Cross-Border Tax Services for Small and Medium Size Businesses
We focus on providing US tax and cross-border tax consulting, compliance, structuring, and planning services for small and medium-size businesses. Our team combined has over 40 years of experience advising cross-industry clients in various areas of US tax and cross-border taxation, which entrepreneurs, startups and global businesses face as they grow and mature. Below are some sample issues we had to deal with for our clients:
While starting a new business in the United States or Canada may seem relatively straight forward in terms of organizational logistics, such as forming an entity, careful thinking has to take place before anything is formalized. How will you structure your business from a legal entity standpoint? Which form of doing your business works best for your specific situation – will it be a single member LLC, a partnership, or maybe a corporation? How will the operation get funding? Are the owners US persons? What revenue streams and costs are you expecting? A lot of areas need to be considered, such as access to capital, repatriation of profits, withholding and indirect taxes, income tax optimization and respective risks. We are here to help you with all aspects of expanding your business into North America or starting a new venture here.
A business cannot operate without sufficient liquidity in place, which puts tax efficient funding and access to cash among the key issues that every business has to work on. How will you know what mix of equity and debt financing would provide most tax-efficient funding for your business? What if you intended interest expense deduction are not in line with the applicable debt to equity or earning stripping rules? Our team will work closely with yours to review the optimal funding options from a currency control, regulatory, and tax standpoints, to allow you to focus on your long-term business goals and objectives.
Is your foreign operation generating significant profits and you are considering how to efficiently get cash out of a given jurisdiction? These are certainly great news business-wise, but can be a bit of a headache, given the various tax implications of cross-border payments. We can advise on smart and effective ways of moving your cash between entities and countries. We can perform an E&P (earnings and profits) study to determine the appropriate treatment of a cross-border dividend payment and advice on options based on the level of your business’s E&P. We can look into risks of a payment being viewed as a deemed dividend and being re-characterized as such by the Internal Revenue Service (“IRS”). Intercompany service arrangements (discussed below) can be and in many cases are a basis for cross-border payments as well. New intercompany loans and repayment of principal and interest on existing loans are also good mechanism to consider.
In many instances, companies have foreign subsidiaries with limited business activities, or the sole purpose of which is to provide intercompany services to the parent. The parent companies also routinely provide management and administrative services to their foreign affiliates. Some of these entities are cost centers by design and have to be structured accordingly with the arms’ length principle and transfer pricing documentation in mind. We can advise you on simple cost plus arrangements, as well as more complex methodologies, such as licensing or return on sales arrangements. We can assist you in guiding you through a process of setting up your transfer pricing methodology, which may be reflected in a benchmarking analysis or a planning transfer pricing analysis, or we can prepare a robust transfer pricing study that would provide transfer pricing penalty protection. We will support you in implementing the adopted transfer pricing methodology and assist you in case of a CRA or IRS audit. Where applicable, we will also assist you in requesting the assistance of the US or Canadian Competent Authorities to resolve your most complex transfer pricing adjustments or controversy. For larger businesses, we will advise you on securing an Advance Pricing Agreement (“APA”) with the IRS and applicable foreign jurisdictions.
We can handle your ongoing US tax compliance on all jurisdictional levels to ensure that your company meets all of its tax obligations in a timely and efficient fashion. This includes preparation and filing of required forms and schedules for all types of legal entities, from sole proprietors to global corporations, including consolidated return preparation and filing.
We can advise you on an array of complicated international issues that can help you optimize your global taxes, including:
- All aspects of both inbound and outbound US and Canadian investment and business activity.
- Thoughtful utilization of tax incentives and credits, including net operating losses (“NOLs”) and foreign tax credits (“FTC”), analysis of available tax attributes (such as tax basis, including preparation of basis studies), their preservation and maximization of cash tax benefits.
- Minimization of Subpart F and effectively connected income (“ECI”).
- Maximizing depreciation and amortization deductions.
- Using tax deferral options to minimize cash tax outflows.
