Are there important tax considerations of a US company looking to expand outside the US?
Yes. As more companies look to expand outside the US, international tax law has become increasingly more important. The selected entity form in the foreign jurisdictions has important tax implications in the US which should be examined prior to formation of the foreign entity. The ability to use foreign tax credits to offset US taxation of the foreign operations will be an important consideration. There are also informational forms that need to be reported in the US to report the activities of the foreign company. It is important to plan for repatriation of the profits to the US prior to forming the foreign company. Our firm works closely with US based and foreign advisers to ensure a comprehensive legal and tax plan.
Are there important tax considerations of a non-US company looking to expand into the US?
Yes. There are many avenues which a non-US company can enter the US market, each with their own benefits. It is important to understand the extent of the operations in the US and the type of business that will be operated in determining how a non-US company should enter the US market. It will also be important to determine how profits will be repatriated back to the home country at the beginning. Our firm works closely with US based and foreign advisers to ensure a comprehensive legal and tax plan.
I am a US citizen living abroad, do I have US tax filing obligations?
Yes. The US taxes US citizens and residents on their worldwide income no matter where they reside. A US citizen or resident living abroad must file a US tax return if their income exceeds the filing threshold levels.
What is the Foreign Bank Account Report (FBAR) and do I have a FBAR filing obligation?
The FBAR is an informational report to report accounts located outside the US. A US citizen or resident is required to file an FBAR if they have financial accounts located outside the US and the aggregate in such accounts exceeds $10,000 at any time during the calendar year. The penalties for non-filing of the FBAR are significant. The penalty for non-willful failure to file the FBAR is an amount not to exceed $10,000 per account per year, for up to six years. Willful non-filing of the FBAR is subject to a penalty of the greater of $100,000 or 50 percent of the balance in the account at the time of the violation, for up to six years. Willful violations can also be subject to criminal penalties.
What is the Foreign Account Tax Compliance Act (FATCA)?
FATCA requires foreign financial institutions to identify and disclose their US account holders to the US or become subject to a 30 percent withholding tax with respect to certain US source income. The 30 percent withholding tax has resulted in foreign financial institutions reporting their US account holders to the US. Corresponding to the foreign financial institutions reporting obligations, US citizens and residents with specified foreign financial assets exceeding certain levels in the aggregate must file an additional informational form with their tax returns to report the specified foreign financial assets. A US citizen or resident who fails to make the FATCA filing could incur an initial penalty of $10,000.
Are there options to become compliant with my offshore account reporting without incurring large civil or criminal penalties?
Yes, depending on the circumstances. For US taxpayers who purposely used foreign accounts to evade US tax, the IRS Offshore Voluntary Disclosure Program is an opportunity to become compliant with your reporting obligations by typically paying large civil penalties, but avoiding criminal penalties. For US taxpayers who were not aware of their US tax filing or foreign account reporting obligations, the IRS Streamlined Domestic/Offshore Procedures offers the US taxpayer a great opportunity to become compliant with their filing obligations while incurring much lower or no penalties.
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