Tag Archives: cross border e-commerce

When International Cross Border Management Consulting Fees Can Send You to Prison

International cross border management consulting fees deducted on a U.S. tax return are traced by the IRS.    This expense can place you in jail if you can not prove why the fee was paid.  

The IRS is hunting for  management fees or consulting fees paid to or from  a foreign business.   The United States is the only country that puts you in jail for ignoring the economic substance of a transaction. 

Mr. Albert S.N. Hee was sentenced to 46 months in prison.  He was a successful businessman in Hawaii.    To get money out of his U.S. corporation, he paid his wife and children about $750,000.  He deducted the expense on his corporate tax return claiming that they were providing services to his business.

When the IRS found out the truth, he was arrested on various criminal charges.  The easiest one for the IRS to prove was filing a false tax return.  All the IRS has to prove is the Mr. Hee placed an item on his return (the expense) that was not true.  The IRS does not need to prove that taxes were avoided.

Take Mike as an example.  He is Canadian and lives in Vancouver.  He has invested in a U.S. business.  He has provided the startup money to an e-commerce business and owns 25% of the business (operating as a limited liability company).  Mike does not want the complexity (and therefore accounting fees) of filing a U.S and state tax return.

Mike is taking his share of the profits as a management fee. He spends time getting an update report from the other owners but he is not managing the business. 

He is paying Canadian taxes on the income but no American taxes.   The criminals are the LLC, its managing members, and Mike.   Often the IRS will add the criminal charge of “conspiracy to defraud” and mail fraud. 

What should have Mike have done?

For a Canadian, an American LLC is not the best choice.  Since Mike is not involved with management, a limited partnership is a good option.  Under the Canadian-United States Tax Treaty, Canada will offset his Canadian income taxes by the U.S. income tax.

The limited partnership will make the estimated tax payments for Mike.  Mike will get one or two-page report (call a Form K-1) from the partnership telling Mike the amount of his taxable income and the amount of estimated taxes.  Mike will file a U.S. and state income tax returns.

Yes, it is a hassle.  But other international businesses see this a part of the cost of being an international business.  Usually the CPA fees for the returns are less than $5,000.  By the way, the fees are a tax deduction. 

Judges are harsh on non-U.S. citizens saying to the defendant that they came to America to make money.  Unlike citizens who have no choice but to pay taxes, the nonresident alien came here by their own choosing.

If you need help in organizing your international business transactions, the email me, Brian Dooley, CPA, MBT at [email protected]

Best International Tax Planning Book on the Planet, By Far

Here are the first few chapter of my easy to read book International Tax Planning in America for the Entrepreneur.   The book is a quick two-hour read with little tax jargon.  You will quickly learn the fundamentals of international taxation planning.  My international tax planning book explains the unique tax savings for the small business,  web based business, tax planning for importers and exporters and the best tax structure for the foreign business coming to the U.S. 

You can get the book on Amazon on this link.  The Kindle is only $9.50  (get the Kindle App for the PC on this link).  The book is also available in paper and audiobook. 

International Taxation in America for the Entrepreneur is the fastest tax answering publication in America. Both the  Kindle and PDF edition have our exclusive quick search function. Just type your topic and find the answer to any international tax planning question.  The audiobook is perfect for those on the road and traveling. 

International Tax Planning Book for the Cross Border Family

Cross Border families have special needs because America’s laws differ from every other country. The multi-national family risks paying taxes in more than one country.  Choosing the correct tax structure before arriving in the U.S. is required. 

A cross-border business has a similar problem.  Multi-national businesses often experience double taxation on one item.  American tax laws are different from the rest of the World.    Thus, you need the best international tax planning book on the Planet.  

Using  “plain English” my book provides solutions to issues regarding cross border taxation.  The examples are easy to understand.  

 For those looking for advance tax planning, the hundreds of footnotes and hyperlinks to court cases and tax planning articles are just a mouse click away.

