Cross-Border Tax Services for Small and Medium Size Businesses
Consulting | Planning | Compliance | Preparation
We focus on providing U.S. tax and cross-border tax consulting, compliance, structuring, and planning services for small and medium-size businesses. Our team combined has over 40 years of experience advising cross-industry clients in various areas of U.S. tax and cross-border taxation, which entrepreneurs, startups and global businesses face as they grow and mature. Below are some sample issues we had to deal with for our clients:
A business cannot operate without sufficient liquidity in place, which puts tax efficient funding and access to cash among the key issues that every business has to work on. How will you know what mix of equity and debt financing would provide most tax-efficient funding for your business? What if you intended interest expense deduction are not in line with the applicable debt to equity or earning stripping rules? Our team will work closely with yours to review the optimal funding options from a currency control, regulatory, and tax standpoints, to allow you to focus on your long-term business goals and objectives.
Is your foreign operation generating significant profits and you are considering how to efficiently get cash out of a given jurisdiction? These are certainly great news business-wise, but can be a bit of a headache, given the various tax implications of cross-border payments. We can advise on smart and effective ways of moving your cash between entities and countries. We can perform an E&P (earnings and profits) study to determine the appropriate treatment of a cross-border dividend payment and advice on options based on the level of your business’s E&P. We can look into risks of a payment being viewed as a deemed dividend and being re-characterized as such by the Internal Revenue Service (“IRS”). Intercompany service arrangements (discussed below) can be and in many cases are a basis for cross-border payments as well. New intercompany loans and repayment of principal and interest on existing loans are also good mechanism to consider.
In many instances, companies have foreign subsidiaries with limited business activities, or the sole purpose of which is to provide intercompany services to the parent. The parent companies also routinely provide management and administrative services to their foreign affiliates. Some of these entities are cost centers by design and have to be structured accordingly with the arms’ length principle and transfer pricing documentation in mind. We can advise you on simple cost plus arrangements, as well as more complex methodologies, such as licensing or return on sales arrangements. We can assist you in guiding you through a process of setting up your transfer pricing methodology, which may be reflected in a benchmarking analysis or a planning transfer pricing analysis, or we can prepare a robust transfer pricing study that would provide transfer pricing penalty protection. We will support you in implementing the adopted transfer pricing methodology and assist you in case of a CRA or IRS audit. Where applicable, we will also assist you in requesting the assistance of the US or Canadian Competent Authorities to resolve your most complex transfer pricing adjustments or controversy. For larger businesses, we will advise you on securing an Advance Pricing Agreement (“APA”) with the IRS and applicable foreign jurisdictions.
We can handle your ongoing U.S. tax compliance on all jurisdictional levels to ensure that your company meets all of its tax obligations in a timely and efficient fashion. This includes preparation and filing of required forms and schedules for all types of legal entities, from sole proprietors to global corporations, including consolidated return preparation and filing.
- All aspects of both inbound and outbound US and Canadian investment and business activity.
If you are a U.S. entity or an individual, you are required to report on IRS Form 5471 your ownership of any non-US entity in which you own or owned at least 10 percent. Failure to file Form 5471 or late filing results in an automatic US $10,000 IRS penalty (per form).
A common misconception when it comes to these forms is that if an entity is losing money or has been inactive, the penalties won’t apply. This is not the case – the penalties are automatically assessed, once the requirements for filing those international information returns are triggered. There are other critical international information returns required, such as IRS Forms 5472 or 926, to report intercompany transactions, such as capital infusions, cross-border dividends and loans. These international information returns are not only required to be filed by US persons, they may also be required to be filed by foreign entities with US affiliates, shareholders, or subsidiaries. Even if you think some forms were missed in the past, we can help you get in compliance, in some cases not triggering the respective penalties (for example, by requesting penalty abatement). Penalty relief is generally available when a taxpayer can claim reasonable cause defense. Other countries also have similar reporting regimes around controlled foreign corporations (“CFCs”) or cross-border activities, which we can advise you on
If you are a U.S. entity or a U.S. resident individual and have over US $10,000 in a foreign (non-US) bank account at any moment during the year, or even just signature or other authority over such an account (for example, having online access to a foreign bank account that is not yours but where you have the authority to initiate and approve wire transfers counts as such ‘other’ authority), you have triggered another compliance requirement – the filing of Form FinCen 114, Foreign Bank Account Reporting (“FBAR”) with the Financial Crimes Enforcement Network. We will be happy to help you stay in compliance with these highly sensitive regulations.