Tag Archives: inversion

Provocative International Tax Planning News for Small Business

International tax planning is going “crazy” with the 2018 GOP tax law.  International tax avoidance has never been more legal.  The tax savings have never been so Big!  It is time for you invest money with your international tax accountant and upgrade your plan.   

International tax planning and strategy

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

Fantastic IRS International Gift Tax Plan

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. Alien’s estate tax exemption is only $60,000.

Amazing IRS Avoidance of  state income taxes  with this new IRS  designer  Nevada trust.  IRS tells how to use a Nevada trust to avoid state income taxes. 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 companiesHere is the letter from the U.S. to the U.K. 

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

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  Supreme Court Doctrine used by the IRS to blow up an offshore life insurance plan.

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 a  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.   Get the IRS memo on asset protection and tax planning with an offshore trust 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.

Here is how it works.  A computer service that can provide a service (such as a tax research program) or a product (such as music, e-books, video) has special sourcing rules.  The income can be foreign source income when the computer server in a foreign country. 

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.

Saving Taxes- U.K. Company Capital Gains Tax when Selling Business Assets 

In this blog, Saving Taxes- U.K. Company Capital Gains Tax when Selling Business Assets, you will learn a little known international tax secret. 

If you are an American, you will be shocked by the United Kingdom’s  pro-small business tax laws. 

This blog post discusses the tax advantages of making the U.K. your international business headquarters. 

Here is the American tax scam… you pay tax on inflation.  Compare this to the U.K., where you do not pay tax on gain from inflation. 

The U.K. reduces your taxable gain by the amount of inflation.   I will provide you an example letter on in this blog post.

In this blog, I have both the United Kingdom tax jargon and the American tax jargon.  Don’t be alarm.  In the U.K , an elevator is called a lift and gasoline is called petrol.  

Here the secret of “Saving Taxes- U.K. Company Capital Gains Tax when Selling Business Assets”.

The next paragraph is called “work out a chargeable gain”.  U.S. tax jargon uses the term “capital gain” while the British use the term “chargeable gain.”

How the U.K. Works out a chargeable gain.

In the U.K. the gain is the sales price less your cost. However, as you will read below, your United Kingdom cost is increased by inflations.

Just like the United States, you’ll need to use the asset’s fair market value if your business gave it away, transferred it to a shareholder or sold it for less than it was worth to help the buyer.  In this U.S., we call this a “bargain sale.”

You can deduct any costs incurred in completing the sale such as solicitors’ (attorney’s)  fees or Stamp Duty.

United Kingdom Accounting  and Tax Planning for Inflation

Before you compute your U.K. taxable gain, you need to compute how much you would have paid for the asset in today’s money using the HM Revenue and Customs (HMRC) Inflation Indexation Allowance. 

Of course, this only approximates today’s cost. The concept is not to tax you on inflation.  As you will see, the savings are substantial.

This will make your gain smaller and mean you pay less tax.

How to work out the gain

  1. Determine the asset’s value when it was sold – this is usually the amount your company received.
  2. Deduct the amount your company paid (this is your cost) for the asset. If it was not acquired in a typical commercial transaction, you need to use the market value at the time.
  3. Deduct any money your company spent buying, selling or improving the asset, e.g. solicitors’ fees and Stamp Duty.
  4. Use HMRC’s Indexation Allowance for the month when your company sold the asset. Next, find ‘inflation factor for the year and month when your company bought the asset. Multiply this by the amount you paid for the asset.  The the inflation factor is obtained from the HMRC.  The factor increases your cost by the amount of inflation.  As a result, your gain is reduced.  Deduct this total from your profit.
  5. If you made improvements to the asset, work out the effects of inflation in the same way. Deduct the total from your profit.

You now have the gain.

What is nice, is that you can ask HMRC to check your valuation by filling in a  . You should allow about three months for the HMRC to reply to you.

Example U.K. Company Capital Gains Tax International U.K. Tax Planning

In this example you will see one tax plan for a U.K. Company capital gains tax. Assume that your U.K. company sold an asset in November 2015 for £200,000.

Here is what to do. First,  Deduct the amount you paid  in March 2001 for the property, which was £120,000.  £200,000 – £120,000 = £80,000.

You spend  £10,000 spent improving the asset in June 2010.  You deduct the $10,000. (£80,000 – £10,000 = £70,000 profit.

