Tax Law Los Angeles
As the business and financial world becomes increasingly global and interconnected, international tax planning is vital to a business’ continued success. Many business owners h employees and assets all over the world, making the tax laws confusing and difficult to navigate.
If you or your business possess offshore holdings, such as bank accounts, warehouses, employees, or inventories, it is mandatory that you understand international taxation, to make sure you get the best possible deal.
Tax planning is the lifeblood of a flourishing multi-national corporation. The principle of international tax planning is simple – that the revenue laws for any given country are mostly restricted to the domestic economy. Tax officials have a hard time crossing borders while businesses don’t.
There are three main changes a person or business can make in their tax situation, to take advantage of overseas tax jurisdiction. They are:
Some of these changes allow for a person or business to move their income to a tax haven – a country that imposes no taxes on the income of companies or other entities. A treaty-haven jurisdiction is a country that has an agreement with the United States or other high tax nations.
The best way to take advantage of international tax planning is to accumulate wealth and income streams in as many different countries with low tax laws as possible, to minimize what is owed. It could look something like this – the income or profits are generated in the United States, but it belongs to a company based in another treaty jurisdiction country. The income moves with little interference, due to the tax treaty, requiring a lesser rate of withholding. If a person or financial entity is paying income to a country with a tax treaty with the US, 30% must be withheld, for US taxes. Once it’s in the tax haven country, it is moved to a non-taxable entity, such as a trust, and allowed to accumulate.
There are two main reasons for utilizing international tax planning: shifting profits and avoiding US taxes.
Shifting profits involve different parts of the same multi-national corporation with border crossing transactions.
Some reasons for this include:
As the saying goes, all is fair in love and war. The same could be said for business, especially in today’s hyper competitive market. In fact, to thrive in today’s business climate, businesses might have to learn to thrive in international waters. Businesses are expected to be as competitive and profitable as possible, using every tool at their disposal.
The problems only arise when businesses begin exploiting tax programs that are not meant for turning a profit, such as tax haven countries.
Some things to consider, while considering your tax planning include: