Tag Archives: international tax strategy

How the IRS Taxes Australian, Candadian, U.K. and Europeans Companies and Citizens Doing Business In The United States

french tax, french tax planning, job loss.

French businesses are profiting by avoiding the VAT by manufacturing in the U.S.

This blog is for Australian, Canadain, U.K. and Western European companies and citizens planning to have a business in the U.S. or business income from U.S. customers.

The United States is courting U.K., Western European, Canadian and Australian citizens to move their businesses.  The U.S. doesn’t  have a VAT (value-added tax).  The absence of this tax gives a 25% increase in a company’s purchasing power (assuming a VAT of 20%) of inventory, machinery and employees.  Business makes more money due to the additional working capital.   

Labor unions are weak in the U.S. Employee rights are limited compared to the U.K., the EU, and Australia.

This blog explains how citizens (and their companies) from a tax treaty country are taxed in the U.S.

I am using the U.S. Model Income Tax Convention (the “U.S. Model Treaty”) for this blog.  I will highlight the articles that apply to business.  I will make the treaty easy to understand by removing the tax jargon. 

If you would like to discuss a U.S.’s tax treaty, then please call me, Brian Dooley, CPA, MBT at (U.S.) 949-939-3414.

 Next, I will explain the U.S. tax law on doing business in USA.  

Lastly, I will have some questions that I am frequently asked and the answer.

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Preparing and Filing a Late Form 5471 for your Foreign Corporation Can Save You Taxes

Preparing Form 5471,

Your first Form 5471 will save you taxes when you elect sophisticated tax accounting methods. The elections must be made on the first Form 5471.

Late is not always bad especially with some IRS tax return.   Of course, some such as the Foreign Bank Account Reporting (FBAR) is a disaster.  The penalties are huge if you are late.

Other forms the penalty is not huge or they can be waived if you are not willful.  In any event, if you are reading this blog and your Form 5471 is late, then you will find a blessing in disguise on this page.

The most important tax return for every business is the first year return.  We call this the “initial return”.    Your tax accounting methods are made on this return.  Smart international tax planners attached a statement of all of the tax accounting methods used by their client.

By the way,  advance international tax planning strategies are always tax accounting methods.

Boring as watching grass grow,  cross-border tax accounting has a plan for every type of transaction.   Yep, every type.   For example, advance payments for products may allow a tax deferral that can last indefinitely.   The result is legal tax avoidance.
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The Transfer of “ Know-How” To a Foreign Corporation and International Tax Planning with the IRS’s Definition of “Know-How”.

United Kingdom claims U.S. LLC is a tax haven company

The United Kingdom is beating America as the better business country with a 17% tax rate.

Jeff is the founder of a new computer based start-up.  The business is virtual in that it has no store front.  The business is e-commerce.  Its website determines the walking score of locations.   His customers are real estate website, large apartment complex promoting their location and hotels by showing a good walking score. 

Jeff is expanding into England and Ireland and would like to tax advantage of Irelands 12% tax rate.  He is in California and the businesses effective tax rate is 44%.  He needs unique e-commerce tax planning. 

Here is Jeff’s tax issue of converting his business to an Irish company.

“The tax code section 367 attempts to keep a successful domestic business within the U.S.  Small businesses want to expand into new markets and not pay U.S. tax on their non-U.S. income.  

Section 367 provides that if intangible property (also known as intellectual property) is transferred to a foreign corporation, the tax savings are reduced.  Know-how is one of the types of property and is included in this law. 

The other intangible properties are trade-secrets and those created by a government such as a patent, copyright, trade name, and trademark. 
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How to Know if You Have the Best International Attorney or International Accountant

International taxation adds a new dimension to the already to the complicate U.S. tax structure. International tax attorneys and accountants use the tax pyramid.

The best international tax attorney and tax accountant have an advance degree in taxation.

The best international tax attorney and tax accountant have an advance degree in taxation.

The best tax attorney and best tax accountants are experts in both the common law and the tax code before they learn international tax law.

The best tax accountants and best tax attorneys have an advance degree in taxation.  Law schools and accounting schools do not teach tax law.  An additional year of schooling is required to be a tax expert.

The international tax adviser studies the “character of your income.  Each type of income has its own tax laws.  The tax law for consulting income is different than the tax law for importing income.  The best international tax CPA looks at your business’s operations and dissects each step.

A website designer has employees in India.  After dissecting his activities, he decided to incorporate in a tax free country.  The tax haven corporation files an IRS Form 1120F (F is for Foreign).  Only half of his net income is U.S. taxable. The other half is not taxable.  His business operates the same.

At International Tax Counselors, our international taxation experts have more than 30 years of experience.  Each expert has an advance degree in taxation.

If you need planning, consulting, or compliance, your team at International Tax Counselors has the needed international accounting and legal expertise and skills.

We have unique expertise in:

1. Foreign tax planning regarding reporting of foreign assets and foreign source income,
2. International tax strategy services with respect to ownership of foreign entities, including foreign corporations, foreign LLC’s, foreign partnerships, or foreign foundations,
3. Analysis of income tax returns filed with foreign governments in connection with the foreign tax credit planning and calculations,
4. International estate and gift tax planning for U.S. citizens living and/or working in foreign jurisdictions and nonresident aliens with U.S. property,
5. Immigration tax strategies for respect to non-resident individuals,
6. Assistance with IRS Tax Amnesty “Streamlined Filing Compliance Procedures,” because of non-reporting of foreign financial accounts and companies,
7. International tax plans relating to compensation structures for U.S. individuals on foreign assignment
8. Handling IRS international tax audits.

Tax Pirates Invade America

Wikimedia Commons, modified by Gretchen McCulloch

Wikimedia Commons, modified by Gretchen McCulloch

Avast me matey!   Tax pirates have found a new tax haven.

They exploit the IRS mistake on the Form W-9  and uses the Delaware LLC to evade taxes.  Wyoming and Nevada are also popular, as explained in this footnote1.

It started in 1996 when the IRS changed the law on limited liability companies (LLC).   The LLC is an invisible corporation. It does not file a tax return!
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