The intricacy of our country’s international tax rules shouldn’t keep you from expanding your business abroad. Karen Stern, Partner in Charge of the Brown Smith Wallace Entrepreneurial Services Group, breaks down some of these regulations in this month’s “Financial Fitness,” as featured in Small Business Monthly.
From exporting goods to purchasing goods for resale in the U.S., small businesses can interact with foreign entities in many capacities. Since the complexities of U.S. international tax rules can be intimidating, we've broken down some of the regulations you should know. However, since issues can multiply quickly, your tax adviser is your best resource for navigating through your questions.
Exporting
IC-DISC is a U.S. tax incentive that allows 50% of export sale
profits from property produced in the U.S. to be allocated to a
separate entity. IC-DISC profits are tax-exempt and are qualified
dividends upon distribution to owners.
Operating an Overseas Business
This is a huge topic. The operations overseas are subject to both
local laws and any U.S. international tax laws that apply to U.S.
citizens operating outside the U.S. Local tax rules will generally
require filing local tax returns. The U.S. tax laws require that
overseas business operations be disclosed on a company's U.S.
shareholder's tax returns – Form 5471, 8865 or 8858, as
applicable.
To avoid double taxation, the foreign entity is required to be properly structured to meet the owner's fact pattern. This will require professional tax advice.
Importing
Importing is generally straightforward. Make sure it is clear who
is responsible for importing, customs and duties. Payments to a
foreign person should not be subject to Form 1099 reporting if a
Form W-8BEN is obtained from the foreign person.
Originally published November 2015
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