- Tax treaty positions and related planning opportunities, including permanent establishment (“PE”) planning, determination of eligibility for treaty benefits and tax residency considerations.
- Minimization of withholding taxes on international payments.
- Categorization and documentation of payments and transactions, including a determination of source of income and the nature of respective payments.
If you are a US entity or an individual, you are required to report on IRS Form 5471 your ownership of any non-US entity in which you own or owned at least 10 percent. Failure to file Form 5471 or late filing results in an automatic US $10,000 IRS penalty (per form). A common misconception when it comes to these forms is that if an entity is losing money or has been inactive, the penalties won’t apply. This is not the case – the penalties are automatically assessed, once the requirements for filing those international information returns are triggered. There are other critical international information returns required, such as IRS Forms 5472 or 926, to report intercompany transactions, such as capital infusions, cross-border dividends and loans. These international information returns are not only required to be filed by US persons, they may also be required to be filed by foreign entities with US affiliates, shareholders, or subsidiaries. Even if you think some forms were missed in the past, we can help you get in compliance, in some cases not triggering the respective penalties (for example, by requesting penalty abatement). Penalty relief is generally available when a taxpayer can claim reasonable cause defense. Other countries also have similar reporting regimes around controlled foreign corporations (“CFCs”) or cross-border activities, which we can advise you on
If you are a US entity or a US resident individual and have over US $10,000 in a foreign (non-US) bank account at any moment during the year, or even just signature or other authority over such an account (for example, having online access to a foreign bank account that is not yours but where you have the authority to initiate and approve wire transfers counts as such ‘other’ authority), you have triggered another compliance requirement – the filing of Form FinCen 114, Foreign Bank Account Reporting (“FBAR”) with the Financial Crimes Enforcement Network. We will be happy to help you stay in compliance with these highly sensitive regulations.
If you have to file a set of financial statements, or present those to current or potential investments, your tax provision becomes an important piece of information. We can help with you global tax accounting needs, such as building a complete tax provision work-paper, including an effective tax rate reconciliation, a deferred tax inventory, a tax basis balance sheet, a current tax payable / receivable analysis, and all the required disclosures. A quality tax provision is a good tool for a planning discussion and a solid basis for your tax filings.
Deals are on the rise and can pop up on the horizon even when you are not expecting. We can help you get ready for due diligence activity and go through the process in a painless and seamless way. We will analyze the purchase accounting aspects of the transaction and tax accounting matters are addressed along the way. There are a number of taxpayer friendly elections and positions available when a deal happens – to name a couple, an IRS Section 338(g) election on a foreign target can provide some tax benefits in the long run, an IRC Section 83(b) election is a smart move when investing in early stage startups. We can also analyze all the deal and transaction costs to determine eligibility under relevant country rules.
Tax audits, examinations and even just informational requests and inquiries can put a lot of stress on your team. We have the knowledge and expertise to jump in and assist when these stressful events are upon you. We will help support and substantiate your tax positions and will work hard to arrive at the best possible result. With tax authorities under pressure to collect more tax revenue around the world, the trend over the last few years has been for more examinations and audits, and often more aggressive ones too. Transfer pricing enforcement is also on the rise, and we can assist you by acting pro-actively to anticipate an upcoming audit, as well as by representing you on audit or Appeals and protecting your interests.
Tax risks are probably the most sensitive item in the world of business. You may have a successful profitable enterprise with a strong balance sheet, but potential buyers, investors and partners will hesitate if they hear of a tax exposure. Many deals fall through before closing when an undisclosed tax risk popped up. We will help you manage and minimize your tax risks, including proper documentation of uncertain tax positions and unrecognized tax benefits
When you have been running your business for a long time, maybe you are up for a “tax audit”, but not by the tax authorities, by a qualified team of tax professionals who can identify any issues and areas that require re-evaluation and some attention, including potential restructuring or structure simplification. We can do a mini due diligence that would not cost you much, but that would allow you to get a fresh look on your tax situation and recommendations on how to optimize any of the areas that may have been ignored for too long.