Find the inflation factor in HMRC’s Indexation Allowance for March 2001 (0.509), and multiply it by the amount you paid for the asset,  £120,000 × 0.509 = £61,080.

Get the inflation factor for the improvement costs (0.159). Next, you multiply it by those costs (£10,000). 0.159 × £10,000 = £1,590.

Subtract these figures from the profit  £70,000 – £61,080 – £1,590 = £7,330 taxable gain.

If you make a loss when you sell an asset

You can reduce your total capital gains by deducting any capital losses.

You can only deduct capital losses from other capital gains and not from trading income or other profits.

Need more U.K. international tax strategies?  This link explains how the United Kingdom Inland Revenue sees an U.S. limited liability company.

Need help with your international business tax strategy and want more information on Saving Taxes- U.K. Company Capital Gains Tax when Selling Business Assets,  then, please contact me, Brian Dooley, CPA, MBT at [email protected]

Inversion Tax Savings for the Small Business wanting International Tax Planning

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

The United Kingdom is beating America as the better business country

I am watching President-elect Trump. He is promising to tax business more and punish them if they leave while he is in office.  

However, the law is targeting only publically traded corporations. A small business can continue to convert to a non-U.S. corporation and avoid taxes on their non-U.S. income.

 Small It takes a year or more to convert your corporation to a foreign corporation to operate your business offshore.  The tax term to this for this is “inversion.”

 Inversion tax savings with publically traded companies changing their headquarters to London and Canada seems to be stampeding.  The press reports are clear.  

Small business owners want to jump on the bandwagon. The owner can live in the U.S. while his business lives in Ireland, Canada or the U.K.  The business can have its administrative offices in the U.S. 

Here is how it is done:   One method (and many methods exists) is to sell the most valuable part of your business to the United Kingdom domiciled company.  “Domicile” is an Irish, Canadian and  UK concept.

I point this out so that you understand that you will need an innovative UK chartered accountant to work with your innovative American CPA.  The UK and the US have very different tax law. If you need some names of a chartered accountant, then call me.

When I say “most valuable part,” I am not talking about your book value.  I am speaking about what allows you to make more than your competition.   Burger Kings inversion is a good example.  The burger joints remain here in the U.S. The assets of the franchise business (all of which are intangible) moved to Canada.  

The most valuable part of a small business is the owner, the key employees, the customer data (especially if you are using big data to increase sales and profits), your reputation,  your method of doing business and your critical software.  If you are a manufacturer, this may be your cost accounting and inventory.   If you are an E-commerce business, this is your website and e-commerce software.   For each of you, this will be different.  

Next, you will form and own create and own a foreign corporation.  It may be in the U.K. Canada, Puerto Rico or a tax haven such as the British Virgin Islands. My favorite country is Ireland with its 12 percent tax rate and its low crime (more on this link).  Manufacturers and distributors like to do business in  Canada.  Its tax rate is between 15%  and 25%.  NAFTA allows easy importing into the U.S. 

If you are starting a new business, consider forming a foreign corporation at the inception. My favorite country for a new business or an existing business is Ireland, with its 12 percent tax rate and relaxed lifestyle (more on this link).

Lastly, you will transfer the assets of the corporation owning the intangible property to the foreign corporation. If you operate the business properly, the income will be “foreign source” income and not taxable by the U.S.   

If you need help with your international tax concerns, then please email me, Brian Dooley, CPA, MBT at [email protected]   As I wrote above, many types of tax inversions as possible.  Each business is unique and thus so is its tax planning. 

Lastly, move quickly.  Congress is panic over the loss of taxes and the loss of jobs.  Congress wants an “exit tax” … a penalty for moving your corporate headquarters.   The “exit’ tax exist for Americans that expatriate.   

If you are starting a new business, then look into forming a foreign corporation to own your business.   The pending inversion tax law will not apply to a new business the starts in a foreign corporation.

Learn more about international tax planning for the entrepreneur with my  easy to read book available at Amazon on this link for $9.50

Eight Hours International Tax Seminar for the California Society of CPAs – Live & Webcast on September 28th

international tax strategy,

International tax planning conference on September 28th, live and webcast from San Francisco.

If you are on this page now, it means you missed the seminar.  However, I have some of the videos and information for your education.  

This is what has happened to the IRS: The courts are hammering the IRS in most international tax issues. From captive insurance companies to cost sharing agreements (the most popular method to shift income offshore), the courts are hammering the IRS. Inversions (moving your headquarter or computer server offshore) continue to provide tax savings.

