Tax Consulting Services - International
Whether inbound taxation (i.e., foreign-based investment in the U.S.) or outbound taxation (i.e., U.S.-based investment abroad), working with an international tax planner can save you time and money. International tax planning can involve several approaches, including the following:
- Choice of Entity
- The Tax Cuts and Jobs Act of 2017 (“TCJA”) changed outbound taxation and foreign deferral with the promulgation of global intangible low-taxed income (“GILTI”) and put in the base-erosion and anti-abuse tax (“BEAT”) essentially creating an inbound alternative minimum tax.
- ITA understands how items like the local foreign tax rate should influence which type of investment entity is utilized (e.g., corp, flow through, check-the-box election).
- Corporate Structure: Holding, Royalty, Financing, and Supplychain Structures
- International structuring in a post-TCJA world is more complex than ever. The interplay between GILTI and foreign-derived intangible income (“FDII”) and contemplating items like State taxes requires a complete shift in thinking.
- Foreign Taxation/Permanent Establishment Issues
- The ability of foreign governments to tax earnings is based upon whether you have created a trade or business in the local country (similar to the concept of creating nexus among U.S. States). If the trade or business activity takes place in a tax treaty country the term used is permanent establishment. Taxation in a foreign country can occur even if you have no brick-and-mortar presence but rather you, an employee, or a dependent agent has the ability to habitually conclude contracts for income. Example. You operate a U.S. digital services business and travel to Colombia (which has no tax treaty with the U.S.) for several months where you continue to operate the business remotely. You and your business may have a tax liability in Colombia even if your presence did not exceed 183 days such that you as an individual did not become a local tax resident.
- Tax Treaty Analysis
- When operating in a foreign jurisdiction, understanding the network of tax treaties is crucial to obtaining treaty benefits. Expert analysis around items like the limitation on benefits clauses can ensure you are able to uphold your benefits.
- Transfer Pricing Determinations
- Considering FDII is only taxed at an effective rate of 13.125% when received by a U.S. C-Corp the location of intellectual property, operations, and key personnel should be re-considered. Proper planning from a transfer pricing perspective can help save world-wide taxes but more importantly help you be prepared and document your positions should the U.S. or foreign tax authorities question your local tax liability.
- Tax Return Review
- Penalties are applied if the proper international tax forms are not filed or if they are substantially incomplete. Form 5471 carries a $10,000 penalty for each missing form and up to $60,000 if that form is not timely filed after notification. Omitting income (i.e., even $1 of SubF) could extend the statute of limitations and expose non-foreign income to a future audit as well. We review prior year’s returns with you to identify potential tax savings and ensure there are no compliance deficiencies.
- Tax Incentive Programs
- The Interest Charge – Domestic International Sales Corporation (“IC-DISC”) regime could benefit your business. There are significant advantages when you consider the TCJA’s favoritism for C-corps in combination with the tax rate arbitrage from an IC-DISC structure.
- Puerto Rico’s Act 60 – Chapters 2 and 3, benefits for individuals and businesses respectively, can provide enormous tax savings and depending on your facts could be available even if you plan to be present in PR for less than 183 days.
For Individuals and Families
- Tax efficient holding in foreign entities;
- Maximize foreign tax credits as an individual;
- Foreign Bank and Financial Accounts (“FBAR”); and
- Foreign Investment in Real Property Tax Act (“FIRPTA”).
- Foreign trust global tax implications and estate tax planning; and
- Taxation of cryptocurrency transactions.
For International Businesses
- Tax planning and controlled foreign corporations (“CFCs”), Subpart F;
- Interest Charge – Domestic International Sales Corporations (“IC-DISC”);
- Foreign Account Tax Compliance Act (“FATCA”);
- Review tax efficient holding company jurisdictions and beneficial income tax treaties;
- Manage effectively connected income (“ECI”) and permanent establishment (“PE”) risks; and
- Tax efficient financing and capitalization, understanding commercial debt/equity constraints and the cash needs of treasury.
Tax Consulting Services - Domestic
While international planning tends to be more sophisticated because multiple country’s tax laws are involved, domestic planning is just as important and often overlooked.
- State and local tax arbitrages
- 1031 like-kind exchanges for real estate
- Capital gain vs. ordinary income management
- Partnership planning exit strategies
- Reasonable compensation for S Corps
- Unemployment/Reemployment obligations
- Gift exemptions
- Trust utilization
- State law considerations