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If a business or individual provides international investment management services, they may qualify for a lower business and occupation (B&O) tax rate of 0.275% under certain conditions.
Investment management services includes investment research, investment consulting, portfolio management, fund administration, fund distribution, investment transactions, or related investment services.
What are the qualifications?
To qualify for this reduced tax rate, a business or individual must meet all of the following criteria:
- Primary business activity: The business or individual must primarily provide investment management services.
- Income from Collective Investment Funds (CIFs): At least 10% its gross income must come from providing investment management services to a qualifying CIF, which can be:
- CIFs based outside the U.S.
- CIFs with at least 10% of their investments outside the U.S.
- Employee location: More than 25% of the employees are in Washington state.
- Affiliated Group Requirements: The business or individual must be part of an affiliated group that collectively has:
- At least 10 offices located in at least 8 foreign countries.
- At least 500 full-time employees worldwide.
- More than $400 million of worldwide gross revenue during the entire current or immediately preceding calendar year.
- More than $200 billion in average assets under management during the entire current or immediately preceding calendar year.
Affiliate consideration: If an affiliate of the qualifying business or individual meets the employment location requirements and is involved in qualifying activities, they can also be considered for the lower tax rate.
References
ETA 3183.2022 – International Investment Management Services
RCW 82.04.290 – Tax on service and other activities
