International tax laws constantly change as the business community expands globally. Most changes are designed to promote competition and diversity in the marketplace. However, gaps between the tax codes of various countries create potential pitfalls for businesses seeking to operate internationally.
One such issue that has caught the eye of domestic and international regulating authorities is that of base erosion and profit shifting, where a company transfers profits from one country to another to take advantage of lower corporate income tax rates. This in turn reduces the corporate income tax base of the host country. Profit shifting is often used by multinational companies as part of an aggressive tax plan to make the most of their international operations. However, there is a fine line between smart strategy and civil or criminal liability.
M. Bradford Randolph, Esq., PLLC, in New York, can help your business walk that line successfully by minimizing your exposure to liability while maximizing your profit margins.
Call our office in Rockefeller Center at 212-759-0097 to speak with a tax lawyer with experience in business tax planning both in the U.S. and internationally.
Understanding the Arm's-Length Exchange
The allocation of profits between a multinational corporation and its subsidiaries or sister corporations is not illegal if the prices of assets or services transferred are identical to what the price would be if the transaction took place between two independent companies. This is known as an "arm's-length exchange," and it is a staple guideline to ensure companies are fairly taxed when conducting business abroad.
Companies run into problems if profits are not transferred as through arm's-length exchanges, thereby leading to either double taxation (being taxed in both countries) or double non-taxation (avoiding taxation in either country). The latter could lead to allegations of tax evasion. Furthermore, as of January 1, 2016, all countries operating internationally will be required to report revenue and taxes for each country in which they do business, therefore increasing scrutiny from international tax authorities.
As an attorney and CPA, Brad Randolph can help you cut through the complexities of international tax law to determine the best transfer pricing method given your company's circumstances. For more than 25 years, his firm has worked to help businesses find resolutions to a wide variety of difficult issues that can arise when seeking to minimize their worldwide book and cash tax rates.
Contact a New York City Tax Attorney
Our firm can help you navigate global tax rules and regulations so that you are in compliance with U.S. and foreign tax laws. Contact us at 212-759-0097 or 866-557-2205 for a phone consultation. We can also be reached via email. Foreign translation services are available.