My international tax planning book is available in audio, Kindle and hard copy.  Need more information.  Then please check out this blog post in offshore e-Commerce international tax planning. 

Saving Taxes in the E-commerce & the Cloud (Virtual) Computer World

cloud computer tax, tax planning, saving taxes, international tax planning,

E-commerce businesses are saving taxes with cloud computer tax planning.

Saving taxes in this century’s cross-border business environment is easier than ever.  

Small businesses are saving taxes with eCommerce tax planning and cloud computer tax planning.  

The cloud has level the playing field between small business and big business.  Amazon is leading the way.

 Small businesses can benefit from cloud computer tax planning.  

Cloud tax planning allows big state and federal tax savings.  A popular term for this is “third wave” tax planning.
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IRS Helps U.S. Headquarters Earn Tax Free Internet Income and E-commerce Income

Domestication of a foreign trust

Applying for an IRS ruling on your international tax planning will save you taxes in the long run.

The Department of the Treasury is keen on getting more business in the United States.  It knows e-commerce, cloud-based businesses are producing most of the world’s new income.  From Netflix to Ebay to Apple music, the world is seeing a change in business.

It is here that the Treasury and IRS foresight into the future pays off.  Before I give you the blueprint, I want to emphasize the skill that our Government used in drafting this tax law in 1972 with a concept that works almost a half century later.

So, let’s pretend that I am starting a business to compete with Netflix.  Of course, I am an American, so all of the controlled foreign corporation laws apply to me.  My capital source as my long time banking associates.  Like so many ‘I” (internet) businesses, I have decided that Ireland is the best location.  
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The Parent of Google Settles In a Tax Haven; Shouldn’t You do the Same?

 The new parent company of Google has already attracted controversy.

Dubbed “Alphabet,” this company has the same name as a subsidiary of German car manufacturer BMW. French News reported that that the company would move into Delaware, the second smallest U.S. state.

Why this state? Known for its farms and cows, Delaware is also known for its favorable tax laws. Plus, and this is a big plus, the U.S. tax treaties makes it (and Nevada) the largest cloud tax haven in the world.

In 2014, Delaware had more than 950,000 global companies exceeding the number of inhabitants (935,600). In total, two-thirds of the 500 largest US stock exchange companies are in Delaware. For the most part, they have just a single mailbox. Among them: Google.

This is precisely the case with “Alphabet” according to the French press,

The website states that the company has no office there but a single mailbox, hosted by Corporation Service that provides legal and tax services “to more than 90% of the 500 richest companies in the world (Fortune).

In France, Google paid “only” five million euros in income tax in 2014 on a revenue of 225 million euros. Why is this legal? Because of the U.S. tax treaty with France (and all of Western Europe). In France, an “installed business pays” no local taxes if it must file a domestic U.S. federal income tax.

After calculation, the annual cost of a company based in Delaware is estimated at $400 a year, the only cost being the installation of a “head office” where an agent must be able to process mail (250 dollars) and some administrative cost (about $ 150).

According to BFM Business, since 2003, Google has created in the State of Delaware “no less than 50 subsidiaries”. And, it is all part of a “vast mounting tax optimization” that allows Google to reduce its tax bill drastically.

Thus, in 2014, the overall tax rate, according to BFM Business, is 19% of its profits. Outside the United States, it is estimated at 7.4% tax rate.

This is what happens: Advertisers who buy commercials are charged by the Ireland, European headquarters of Google, where taxation is more favorable. The French staff merely conduct marketing assistance and other services for large customers and software development.

In the same vein, BFM Business reported that Facebook’s tax planning beat Google’s.  Its French income tax was only 320,000 euros. FaceBook rerouted 99% of its profits to a Cayman Islands company.

Learn about how small business are using the internet to save taxes in my book, International Taxation In America for the Entrepreneur, on this link.  

If you need to up the quality of your tax planning, then contact me, Brian Dooley, CPA, MBT, at [email protected]