When you operate in multiple jurisdictions, your company must comply with all the laws of those countries -- including the tax laws. In many cases this means that if your company operates abroad, it must also pay the appropriate taxes abroad. Tax issues can be a real legal and financial headache for companies—and international tax issues even more so. At Priori Legal, we can put you in contact with experienced international tax lawyer who will be prepared to help you devise a legal strategy that protects your company’s best interests.
About International Taxation
In today’s globalized business world, more and more businesses are dealing with incredibly complex issues of international taxation. When your commercial activities occur abroad or profits are derived from other countries, you may owe taxes in those locations. Ignorance of international tax law does not exempt your company from paying taxes or from paying applicable civil (and sometimes criminal) penalties for not fulfilling your tax obligations.
Whether you have locations in other countries, do business with international entities, or simply derive profits from sales in other countries or have corporate accounts abroad, it’s important to fully assess your company’s international tax responsibilities and pay accordingly. Consulting with an international tax lawyer and international accountants will help you protect your company.
Actions That Might Subject You to Foreign Taxes
There are a large number of corporate actions that could subject you to international taxes. Exactly what these actions include will depend on the countries where you are operating. The following are some of the most common corporate activities that may make you liable for taxes in countries outside of the U.S.:
- Having employees located in a country outside of the U.S.;
- Having a business office located in a country outside of the U.S.;
- Owning property in a country outside of the U.S.;
- Finalizing a large deal in a country outside of the U.S.;
- Selling your product abroad; or
- Maintaining offshore bank accounts.
An international tax attorney can help you think through your business’s activities and presence abroad in order to assess your liability for taxes outside of the United States.
Minimizing Your Company’s International Tax Liability
Every company responsible for paying international taxes from small international startups to giant multinationals can leverage international tax laws and treaties to minimize the tax burden they ultimately pay. For this reason, international tax planning is vital if you want to minimize your company’s international tax liability. International tax planning involves discussing your tax options related to the countries where you operate and aligning business interests and decisions with those needs. Many businesses recognize significant savings by implementing a carefully considered international tax plan.
A common but increasingly controversial way to lower your company’s international tax burden is through transfer pricing. Transfer pricing refers to the special (often lower) price used while allocating a company’s profits to the different tax jurisdictions where it operates its subsidiaries using a series of intra-company transactions. Today, companies often do this to shift income to low or no tax jurisdictions, thereby reducing their overall tax liability.
When this is done by adding steps to an intercompany transaction that have no economic reasoning other than to ensure that most of the profit is made in a low income tax jurisdiction, it can be considered an abuse. The IRS and some other foreign tax entities can use this to recover the taxes “saved,” as well as penalties. Before using transfer pricing as a part of your international tax plan, you may want to discuss the legal issues involved with an international tax attorney.
International M&A and Tax
International mergers and acquisitions involve a number of complex legal issues, but the international tax implications rank among the most important. In fact, tax considerations sometimes even make or break these deals. A large part of the ultimate cost of these contracts traces back to the tax cost. If you are in discussions with another company about a potential merger or acquisition, consulting with an international tax expert is of utmost importance.
The legal costs related to international tax-related issues can vary significantly based on a variety of factors. Priori lawyers can guide you through the process from approximately $150 to $450 per hour. In order to get a better sense of cost for your particular situation, put in a request to schedule a complimentary consultation and free price quote from one of our lawyers.
How do I know if my company owes international taxes?
If you are operating outside of the United States, your company may owe some international taxes. If you are worried about your tax liability abroad, it can be helpful to speak with an international tax attorney to discuss your company’s unique tax situation.