IRS Putting Together "SWAT" Team To Go After Transfer Pricing Cheats

Transfer pricing is a booming field of global tax law strategies. It involves multinational corporations that are constantly moving goods, services and assets from one subsidiary to another in different countries, and how they account for these "transfers." By carefully manipulating the pricing of such moves, companies can effectively shift profits to low-tax countries from high-tax ones, lowering their overall tax costs.

Small US Entrepreneurs with operations abroad and foreign corporations also take advantage of this procedure as well as the giant corporations.  The IRS is forming a task force in order to be certain reasonable profits are taxed in the US rather than transferred to  low tax or no tax countries and thus escape US taxation. A good  example is Apple which has accumulated Sixty Billion Dollars in Cash abroad  (in low tax or no tax countries) and will not remit it to the US which would subject it to US taxes,  though they would get a credit for any taxes it did pay (if any) on those funds in other countries.

READ MORE in the ACCOUNTING TODAY ARTICLE HERE

US Tax Ramifications of Forming a Foreign Corporation to Do Business Abroad

There are significant consequences (on your US tax return) when you form a foreign corporation in a country outside of the USA to operate your business or make investments in any other country in the world. Most offshore accountants and attorneys do not know enough about US international taxation to advise you of the consequences which should be considered in advanced.  It is much harder to correct the US tax problems which WILL occur later if you do not do your US tax planning in advance.

You need to consider the following US IRS reporting and election consequences:

• Controlled foreign corporation rules
• Subpart F income possibilities
• Passive foreign investment company rules.
• Possible Flow Through Election for US tax purposes.
• Subpart F personal holding company rules
• The need to file FBAR forms to report foreign bank accounts
• Transfer Pricing
• Possible Tax on Transferring intangible property and tangible property to a foreign corporation

We can help you plan your foreign corporation structure to avoid unpleasant and possibly expensive consequences for failing to consider the rules set forth above.  Many of these items are difficult to deal with after you have already formed your foreign corporation.

Keep in mind their are also special rules which apply to foreign partnerships, foreign LLCs and foreign trusts which must also be considered.