How to Open a U.S. Registered Office in NY for Foreign Banks

by Fulton Abraham Sanchez, CPA · Published July 10, 2018 · Updated August 1, 2018

banks

We recently have an inquiry from a foreign bank on how to open a registered office in the U.S., specifically in NY, to market loans and commercial mortgages and the tax consequences of such structure will have on the parent bank.

Depending on the structure of your project, either as an office for commercial promotion or to engage on some type of financial activity like lending, a representative office will be the first base, but keep in mind that there are other structures, as we described on an earlier post: US Banking representation for foreign banks, such as branch and subsidiary.

When we consulted the financial authority in NY, they were very nice and went on confirming that a Rep Office will be suitable for this project and that in addition of the Rep Office license, an Agency implementation will be needed to carry on the lending. If the mortgage lending is exclusively for commercial, there will be no need for a MLS broker license employee, as that is only needed for residential mortgage lending.

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The start of the project implementation will be:

Prepare a full plan for the project
Coordination with the financial authorities in the State of your choosing
Foreign bank registration with the State
Foreign bank registration with the IRS
Rep Office application submission with the State
Fed regulation application

The Rep Office will also require to provide, for the Agency licensing:

Statement of Financial condition
Capital and profits certification

The above will not be required if the Rep Office doesn’t get involved on lending.

Operations of a representative office that create income in the U.S., such as the interest accrued or collected over the loans granted to U.S. individuals or businesses, will be subject to taxation and the Rep Office will need to file a tax return at the end of the fiscal year for the portion of income and expenses. Please note that the Rep Office will not engage in any financial activity and will work as a Rep Office, then no tax reporting is required, as there will be no income.

In addition to the licensing application process, the Rep Office that plans to do lending, will also need to provide with the policies and manuals for each of the lending practices, same as any other U.S. bank. This requires the elaboration of the manuals and procedures, AML, operations manuals, etc. for loans, mortgages, etc. The Rep office with Agency license will not be able to take deposits from the public at any time or risk to lose its licensing and prosecution from the DOJ.

Our team is trained to provide you with the necessary information for the formation of your project.

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