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offshore tax planning, offshore tax strategies, controlled foreign corporation,

Tax Planning Small Business Are Taxed at 14%

Government Report Shames Businesses Paying More than 14% in Taxes.    Hard to believe that Senator Bernie Sanders  (who paid tax at 13%) released the report.  It states that a business that plans its taxes are taxed at 14%. Here’s what’s going on.    

saving taxes, how to save taxes, tax planning,

Saving taxes with an IRS approved tax plan is called a private letter ruling.

International Gift Tax Plans with this IRS internal letter on this link. Fantastic legal tax avoidance for the foreign person with family in the U.S. is explained in this letter.

  • Avoiding state income taxes this new IRS  designer  Nevada trust.  IRS tells how to use your Nevada corporation as your trustee to legally stop paying state taxes on your investment income. Here’s what’s happeningon this link.

New- Department of the Treasury letter to the U.K. tax authorities on U.S.  tax planning for UK and EU companies.  Here is the letter from the U.S. to the U.K. 

Be an IRS tax wizard with our new custom Google search, on this link.  This custom Google app to read 300,000 pages deep inside the IRS’s website and the tax court’s website and it is free!.  Find the answers to your tax question quickly and accurately.

Tax planning, with the Supreme Court common tax laws

Tax planning with Supreme Court common tax laws

18th Century Supreme Court case destroys IRS tax penalty law. Using this case, the Tax Court gave the IRS a significant defeat.  Here is what happen.   The Supreme Court is the “Law of the Land.”  It rules over the IRS and Congress.   

It works both ways.  The blog on this link explains the most missed Supreme Court Doctrine used by the IRS to blow up this offshore plan.

international tax planning, international, tax, planning,

International tax planning and international tax savings with this Treasury Department report. 

The secret report on tax savings international tax plans that the IRS cannot stop was issued by the U.S. Department of the Treasury (a branch of the White House).

They reported the successful foreign tax plans of international businesses. We have obtained a copy.  It is on this link.   Here you will learn the legitimate foreign tax plans that Congress likes. 

offshore trust, foreign trust, nevada trust, estate planning trust, esbt,    Since the Middle Ages, the wealthy have capitalized on trusts to avoid paying taxes. During the Great Crusades, upon the death of a knight, his entire estate went to the king.    Nine hundred years later, things have not changed much except the ‘King” takes only half.

Trusts are the most efficient tax tool. International tax planning should start with a Nevada trust to own the foreign company.  Learn trust tax planning and asset protection in this easy to read blog post.    It has the blueprint for successful trust tax planning.   IRS memo on asset protection and tax planning with an offshore trust.  Get it now on this blog post.

internet tax planning, saving taxes, cloud tax planning

Saving taxes with the offshore cloud computer. 

Cloud tax planning. Learn how businesses are using the cloud to avoid taxes on this link.  E-commerce companies are avoiding state income taxes and in some cases deferring U.S. taxes.
Is the U.S. a tax haven for citizens of the UK, Sweden, Belgium, Canada, Luxembourg, and Austria?  Yes, says the IRS in its Publication.  Learn the magic Tax Treaty words for these lucky citizens of The UK, Sweden, Belgium, Canada, Luxembourg, Austria on this link.

International Tax Strategy for Importers with Contract Manufacturing

International tax planning for the Contract Manufacture

International tax planning for the Contract Manufacturing

A new contracting manufacturing international tax law is allowing small business to reduce taxes.  If you import products into the U.S., you want to look at this new law.

Briefly, you form and control a foreign corporation where you contract your manufacturing.  The corporation manufactures products for you.  It sells these products, at a profit, to your U.S. business or directly to your customers.

The tax law does not tax you on the profit made by this corporation.

The tax provides that the shareholder of a  foreign corporation is not taxable on the income from the sale of personal property (including inventory) manufactured by a corporation formed in the same country as the manufacturing.[1]  In other words, tax on this profit from manufacturing is not taxed.[2]

The sale of the property takes place outside the U.S. This means title to the property occurs anywhere other than the U.S. Usually, the sale takes place when the property leaves the factory of the contract manufacturer.

You or an employee must only do one or more of these activities either via the internet or in person:
(1) Oversee and direct the activities or process which the property is manufactured, produced, or constructed or
(2) Select the materials or the vendor or
(3) Control the raw materials or the work-in-process or the finished goods or
(4) Manage the manufacturing costs or capacities or
(5) Control of manufacturing logistics or
(6) Control the quality such as overseeing the sample testing or establishing the quality control standards or
(7) Develop and direct the use or development of the product, design, and specification.

This is a fantastic tax law.  Importers are reaping significant tax savings. Importer tax plans rely upon a solid IRS regulation for contract manufacturers.

I know that you are busy and   I wish I could place all the tax breaks on a few paragraphs.   However, to have a blog post for as many different types of businesses, this post is a few pages.

If you want to schedule a time to talk, then email me Brian Dooley, CPA, MBT at [email protected],

Here is how contract manufacturing tax avoidance works  You do not pay income tax on your controlled foreign corporation income that is not classified as “subpart F income.”  Subpart F is the location in the tax code that talks about the taxable income.  You want your controlled foreign corporation to earn income that is not Subpart F income.

Subpart F income does not include income from the sale of personal property manufactured, produced, or constructed by a foreign corporation.[1]

For example, Ford Motor manufacture in England.  These cars are sold in the U.K. and Europe through independent dealers.  None of the income is Subpart F income.  The income is not taxed by the United States.

Avoiding U.S.  taxes for Big Business like Ford is easy.  They can afford to build a factory.

Now, small businesses have the same opportunity for tax planning.  Contract manufacturing allows the small business to manufacture its products.
Continue reading

United States Tax Planning for United Kingdom Pay-as-You-Earn Tax (PAYE) or Pay-as-You-Go Tax (PAYG) Payroll Taxes

The blog explains how to avoid the United States 15.3% gross payroll tax on wages paid by U.K. businesses for U.K. residents. 

Both employees and their employers pay social security taxes (a small pension paid by the U.S. government) and tax to fund the U.S. national health insurance (for those over age 65) known as Medicare.[1]

The employee pays half of these two taxes.  The employer pays the other half.

 If you are self-employed, you pay both halves. Each half of the tax is 7.65 percent for a total of over 15 percent paid by the employee and employer. The U.K. does not provide a tax credit for these two taxes.                                                           

Electing to Eliminate the tax with the U.K.-U.S. social security agreement referred to as a “totalization agreement.”

American tax law exempts a U.K. company and U.K. resident when a U.K. resident individual’s earnings are subject to U.K. taxes (or contributions) for similar purposes.[2]

Totalization agreements prevent a duplication of taxes on social security coverage. 

When an individual who is a resident of one country works in the different country,  he or she must pay social security taxes to both countries.

 The agreement  eliminate duplicated taxation under the laws of the United States and the United Kingdom.  For example, Keith is a citizen and a domicile of the United Kingdom.  He owns a U.K. company that is opening a branch in California.  He receives a salary of   ‎£200,000 per year. 

Since Keith spends half his time in California, he pays both U.S. and California income taxes.  

Also, Keith and his U.K. company must pay  ‎£15,300 in  U.S. Social Security taxes and Medicare taxes unless they elect to have the U.K.-U.S. totalization agreement apply.

The totalization the agreement provides that Kieth will continue to be covered under the system of U.K. and is exempt from coverage and taxation in the United States.

By the way, the agreement has rules similar rules for self- employment earnings that are subject to social benefit coverage under the laws of both countries.

Besides the U.K.-U.S. agreement, the United States has totalization agreements  with most Western European countries.

If you need help in opening your business in the United States, then please give me, Brian Dooley, CPA, MBT a call at 949-939-3414 or email me at mailto:[email protected]

FOOTNOTES

[1] Self-employed individuals pay both the employees portion and the employer portions. U.K. residents can elect to avoid this tax.

