partnership for such purposes, you will be required to include on your annual U.S. federal income tax return for each year, your share of dividend income and capital gain or capital loss realized with respect to the Shares. Odin will annually provide you with the information regarding your share of dividend income, capital gain, capital loss and other relevant tax items for U.S. federal income tax purposes.
US Investors are permitted to invest using UK Bare Trust SPVs. However, you may have certain tax filing obligations with respect to investments made via this structure. For example, you may be required to file Internal Revenue Service Form 8938 and / or Form 8865 with respect to investments on the Odin platform. You should consult your own tax advisor with respect to these reporting obligations or any other applicable filing requirements with respect your investment via Odin’s UK Bare Trust / Nominee structure.
As Odin is UK-based (i.e “foreign” from a US tax perspective), we do not provide K-1 forms to investors through our UK SPVs, however we will provide you with all documents needed to report any income received through this structure on an investment-by-investment basis.
It is possible that the IRS may disagree with Odin’s characterization of the investment in the as a constructive partnership. The IRS may seek to recharacterize the investment as a nominee arrangement or as a “passive foreign investment company” for U.S. federal income tax purposes. Such alternative characterizations may change the timing or character of inclusions of income, gain or loss with respect to the investment. In addition, additional information reporting requirements may apply. You are encouraged to consult with your own tax adviser regarding the proper treatment of investments on the Odin platform.
As Odin’s UK SPVs do not themselves issue any securities, but simply act as a vehicle to acquire securities in an investee company, we also do not handle blue sky filings nor registration of securities with the SEC.
Odin is not a tax advisor - the above and any other notices with respect to tax filing obligations are explicitly not intended to constitute tax advice. We encourage you to consult a US tax advisor to determine what best fits your specific circumstances.
Frequently Asked Questions (FAQs)
You should consult your tax advisor regarding whether any amendment to your prior tax filings is required in your specific circumstances.
Depending on your circumstances, you may need to:
- Amend your returns to remove PFIC reporting (Form 8621) with respect to these investments, and replace it with the appropriate reporting (Form 8865 / Form 8938 for a foreign partnership)
- If appropriate, provide the IRS with a Reasonable Cause statement explaining why tax filings were filed mistakenly – please see the Tax Notice here which may assist you with this.
Why is Odin changing this now?
As the number of US-based investors using our platform has increased, we have engaged new US counsel to advise us on the tax implications for US investors using our UK-based Bare Trust structure. The concept of a “Bare Trust” does not exist in US law, so there is no ‘clean’ category this structure fits into - as such we required legal advice to help to inform us as to the most likely tax treatment.
We previously received tax advice that this structure most closely resembled a Passive Foreign Investment Company (PFIC). After a thorough review of our suite of platform agreements, platform and legal structure alongside our new U.S. counsel and tax advisors, we have come to the decision that we should instead treat this structure as a constructive partnership for US federal income tax purposes.
As a US Person, what information does Odin provide for me for my tax filings? How do I access it?
In the case of a distribution resulting from an exit, dividend or otherwise, Odin will provide you with a “Distribution notice” detailing, among other information, the income associated with that distribution event. You will have received this by email to the email associated with your account upon an exit.
If we have determined from our internal records (tax residency and/or address) that you are a U.S. Person, you will also receive tax reporting documents detailing any income earned by to as a result of your investments through the Odin platform after the end of the calendar year.
If you haven’t received any payments or distribution notices from Odin with respect to your investments, you most likely have not had any income relating to your investments.
In the page for the relevant deal on the Odin platform you will also be able to see other useful information relating to your investment, such as a Proof of Investment, which may also help with your tax filings.
What sort of forms might I need to file with the IRS as a US person with respect to any income distributed to me via Odin’s nominees?
As mentioned above, we intend to treat your investment as if you have invested via a foreign constructive partnership. Under this structure, the tax treatment of investments into companies and/or other entities (eg Limited Partnerships) based either in the US or outside the US is the same, because the investment vehicle (i.e the Odin SPV) is foreign. Regardless of the location of the ultimate investee, you will likely be required to file form 8938.
In the case of an investment into a foreign (i.e non-U.S.) entity, additional filings may be required on IRS Forms 926, 8865, 5471, or 8621 depending on the amount or U.S. tax characteristics of the investment.
Does this change the tax treatment of any Carried Interest payable to me as a Syndicate Lead?
The tax treatment of Carried Interest payable to you as a Syndicate Lead would specifically depend on your individual circumstances. We encourage you to consult your US Tax Advisor with respect to this.