International Tax
To avoid pitfalls while seizing foreign opportunities, your company needs help to plan creatively and comply with often complex international tax rules.
Whether you are a foreign company with operations in the United States or a United States company with operations abroad, international tax challenges are among the most complex and costly issues facing companies today. The increasing complexity of international tax laws and regulations makes international tax compliance, consulting and structuring a critical element of any company’s international business strategy.
Let Mueller & Co., LLP provide greater value to your company with our resources and service in the international tax area.
Comprehensive Capability
Our professionals have experience working with complex international tax concepts across a broad range of industries.
Our range of expertise includes:
- Export Tax Incentives
- Foreign Earnings & Profits
- Foreign Repatriation
- Section 861-8 Expense Apportionment
- Foreign Tax Credit
Export Tax Incentives
Historical Perspective
The United States has long provided income tax incentives for U.S. exporters. The most significant legislation was in 1971 with the adoption of the Domestic International Sales Corporation (“DISC”). The government believed these rules were necessary to achieve tax parity with competing international tax systems, including foreign tax exemptions. Unfortunately, U.S. trading partners attacked these provisions almost from their inception.
The Deficit Reduction Act of 1984 replaced the DISC with the Foreign Sales Corporation, quasi-exemption regime, and the Interest-charge DISC, a deferral mechanism. Later, the U.S. failed to sustain the FSC regime as well, and in 2000 replaced the FSC with the Extraterritorial Income (“ETI”) provisions. This regime too failed to pass World Trade Organization muster. The American Jobs Creation Act of 2004 repeals ETI over a two-year phase out period. Only the IC-DISC survives past 2006, but it provides superior benefits to closely held businesses!
View the IC-DISC Diagram to see how an IC-DISC benefits an organization.
Immediate and Permanent Tax Savings
We have a proven record of accomplishment, experience, technology, and processes to offer personal service, and leadership to help your company meet the following goals:
- Maximize both export tax savings and foreign tax credits for all open tax years, including all levels of IRS and legislative review
- Structuring, and implementing IC-DISC tax savings for closely held businesses, and publicly traded corporations
Our team will help your company achieve the highest level of immediate and permanent tax savings.
Foreign Earning & Profits
The earnings and profits (“E&P”) of foreign subsidiaries is a cornerstone of international tax planning, and represent future U.S. taxable income. Accurately determining foreign E&P is essential to accurately reporting foreign earnings for federal income tax, and financial reporting purposes. Both the IRS and Securities Exchange Commission have increased their attention in this area.
American Jobs Creation Act of 2004
Repatriation transactions driven by newly enacted Section 965 of the American Jobs Creation Act of 2004 have increased the need to determine foreign E&P and the effective tax rate for foreign tax credit purposes. Our technology and network of professionals has the ability to perform any level of E&P work required. Perhaps our clearest advantage is bringing the necessary level of experience at more competitive prices than our larger competition.
Foreign Repatriation
Effective Tax Rate Planning
The U.S. worldwide tax system, coupled with its anti-deferral mechanisms (“Subpart F”), Foreign Tax Credit, and volatile currency exchange rates produces an intricate web of complexity with many traps and potential pitfalls. Well-informed financial planners recognize the need to enlist the assistance of professionals with the requisite expertise and experience necessary to plan for the tax effective repatriation of foreign earnings.
American Jobs Creation Act of 2004
The American Jobs Creation Act of 2004 and Section 965 create an unprecedented opportunity for the tax effective repatriation of foreign earnings and profits. We can help you minimize the effective tax rate on fully repatriated profits of foreign operations, both for tax, and financial statement purposes.
Section 861-8
A Major Limiting Factor
- Foreign tax credit
- Export tax incentives
The above provisions, and many other operative sections, are limited by the amount of tax that is attributable to specific sources of income. Stringent rules mandate prescribed methods of apportionment for interest expense, and R&D, but wide taxpayer latitude is available for selling, general, and administrative expenses.
We have experience in identifying allocation and apportionment methodologies that are consistent with client facts, but less burdensome from a tax viewpoint. Some examples include:
- Fair Market Value Asset Base
- Alternative Book Value Method
- R&D Sales and Optional Gross Income Bases
- Divisional Apportionment
- Activity Based Costing
- Foreign Source Income vs. Extraterritorial Income
- Foreign Source Income vs. Qualified Production Activity Income
- Foreign Tax Credit
Foreign Tax Credits
The foreign tax credit (“FTC”) is necessary to eliminate double taxation as a result of the United States Worldwide Tax System. Therefore, FTC planning is of paramount importance to minimizing the global tax burden for U.S. based multinational corporations.
GAAP Reporting and Cash Tax
As international tax leaders from global accounting firms, we are well versed in the significant issues involved in reporting the global tax provisions for SEC Clients. As a result of Sarbanes-Oxley, and other independence issues auditing firms are restricted in the amount of advice it can provide clients in preparing their tax provisions.
Major client advantages in working with us include:
- SEC experience
- IRS audit experience
- Proven process and tools
