International Tax

LBMC provides comprehensive international compliance and consulting services for individuals and corporations with international activities, with a focus on German-speaking countries. Our team ensures that the appropriate U.S. tax issues related to the interaction between the jurisdictions are considered.

International Tax Planning and Compliance Services include:

• Preparation of U.S. tax returns, including U.S. compliance associated with interests in foreign financial accounts, corporations, partnerships and trusts
• Compliance related to bringing taxpayers up to date with their tax filings through IRS programs
• Pre-immigration tax planning
• Capital gains tax calculations on potential disposal of assets
• Advice on the implications of expatriating (renouncing of U.S. citizenship/permanent resident status)
• Year-round assistance and tax planning guidance, including effective utilization of foreign tax credits, maximizing benefits from international tax treaties, minimizing withholding obligations, etc.

The law known as The Tax Cuts and Jobs Act (“TCJA”) brought seismic change to the U.S. international tax system, with an array of revenue generating provisions (read, tax increases) and tax incentives. Prominent among the latter category is the foreign-derived intangible income (“FDII”) deduction. These rules are designed to incentivize U.S. C corporations to export goods and services and make the U.S. tax system more competitive relative to other tax regimes across the globe. The hoped-for result is that businesses increase their presence in the U.S. by creating jobs and repatriating and/or developing intellectual capital.

Conceptually, the tax incentive is straight forward—U.S. corporations are allowed a special deduction that is claimed against qualifying income, which draws down the effective tax rate on that income from 21% to 13.125%. For a business generating $500k in qualifying income, U.S. federal tax savings of almost $40k would be recognized. Not surprisingly, however, Treasury’s finalized regulations covering computation of the special deduction are almost 300 pages long. The devil is, indeed, in the detail.

International tax specialists at LBMC are experienced in helping clients maximize the FDII deduction. Our disciplined process starts with ensuring that all qualifying transactions are identified (potentially including transactions with related parties), and then proceeds to the calculation of the tax profits on such transactions, net of a hypothetical return on the corporation’s tangible assets. It is an involved set of calculations, but we make the analysis understandable and supportable should the IRS ever audit. Please contact us if you would like to ensure that this tax incentive is maximized for your business.

An Interest Charge Domestic International Sales Corporation, or IC-DISC, provides a permanent tax savings opportunity for qualifying U.S. exporters. An IC-DISC is not a tax shelter. It’s an incentive specifically provided by the tax code that allows U.S. exporters to increase their ability to compete globally by reducing U.S. tax liabilities. It is a paper entity designed solely for the purpose of realizing export tax savings.

Benefits of an IC-DISC

• Creates permanent tax savings on the export sales commission
• Increases liquidity for shareholders or businesses
• Supplies ongoing financing to reduce cost of capital
• Creates a tax-advantaged vehicle for succession or estate planning
• Eliminates double taxation for C-Corporations and defers taxes

LBMC’s approach is designed to minimize the filing and maintenance burdens for our clients while maximizing commissions and tax savings. Our IC-DISC team evaluates all commission alternatives on an annual basis, including performing a detailed transaction-by-transaction analysis. Choosing the optimal methodology and performing a detailed annual analysis will ensure maximum savings.

For foreign-based businesses, we know how frustrating and inefficient it can be when your local business advisors don’t speak your language or understand your culture. Interacting with foreign parent companies and their external auditors requires extensive knowledge of international accounting and auditing standards, as well as cultural sensitivity.

LBMC’s resources offer international accounting experience and with backgrounds in Big Four accounting firms and multinational corporations. For US-based companies expanding into overseas markets, this experience means that we can help you navigate complex regulatory requirements and subtle cultural norms with finesse.