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August 3, 2021

Overseas Expansion - Tax Questions Can Complicate Your Growth Plans

When a domestic company begins operations in another country, its tax picture grows dramatically more complicated. If an international expansion is part of your company’s growth strategy, your financial management and tax teams will need to make a number of critical tax-related decisions in addition to the many strategic, competitive, and financial considerations your company already must address.

Here are seven important tax-related variables that will affect when, where, how, and even whether you launch overseas operations. While these are by no means the only issues you must consider, your answers to these questions will drive much of your future decision-making. (more…)

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Categories: Execs & Owners, International Business Issues
Tags: Foreign operations, International Business, Transfer pricing,
August 8, 2019

Failing to File FBAR Form Results in Large Penalties (Again) - District Court Refuses to Dismiss FBAR Penalty Action Against Decedent’s Family

If you have an interest in (or authority over) a foreign financial account, you may have to electronically file a form called the “Report of Foreign Bank and Financial Accounts” (FBAR). Failing to file a required FBAR can result in penalties.

In the recent case of U.S. v. Park, a federal district court refused to dismiss an action to collect an FBAR penalty from a decedent’s family. In the court’s view, the IRS provided sufficient factual detail about the penalty and assessment, the penalty didn’t exceed the statutory maximum, and the assessment survived the decedent’s death. (more…)

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Categories: International Business Issues, Summer 2019
Tags: FBAR penalty, Report of Foreign Bank and Financial Accounts,
May 24, 2019

An Overview of the Proposed Regs on the FDII and GILTI Deduction

In March, the IRS issued proposed regulations that cover determining the amount of the deduction for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI). The regs also coordinate the FDII and GILTI deduction with other tax provisions. Here’s an overview.

Background

The Tax Cuts and Jobs Act (TCJA) established a “participation exemption system” under which certain earnings of a foreign corporation can be repatriated to a corporate U.S. shareholder without U.S. tax. (This occurs under Internal Revenue Code Section 245A.) (more…)

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Categories: International Business Issues, Spring 2019
Tags: Domestic Corporation, FDII, GILTI, international tax,
April 12, 2018

IRS to Deny Certain Changes to Foreign Corporations’ Accounting Periods

On February 13, 2018, the Treasury Department and the Internal Revenue Service issued Rev. Proc. 2018-17, which provides modifications to the procedures for changing the accounting period of foreign corporations owned by U.S. shareholders that are subject to the transition tax under the Tax Cuts and Jobs Act.  Rev. Proc. 2018-17 basically disallows the accounting period change if such change could result in the avoidance, reduction, or delay of the transition tax.  (more…)

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Categories: International Business Issues, Tax Reform
Tags: accounting periods, deferred foreign income corporation, foreign corporations, Tax Cuts and Jobs Act,
March 29, 2018

IRS to End Offshore Voluntary Disclosure Program in September

The IRS announced it will begin to ramp down its Offshore Voluntary Disclosure Program (OVDP) and close it on Sept. 28, 2018. This gives taxpayers with undisclosed foreign financial accounts time to still use the program.

“Taxpayers have had several years to come into compliance with U.S. tax laws under this program,” said Acting IRS Commissioner David Kautter. “All along, we have been clear that we would close the program at the appropriate time, and we have reached that point. Those who still wish to come forward have time to do so.” The current OVDP began in 2014 and is a modified version of the OVDP launched in 2012, which followed similar voluntary programs offered in 2011 and 2009. The programs have enabled U.S. taxpayers to voluntarily resolve past noncompliance related to failure to report foreign financial assets and file foreign information returns. (more…)

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Categories: International Business Issues
Tags: FATCA, international tax, offshore voluntary disclosure program, OVDP,
January 31, 2018

New Law Includes Loophole That Lets Taxpayers Reduce Tax on Repatriated Income

A loophole in the Tax Cuts and Jobs Act (TCJA) could allow multinational corporations like Apple to avoid paying billions of dollars in taxes on profits stashed overseas.

The TCJA imposes a transition tax on untaxed foreign earnings of foreign subsidiaries of U.S. companies by deeming those earnings to be repatriated. But the law contains a loophole that allows taxpayers to convert income that would otherwise be taxed at 15.5% (cash holdings) into income that is taxed at 8% (more illiquid investments).

And multinationals could have leeway to shift foreign earnings into the 8% tax bracket. (more…)

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Categories: International Business Issues
Tags: international tax, multinational corporations, Tax Cuts and Jobs Act, TCJA,
December 13, 2017

EU Commission Wants Tech Companies to Pay Fair Share of Taxes

Digital companies in the European Union (EU) pay less than half the amount of tax that other companies pay, the European Commission said in a report. The EU needs a modern tax framework to seize digital opportunities, while also ensuring fair taxation, the report added.

Within the EU, international businesses typically pay a 10.1% tax rate while traditional companies pay 23.3%, due largely to the difficulty of taxing digital assets, which are typically Internet-based. This is particularly important given that more than half of the world’s top 20 companies are technology-based. The Commission stated that the best solution to address this distortion would be on a global level, but in the absence of sufficient progress, the EU should move ahead alone. (more…)

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Categories: International Business Issues
Tags: Corporate Inversion, digital economy, equalization tax, international tax, OECD,
November 30, 2017

Taxpayer Loses Court Challenge to U.S.-Canada Tax Treaty

A U.S. District Court held that it isn’t unconstitutional under a provision of the United States–Canada tax treaty for Canada to offset Canadian tax refunds against unpaid U.S. tax liabilities.

The U.S. District Court for the District of Columbia stated that “the arm of the U.S. tax man is long, but in this case it needed extend only over our northern border to find” the taxpayer. The court dismissed the expat’s case, finding that he’d failed on his claims for relief under the Eighth Amendment and both the Due Process and Equal Protection Clauses of the Fifth Amendment. (more…)

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Categories: International Business Issues
Tags: Canadian tax refunds, equal protection claim, fatal flaw, International Business,
November 7, 2017

Commercial Pilot Fails Tests for Foreign Earned Income Exclusion

The U.S. Tax Court has held that a commercial airline pilot stationed in South Korea failed both the “tax home” and the “bona fide residence” tests that determine whether a taxpayer qualifies for the foreign earned income exclusion.

The pilot flew airplanes for Korean Air Lines (KAL) in 2011 and 2012. KAL considered him to be stationed in Incheon, Korea, which meant that Incheon was the airport he most frequently operated from. (more…)

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Categories: International Business Issues
Tags: bona fide residence, foreign earned income exclusion, international tax, Sochurek standard, tax home,
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