Cross-border transactions often involve complex US tax issues, some of which may not immediately be apparent. Planning for these issues is fundamentally important, but so is correct proper compliance and reporting.
In addition, foreign country tax considerations and constraints need to be factored in to achieve the best overall solution.
Transferring IP across a US border poses some unusual challenges and opportunities, not normally associated with tangible assets.
From the tax perspective, provided the arm’s length norm is observed the correct structuring of IP within a group can bring about significant benefits.
In cases where the IP has been developed in the US, it often makes sense to transfer the IP to a subsidiary in a low tax jurisdiction, especially where the IP has the potential to grow in value over time.
Conversely, where IP has been outside the US it sometimes makes sense to transfer the IP to a US entity, particularly if the group is being positioned for sale to a US purchaser.
Whenever IP is to be transferred across a US border, or cross US border royalty payments are to be made to a related party, a transfer pricing study should be undertaken to determine the arm’s length range of transfer price or royalty.
Virtually all cross border related party IP transfer payments and royalties have to be specifically disclosed to the IRS, and may be challenged in an IRS audit. In the early stages of most IRS audits the taxpayer is presented with a “30 day letter” for the submission of transfer pricing documentation. Suitable documentation supporting transfer prices is generally required to have been in existence by the time of submitting the taxpayer’s returns.
When a non-US business exports product to the US, a number of tax and regulatory factors come into play, some impacting the product imported, and others impacting the exporter’s US structure and activities.
Where the exporter appoints a US distributor, and as a result does not get involved with US structures or activities, the US regulatory requirements are generally limited to matters such as Tariff classification, import security, labeling, and satisfying the requirements of any relevant US government agencies (such as the FDA, USDA, etc).
Where the exporter undertakes their own US distribution, US tax becomes a vital consideration. The difference between US tax rules and the tax rules of other countries make it essential to obtain US tax advice on the structure and related tax consequences prior to export.
Non-US corporates and individuals who wish to form a US entity face a number of decisions both as to the type of entity and in which US state it should be formed. We assist clients select and form the entity best suited to their needs.
Investing in US real estate entails a number of tax and structural considerations for non-US resident investors.
Nonresident investors in US real estate are subject to special US tax rules, with the result investment of this nature requires specific attention.
Aside from the US tax position, consideration also needs to be given to the tax position in the investor’s home country, as well as the impact of any relevant Tax Treaty. Planning for these issues is fundamentally important, but so is correct proper compliance and reporting.
Non-US entities require highly specific US tax treatment in many situations, including cases where they conduct business in the US; own US entities; are owned by US taxpayers; are funded by US taxpayers; make distributions to US taxpayers; or are managed by US taxpayers.
Care needs to be taken to avoid US taxpayers from being taxed on the income earned by some foreign entities, for example, certain Controlled Foreign Corporations (CFCs) or Foreign non-Grantor Trusts.
Care also needs to be taken to avoid US taxpayers from penalties or other harsh tax treatment often accorded to investments in Passive Foreign Investment Companies (PFICs) such as certain foreign hedge fund investments.
We can advise you on US tax planning and US tax reporting relating to non-US entities.
Of all non-US entities, foreign trusts require the most careful consideration due to the US tax consequences attaching to foreign trust transactions, and the highly specific US disclosure requirements in many situations, including where a foreign trust has one or more US beneficiaries, or is funded by US taxpayers.
The US distinction between Grantor Trusts and Non-Grantor Trusts is fundamental, yet does not exist in other countries. Special classification rules apply to trust classification where the Grantor is a foreign (non-US) taxpayer.
Where individuals will be moving to the US, pre-immigration planning generally requires a review of their foreign trust interests as early as possible and in any event before they become US tax resident.
Individuals who do not have a social security number or any party that does not have a US tax number may have difficulty opening a bank account in the US. We can generally assist clients who fall into these categories.
Over time any of a number of circumstances can change that make corporate tax structures less efficient. Furthermore, tax laws change frequently, especially on the US international side, which impact tax efficiency.
Tax compliance rules also change frequently, requiring increased reporting and disclosure to be made especially on the US international side.
We can assist by undertaking a group tax review to ensure your structure remains tax efficient and in compliance with recent tax reporting requirements.
The US has tax treaties with a number of countries that modify the usual US tax position. Most of these treaties deal with income tax, but some deal with estate tax, exchange of information, or social security (totalization).
“U.S. tax treaties differ from the OECD Model in certain important respects.”
Most US treaties contain provisions that are not found in tax treaties unrelated to the US, for example Limitation of Benefits (LOB) provisions, and Savings provisions.
Any treaty question needs to be considered in light of the wording of that specific treaty, as the wording of provisions sometimes varies from treaty to treaty.
US tax returns, information returns and tax forms are complex especially on the international side.
In many cases experience with the type of disclosure is essential, especially where the information publicly available is insufficient to deal the specific disclosure requirement.
We have the experience to advise you on US tax return and tax form disclosures, especially relating to US international tax.
US tax returns, information returns and tax forms are complex especially on the international side.
In many cases experience with the type of disclosure is essential, especially where the information publicly available is insufficient to deal the specific disclosure requirement.
We have the experience to advise you on US tax return and tax form disclosures, especially relating to US international tax.
Foreign (non-US) bank and other financial accounts (including pensions, annuities, endowment and some life policies) require special US disclosure and treatment for taxpayers who file US tax returns.
“U.S. owners of foreign accounts (including the entities they own) should generally file Foreign Bank Account Reports (FBAR’s) with Treasury.”
Under recent FATCA (Foreign Account Transaction Compliance Act) legislation, taxpayers filing US returns are required to make certain additional disclosures.
Where foreign account(s) have not been disclosed in US tax returns, in most cases we assist clients to make voluntary disclosure of the account(s) and have significant experience dealing with the IRS in this regard.
Whether or not the foreign account(s) have been disclosed, owing to the sensitive nature of this type of matter, you simply need to provide us your contact details and we will contact you.
If you are one of the many taxpayers that has fallen out of tax compliance by failing to submit US tax returns, or by failing to fully disclose income, we can assist you.
Although the types of non-compliance vary widely, one aspect is universally true: it is far better for taxpayers to come back into compliance – and to come into compliance voluntarily – rather than when under audit or other challenge from the IRS.
In some cases, it’s simply a matter of filing delinquent returns, though even here there are legitimate methods that are less likely to trigger an audit or penalties. In other cases, it may entail making disclosure under one of the IRS Voluntary Disclosure Programs.
We have the experience to advise you on the best means of coming into compliance, of preparing your delinquent tax returns, and assisting you through Voluntary Disclosure if appropriate.
We respond to and deal with US international tax questions across a large number of factual situations and tax rules.
Although each question is considered relative to the specific facts and related tax rules, one factor is universally true: the more information the client provides upfront, the better it allows us to deal with the question and determine the best result.
We assist clients in obtaining US tax numbers. While US tax numbers can be obtained in a variety of situations, much depends on the facts as in some instances the IRS refuses to issue a tax number.
Although each question is considered relative to the specific facts and related tax rules, one factor is universally true: the more information the client provides, the better it allows us to deal with the question and determine the best result.