[2] Section 1401(c) of the code grants a similar exemption from the taxes imposed under the Self-Employment Contributions Act (SEKA). Employees and employers exempted from FICA taxes and self-employed persons exempted from SEKA taxes under the provisions of a totalization agreement are exempted from both the portions of the tax related to retirement, survivors, and disability insurance and the portion related to Medicare.

Best Tax Treaty Shopping and Savings with U.S. Tax Treaties for Australians, Canadians, Europeans & U.K. Citizens

Avoiding Taxes with Treaties –  The United States has income tax treaties with some foreign countries. Residents (not necessarily citizens) of foreign nations can be exempt from U.S. income taxes on specific items of income.  “Exempt” means that you do not pay taxes. 

And there is more – Avoid the Green Card and Avoid U.S income taxes.  Many Australians, Canadians, European citizens living in the U.S., do not pay U.S. income taxes on foreign income if the alien does not have a green card.

For example, the foreign income of a U.K. residents or citizens living in the U.S. is not. taxable. The tax exemption included income of international investment funds and controlled the foreign corporation.    The U.K. Tax Treaty along with most other European tax treaties provide this rule.

Tax Planning Tricks for Americans ​​​​​

Treaty provisions are reciprocal (apply to both treaty countries). Americans and green card holders who receive income from a country that has a treaty with the United States (called a “treaty country”)  and who are subject to a foreign country’s taxes may be entitled to the foreign tax credit and exemption or reductions the foreign country’s tax rates.

Here is a problem to avoid.  Some tax treaty benefits are available only to residents of the United States.   
American not residing in the U.S. are sometimes denied the treaty benefits by the foreign country.  

To offset this, some conventions have safeguards, such as the nondiscrimination provisions,  Besides reading the treaty very carefully, I recommend that you read the explanation provided to the Senate and the President.

U.S. citizens and U.S. entities residing in a foreign country might be entitled to benefits under that country’s tax treaties with other nations. This is known as “treaty shopping”. Depending upon your facts, you may be allowed the benefit of treaty shopping.

The foreign government often require certification from the IRS that American or the American entity (such as an LLC) has filed an income tax return.   Obtaining this certification can take a month or more.

More Tax Savings: You should carefully examine the specific treaty articles that may apply to find if you are entitled to a:

  1.  foreign tax credit
  2.  exemption from taxation,
  3.  reduced rate of tax, or
  4.  other treaty benefits or safeguard.

The Effect of Tax Treaties in the United States:   Tax Treaties override the U.S. tax code.  Treaties decide if the alien is a U.S. tax resident and if the alien are subject to U.S. taxes.

Tie Breaker Rule can save you U.S. taxes. Not to be confused with the many European tax treaties that have the green card exemption, the tiebreaker rule is found in most tax treaties.

This rule applies when two countries consider you a resident.  Under this rule, the nation where you have the closest family and economic ties is the country of tax residence.

If you are treated as a resident of a foreign country because of either the tie breaker rule or the green card rule, then you are a nonresident alien for U.S. income tax.   This means you will not pay U.S. income tax on your foreign income.   Income of a controlled foreign corporation and from a passive foreign investment company are not taxable.  However, U.S. reporting of foreign bank accounts, foreign corporations and your foreign assets is required. 

If by chance you are a resident of both the United States and another country under each country’s tax laws, you are a dual resident taxpayer. If you are a dual resident taxpayer, you can still claim the benefits under an income tax treaty.  However, you will pay U.S. income tax on your worldwide income.

The income tax treaty between the two countries contains a provision that provides for resolution of conflicting claims of residence.   This is known as the “tie breaker rule.”

For further information on tax treaties, refer to the Treaties and Other International Documents of the U.S. Department of the Treasury.  The links are below,

Saving Taxes as the U.S. Goes to the Trump International Tax Plan

Will it be protectionism or something more dramatic?  International Tax Planners are shifting their client’s tax strategy now getting ready 2018.

