(Planning for IP transfers into and out of the US)
The large potential value of IP, as well as the ease of transfer makes IP one of the most effective tools for achieving tax efficiency.
Correctly treated, and provided the norms of transfer pricing are observed, the development, sale, and licensing of IP typically yields significant tax benefits, especially when the IP is licensed into or out of the US.
In many cases the appropriate transfer and treatment of IP can position a group for sale or listing in addition to maximizing after tax earnings. See Transferring IP?
Ensuring that IP is held by an appropriate entity is fundamental both for tax efficiency and for value recognition with a sale or listing. (See Forming a US Entity? and Non-US Entity?)
(Planning for IP transfers into and out of the US)
The large potential value of IP, as well as the ease of transfer makes IP one of the most effective tools for achieving tax efficiency.
Correctly treated, and provided the norms of transfer pricing are observed, the development, sale, and licensing of IP typically yields significant tax benefits, especially when the IP is licensed into or out of the US.
In many cases the appropriate transfer and treatment of IP can position a group for sale or listing in addition to maximizing after tax earnings. See Transferring IP?
Ensuring that IP is held by an appropriate entity is fundamental both for tax efficiency and for value recognition with a sale or listing. (See Forming a US Entity? and Non-US Entity?)
(Planning for funds that cross a US border)
Investment or funding across a border generally entails a number of specific tax consequences, both to the investor and the recipient.
Investment into the US generally entails consideration of the purpose to which the funds will be put and the related structure to determine the tax treatment of the funding in the US, whether the income on the funding may be tax deductible, and whether withholding taxes may need to be paid on this income or on profits flowing from the funding.
Depending on the circumstances, investing into the US may entail additional specific considerations. See Forming a US Entity?, Investing in US Real Estate?, Opening a US Bank Account? and Applying for a US tax Number?
Investment from the US to another country entails consideration inter alia of the type of income that will be earned from the funding, the type of US structure, and whether income tax as well as withholding tax that may have been paid in the foreign country can be claimed as a credit in the US.
Depending on the circumstances, investing from the US to another country may entail additional specific considerations. See Non-US Entity?, Foreign Trust? and Foreign Accounts?
(Between US and non-US parties)
Services between US and non-US parties entails planning for the tax consequences that will arise both to the party rendering the service and receiving the service.
Where the party rendering the services is related to the party receiving the services, provided the norms of transfer pricing are observed, the cross-border nature of these transactions lend themselves to tax arbitrage.
Where a non-US party renders services to US customers, one of the considerations is whether a US entity should be formed (see Forming a US Entity?). Similarly, where a US party renders services to non-US customers, consideration needs to be given to whether a non-US entity should be formed (see Non-US Entity?).
If the non-US party resides or was formed in a country with which the US has a tax treaty, this cross-border rendering of services often gives rise to questions under the treaty (see Tax Treaty Question?).
Whether the services are rendered in the US or in another country, in many cases there will be a US tax compliance requirement (see Tax Return Question?).
(Planning for goods moving across a US border)
Imports into and exports from the US typically entail a range of US tax and related considerations.
At a minimum, imports into the US entail tariff classification and valuation for Customs purposes, as well as compliance with non-tax requirements relating to security and clearance procedures, labeling, certificate of origin, etc.
If the party importing into the US has any US activities other than appointing an unrelated distributor, they will need to consider the nature of the entity that will perform these services (see Forming a US Entity?) as well as the structure for holding the US entity.
Exporters from the US can generally expect tariff classification and Customs valuation requirements when their goods enter the foreign country. It is generally possible to structure export activities tax efficiently from the US perspective, including distribution and other activities in the foreign country, which may entail forming a foreign entity (see Non-US Entity?).
(Planning for payments that cross a US border)
Because US rules often tax the income earned by different entities at different rates (see Forming a US Entity?), and often tax different types of income at different rates, planning for income and distributions that cross a US border is essential.
For example, US recipients of cross-border dividends are taxed at beneficial rates under certain circumstances; while US recipients of cross-border trust distributions are often taxed at heavy rates (see Foreign Trust?).
On the other hand, non-US recipients of income from the US typically face a variety of US withholding tax rates depending on the type of income – especially if they reside in a country with which the US has a tax treaty (see Tax Treaty Question?).
If the income is paid by a party who is related to the recipient, planning is then aimed at global tax efficiency, taking account of the overall tax inclusion and tax deduction rates of both parties.
Entity Formation
(Planning for US and some non-US entities)
Forming the right type of entity in the right jurisdiction is key to achieving tax efficiency for any business or investment.
A large number of entities can be formed in the US, including Limited Liability Companies (LLCs), Corporations, Limited Partnerships (LPs), and various types of trusts, with varying Federal tax consequences.
Entities are formed at State level and State tax varies depending on the State in which an entity is formed or conducts transactions.
Determining the best entity and jurisdiction in which it should be formed depends on the type of business or investments intended, as well as income flows such as dividends, interest and royalties, and the location and tax status of the entity owners. See Forming a US Entity?
In some cases we also advise on the formation of non-US trusts and other entities to ensure beneficial US tax treatment of these entities.
If you want an answer or assistance with forming an entity, complete the Basic Information Questionnaire and follow Our Process.
FATCA is a US tax reporting regime that has been adopted by a number of countries outside the US.
Although the details vary slightly between countries, in most cases banks and financial institutions in the foreign country where FATCA has been adopted are required to report accounts held by US citizens and green card holders.
In most cases the institutions report these accounts to the revenue authority of the foreign country, and the revenue authority the reports the accounts to the IRS.
It is imperative that US citizens and green card holders disclose their foreign accounts to the IRS before the foreign accounts are reported to the IRS. This includes citizens and green card holders who may be living abroad. See US Citizen or Green card Holder Living Abroad?
US citizens and green card holders should generally disclose their unreported foreign accounts through Voluntary Disclosure. Some forms of Disclosure provide strong protection against criminal proceedings, but can be costly as far as penalties are concerned; while others do not provide protection against criminal proceedings, but allow for low or minimal civil penalties. See Foreign Accounts?
We have the experience to identify the best procedure and to assist clients through the Disclosure process.
(to or from the US)
Immigrating to the US entails changing from nonresident tax status to US tax status. Planning for this change is important because it is generally possible to delay or accelerate the change date if the correct steps are taken at the right time. See Moving to the US?
Planning is even more important for prospective immigrants who own shares in non-US companies or have interests in foreign trusts. See Foreign Trust?
Relocation from the US and taking up residency in another country does not change a US citizen or green card holder’s US tax status. However, US tax status is terminated where US citizenship is renounced or US permanent residence formally abandoned. In certain circumstances an “exit tax” is levied based on wealth.
(for people or transactions that cross a US Border)
Special tax returns are generally required for people who move to the US, and for transactions that cross a US border. A number of these tax forms entail subtle nuances, so if they are not filed or if they are filed but completed incorrectly, the consequences can be costly (see Tax Return Question?).
For example, non-US ownership of US corporations needs to be specifically reported under certain circumstances. Where US persons own interests in, or are directors of, a foreign company, this also requires specific reporting (see Non-US Entity?).
Specific reporting is also required where a US person makes a transfer to, or receives a distribution from, a foreign trust (see Foreign Trust?).
Where a person moves or immigrates to the US, special tax reporting is generally required for the year that they transition to US tax residency (see Moving to the US?).
