Driven by costs and enabled by technology, companies, are aggressively pursuing global markets. All types of businesses are experiencing the trend toward going global, including insurance carriers, banks, architects. Even healthcare is going global with patients shopping around for the best price on a surgery, often finding it in countries like India and Singapore, which by promising quality care at lower prices. Therefore,, in order for businesses to grow and compete, the need to develop internationally has become more crucial than ever.
However, if you are operating across borders, or competing in multiple jurisdictions, complying with local tax laws, reporting requirements and statutory filings — not to mention staying on top of new legislative developments — is more than a full-time job for your tax department.
We at The Rascon CPA Firm are committed, highly experienced in this area, and very passionate about the success of our client’s business here in the United States and globally. Therefore, we are proud to offer various high quality International Tax Services at a small firm competitive rate that will enable our clients to grow and develop toward being competitive Global Leaders in their industry.
Choice of Business Entity
One of the many challenges of expanding into global markets is to determine the optimum legal structure. However, there are many opportunities to be taken advantage of from companies who want to structure their company overseas and benefit from the global economy.
Whether to use a corporate or a partnership entity is not a simple a decision. Each country has different legal and tax rules for various entities so that the combination of specific entities in the countries involved may have unique effects. Also, some entities may be ‘opaque’ under the rules of one country, whereas another country may regard the entity as transparent or even non-existent for either legal or tax purposes. Careful analysis of the various entity types available and their combinations should lead to the optimum tailor made solution.
Both the planning and the implementation of overseas structures are equally important. A danger in “cloning” successful structures from a particular situation is that differences in relatively minor aspects, either in the structure or in the underlying fact pattern, may alter the structure’s entire effect.
The choice of legal structure must consider all relevant effects, preferably not only in the present situation but also in respect of future changes – both as to the business objectives and the surrounding legal environment. Otherwise, the structure may not be adequate to withstand the challenges of its economic operation. One of the main tasks of the business and the adviser is to determine and prioritize the business’ needs in light of the objectives of the business so as to determine the optimum overseas business structure.
Services we provide include:
- Foreign Business Expansion
- CFC Consultation
- Preparation of Expatriate Tax Returns
- Foreign Tax Credit & Planning & Compliance
- Apply benefits of Tax Treaties
- Repatriation of Foreign Earnings
- Disposition Planning
- Foreign Account (FATCA) Reporting
- Consultation on which W-8 Form to have on file
- Preparation of all U.S. international forms, including Forms
Controlled Foreign Companies
One of the many challenges of expanding into global markets is managing the taxation treatment of controlled foreign companies (CFCs).
The CFC rules aim to counter tax avoidance through the accumulation of income in subsidiaries in low tax jurisdictions and the artificial diversion of business profits from the parent operating company to such companies. The essential aim of the rules is revenue protection, by preventing groups from artificially diverting profits from the parent company. These rules provide significant armory for the revenue authorities in UK, US, Australia, France, Germany and other high tax jurisdictions.
Whether your parent company is in the UK or another country, an understanding of the taxation treatment of any CFC’s within your corporate group is essential in managing the group’s international tax exposure. Also, if you are an individual who has an overseas CFC you should be familiar with the potential tax consequences.
Employers wishing to maximize benefits of the global economy will find that they have to transfer employees internationally. Such employee transfers create challenges regarding competitive compensation and ensuring that taxation, pension and social security concerns are all addressed. These challenges can be turned to the employer’s advantage if handled correctly so that the expatriate’s international transfer becomes a less stressful and more positive experience for the individual.
From an individual expatriate’s perspective, an international transfer can open up new horizons. Such transfers can provide invaluable experience, adding to the growth of an individual’s career. If the numerous taxation and related regulatory issues are handled correctly, the individual can enjoy a peace of mind enabling him or her to concentrate on the most productive use of their time abroad.
In order to benefit from international expatriate transfers it is essential that both employers and employees are able to obtain expert advice on a variety of expatriate tax issues, preferably from the one source, including:
- Pre-departure and post-arrival consultation to ensure that expatriates understand their home and host country tax obligations
- Liaising with immigration agents regarding employment permits, immigration and visa issues
- Tax implications if the expatriate remains on their home country payroll
- Living-away-from-home benefits tax assistance and similar expatriate tax concessions
- Preparation and filing of home and host country individual tax returns
- Implementation of tax equalization agreements and calculations
- Compliance with employment and payroll taxes
Foreign Tax Credits
Most tax jurisdictions express the aim of operating to ensure that, for all companies operating internationally, a fair amount of tax should be paid; double taxation should be avoided where possible; and economic distortions and administrative costs should be minimized.
In any case, understanding how foreign taxes may be credited against domestic income tax or how they may lead to an exemption from tax is invaluable for any businesses operating overseas and wish to manage their international tax exposure and maximize their after tax return.
Tax treaties are bilateral agreements between countries that generally determine the amount of income tax, including capital gains tax that each country to the treaty can apply to a taxpayer’s income and wealth. Tax treaties do not cover other forms of taxation, such as turnover taxes like VAT.
One reason countries enter into tax treaties is to prevent the double taxation (two different countries imposing a similar tax on the same taxable income of the same taxpayer) of various forms of income and economic gain. Double taxation is seen as undesirable because of its negative impact on international trade and investment.
Under tax treaties, residents (though not necessarily citizens) of countries can be taxed at a reduced rate (or may be altogether exempt) on certain items of income they receive from sources within the treaty country in which such income is derived. Tax haven countries (generally very low or no tax regimes) are the only countries that typically do not enter into tax treaties.
If there is no tax treaty between a source of income country and the resident’s home country, residents must pay tax on the income in the usual way and at the same rates applicable in both the source and the home country. In this situation, the residents might be able to reduce, but not completely eliminate, their double taxation by utilizing foreign tax credits, if available.
Finally, foreign taxpayers investing or doing business in the United States should note that many of the individual States of the United States tax income which is sourced in their States. No State has a treaty with foreign countries and they do not fall under treaties that the U.S. government enters into with foreign countries. Thus, separate consideration of how State and local taxes impact taxpayers must be taken into account, not just in the United States but also in other countries.