What is International Tax?
Any time a business or individual engages in a financial transaction that crosses a border, there are international tax implications, and therefore an international tax advisor should be consulted. Some examples of such transactions are:
- investing in non- U.S. investments
- selling services or products to customers outside of the U.S.
- hiring an employee outside of the U.S.
- establishing a foreign subsidiary
- collaborating with a business based outside of the U.S. in a joint venture
- borrowing money from a non-U.S. lender, or
- purchasing real estate in a different country.
What are some International Tax implications?
Any time you do business or make an investment, the country where the transaction took place has the right to tax the income you’ve earned. In our digital world, even if you don’t have any physical presence in a particular country, that country may still leverage a tax on the income generated within it. An international tax advisor can assist you in understanding what are the local country’s tax implications of your activities and what may be your potential tax liability. There will likely be income tax ramifications and a Value Added Tax (VAT), a tax which is common in Canada and many European Countries. Often, these additional taxes can be as high or higher than a country’s corporate income tax.
In addition to the foreign country’s tax implications, there are specific tax rules that address how the IRS taxes transactions outside of the U.S., and there are additional disclosure requirements. These requirements usually take the form of specific filings that report details of the foreign activity. Even when there may not be a significant taxable impact from the cross-border activity, there will be a filing requirement that, if left unmet, could result in heavy penalties starting from $10,000 per form. The costs of missing a filing requirement or planning opportunity in the cross- border context can be very high, more so than in a purely domestic context.
How can one benefit from using an International Tax Advisor?
Anyone dealing in any cross-border transaction could potentially need international tax services. Cross-border tax is fraught with traps for the unaware; it also offers many planning opportunities. Consulting with a knowledgeable international tax specialist can help you avoid unnecessary costs or potential penalties and inform you about opportunities to minimize your effective global tax rate.
Businesses with international connections and multinational corporations require insight into the international marketplace, as well as information regarding the global business arena.
Whether regarding regulations, compliance, or tax advisory, international tax consultants can help you navigate the complex web of the international market and help you achieve your business goals.
This material has been prepared for informational purposes only, and is not intended to provide or be relied upon for legal or tax advice. If you have any specific legal or tax questions regarding this content or related issues, please consult with your professional legal or tax advisor.