The Key to Saving Taxes is the IRS Tax Form: Originally used to allow the IRS to track big publically traded multi-nationals, these forms now provide the blueprint to tax savings. Each time the IRS loses in court, they place a question regarding the tax method on a tax form. They think this will scare you away. But, tax planners are reverse engineering the IRS questions and are fine tuning their methodology.

If you have thoughts of going offshore or have an international business, then suggest you spend two hours with my offshore tax book.  Below is the first chapter.  The book is available as an audiobook, Kindle or paper.   It is by far the best international tax book on the market.

You can get the Kindle edition of the best offshore tax book at Amazon for $9.50 on this link.  

Here is  the Form 1040NR, taxation of the nonresident alien and foreign trust, video.

Saving Taxes with the Pfizer Pharmaceutical’s International Tax Plan

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

Saving taxes with Pfizer international tax planning in the UK

As I write this blog, both the U.K. Government and the U.S. Government are bewildered by the pending merger of Pfizer with a UK firm.  The tax term for this as an “inversion.”

The American Congress cannot believe that a major U.S. firm is willing to live in foggy London to save billions of dollars in taxes.

The Pfizer international tax plan is one of many that you never find on the internet (until now).   If you want to brainstorm your tax planning ideas, then please call me, Brian Dooley CPA MBT, at 949-939-3414 for a free one hour consultation.

Here is what is going on.   

The United Kingdom is an attractive low tax haven.  It provides an exception to the U.S. controlled foreign corporation rules because of its tax rate (up to 21%).  But there is more. 

Until 1960, the Western world (Western Europe and the United States) international tax laws focus on a corporation’s headquarters.  This was known as the “force of attraction” rule.  There was a problem with this rule.  It caused chaos.  The U.S. was losing tax revenue.

So, the U.S. and only the U.S. replaced the “force of attraction” rule with today’s U.S. international tax laws.  The Pfizer move to London benefits by two opposing tax theories.

In other words, the UK looks at the location of the headquarters.  While the U.S. has unique income sourcing rules and ignores the location of the headquarters.  By combining the laws of both countries, you create a low tax haven.  Pfizer Pharmaceutical’s international tax plan focuses on these laws. 

Now, let us get into some UK tax law.  The UK uses the term “Corporation Tax”   It is a tax on the net income of “limited companies” and other organizations including clubs, societies, associations and other unincorporated bodies.  This guide gives you a basic overview of Corporation Tax. 

A “limited company” is a company where the owners are liable for the debts of the company.  In the US, it would be a corporation or a limited liability company. 

Taxable profits include:
1. profits from taxable income such as trading profits and investment profits (except dividend income which is taxed differently) and 

2. capital gains – known as ‘chargeable gains’ for Corporation Tax purposes 

If your company or organization is headquartered in the UK, you will have to pay Corporation Tax on all your taxable profits – wherever in the world those profits come from.  The tax rate is no more than 21 percent.  In the U.S., a corporation pays taxes at 43% (including state income taxes).

So, the worst you do is to cut your income taxes in half.  

If your company is not headquartered in the UK but operates in the UK – for example through an office or branch (known to HMRC as a ‘permanent establishment’) – you will only have to pay Corporation Tax on profits arising from your UK activities. 

For example, a foreign corporation has its headquarters on Nevada (a tax-free state).  It has a branch in the UK for European e-commerce.  The UK will not tax the income from European customers or from American customers.  The European countries do not tax you because your branch is in the UK.   The U.S. will not tax the income generate by the UK branch. 

The UK will tax the profits earned from UK customers at 21%. 

If you are an American, you will find this concept odd.  However, only the U.S. has the concept of taxing worldwide income. 

Here is some basic information on U.K. corporation taxes. 

For Corporation Tax, the tax year is called the ‘financial year’ or ‘fiscal year’ and runs from 1 April to 31 March.  This is different from the tax year for individual taxpayers, which runs from 6 April to 5 April. 

The Chancellor sets out the rates of Corporation Tax and various allowances, reliefs and credits in the Budget each year (usually in March or April) and in the Pre-Budget Report the previous November/December.  Normally any changes are announced one or more financial years in advance of the year to which they will apply.

U.K. Corporation Tax rates

There are currently two rates of Corporation Tax, depending on the company or organization’s taxable profits:

  1. The lower rate (known as the small profits rate) is 20%
  2. The upper rate (known as the full rate or main rate) is 21%