Small Business Tax Planning. Try very hard to pay the least in taxes

Small Business Tax Planning. President Trump states “I fight very hard to pay as little tax as possible.”

Here is what’s happening.   First,  President Trump is proposing a 15%  U.S. business income tax rate.   The goal is to keep American businesses from going offshore.    The downside is this lower tax rate will apply only to corporations (excluding S-corporations).   When a corporate distributes its profits, it is called a dividend.   The shareholder pays tax on the dividend income.

 Budgets concern are big since Big Business killed the Trump important duty on countries that apply a duty on U.S. goods (which is Europe, the UK, Canada, Australia, China and most of Latin America).

 Second, small business will have a five percent higher tax rate .  Small business uses S-corporations and LLC’s.  They avoid the dividend tax that apply to publicly traded businesses.    It will effect my work load because at a 20 percent tax rate,  small business owners have little need for tax planning.  At last, I get to  slow down and smell the roses.

International businesses are starting to re-organize and eliminating cross-border joint production and cost sharing programs.

Currently, the average U.S. tax rate for international  publically traded corporations is 14% .   They get a unique tax savings with the foreign tax credit law.  The IRS  reimburses a domestic corporation the taxes paid by it or a subsidiary to a foreign government.    With the current high-income tax rate, the full amount of the foreign taxes were reimbursed.

But, with President Trump’s tax plan, the reimbursement will be reduced because the income tax rate is reduced to fifteen percent.   For example, if a foreign government tax rate is 30% and the U.S. business has a $1,000 of foreign income, the foreign tax is $300.   If the U.S. tax rate is 35% then the U.S. tax of $350 is reduced by the foreign tax of $300.   The net amount is paid to the IRS.

With President Trump’s tax law, the U.S. tax will be $150 (15% of $1,000).   The foreign tax will reduce only $150 of U.S.  taxes.    As a result, tax planners will want to avoid having plants, employees and “permanent establishments) in foreign countries unless their tax rate is less than 15%.

Currently, only Ireland and Canada fits a tax rate less than 15% and has the capacity to manufacture.  Both countries have good tax treaties with the U.S. 

What about tax havens like the Cayman Islands?  They are too small for manufacturing or productions.

Tax havens are ideal for the internet business and for firms that stream content.   But, where good electricity for big equipment is required, they are not the best choice.

Summarizing 2018 foreign tax planning

Cross-border multi-national businesses are gearing up for all in one production within the U.S. for their American customers.  With the British Exit from the Europe,  these firms are going to be all in one within the EU  or the British colonies.  As a result, three separate free trade zones will develop (the U.S., the EU, and the British Colonies, (the U.K., Australia, New Zealand and Canada with its new 9% tax rate).

International tax strategies are now being developed for each of the three free trade zones.

Latin America countries, China and the rest of Asia will find their markets are changing.   They will be caught fall out from  President’s Trump isolation protective tax laws.  American international firms will find the overall tax costs too high in these countries and their market to weak.

Tax planning is not so much about today’s tax laws.  Tax planners closely look at the economic and political trends.  These trends shape future tax bills and tax planning is only for the future, not the present or the past.

The Wall Street Journal “Think Tank” blog’s headline today is Donald Trump’s Foreign Policy Is ‘America Only,’ Not ‘America First’.     The import duty to keep out foreign products and the lower corporate tax rate to keep American businesses in the Country is an “American Only” tax program.

tax planning, avoid taxes, small tax business,

President John Kennedy (Democrat) is the most respected president of last century. The President and Supreme Court Justice Hand agreed that patriotism does not mean paying more than your legal share.
Supreme Court Justice Holmes said tax planning means you get as close to that legal line as possible

Cross-border tax planners have noted this and are shifting their tax planning into three economic segments- the United States,  the European Union and the British Commonwealth.

If you need help with your international tax planning, then please call me, Brian Dooley, CPA, MBT, at 949-939-3414. 

We will help you “fight very hard to pay as little tax as possible.”