International Tax Planning for U.S. Businesses

International Tax Planning for U.S. Businesses

Key Concepts

Worldwide vs. Territorial Taxation

Post-TCJA (2018), the U.S. moved partially toward a territorial system for corporations:

• Participation Exemption: 100% dividends from foreign subsidiaries may be exempt
• GILTI: Global Intangible Low-Taxed Income — minimum tax on foreign subsidiary profits

Controlled Foreign Corporations (CFCs)

A foreign corporation is a CFC if U.S. shareholders own more than 50% (by vote or value).

• U.S. shareholders may owe tax on their share of the CFC's income even without a distribution (Subpart F income)

GILTI (Global Intangible Low-Taxed Income)

A minimum tax on CFC income in excess of a 10% return on tangible assets:

• Corporate rate: 10.5% (21% x 50% deduction)
• Individual owners: May elect Section 962 to get corporate treatment

Transfer Pricing

Transactions between related U.S. and foreign entities must use arm's length pricing.

FBAR and FATCA Compliance

• FBAR: Foreign bank accounts over $10,000 — file FinCEN 114
• FATCA: Broader foreign asset reporting for specified foreign financial assets

Foreign Tax Credit

Take a credit for taxes paid to foreign governments to reduce double taxation.

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Business with international operations? International compliance is specialized — get expert help to avoid costly mistakes.