Outbound Services
Some key issues to consider when investing in and/or expanding to Europe
- Optimising the position for foreign tax credit relief – this may be achieved through, among other approaches, entity classification elections, restructuring a group or where possible, introducing debt or other inter-group charges.
- Managing issues with controlled foreign corporation legislation. Again, entity classification may help mitigate issues as well as planning around local profit and effective tax rates.
- Consideration of onerous US rules relating to passive foreign investment companies. The US tax impact for US persons investing in structures such as open-end investment vehicles can be quite burdensome particularly where the investment is held over many years. Elections may help mitigate the impact of these rules.
- Planning with intellectual property (IP), licensing and IP development. A thorough review of the type of IP used and developed and proper deployment of IP can often yield significant tax benefits.
- Cash repatriation planning.
- Entity classification election planning. The US rules on classification of US and non-US entities is a very powerful planning tool in the international context. Even with the introduction of anti-hybrid rules in many jurisdictions (including the US), planning with entity classification continues to be at the forefront of international structuring to optimise the overall tax position.
Debt:equity considerations in financing European investment. Careful consideration should be given to whether and how to use debt when modelling after tax cash returns on investment and expansion. - Structuring carried interests and hedge fund structures. While often under fire from legislators, carried interests in hedge funds continues to be available to provide tax benefits to managers. We have extensive experience in structuring funds including equity funds, crypto-currency, real estate and debt/distressed debt funds.
- Private equity investment. We regularly provide input on proposed investments for PE houses and how best to structure the acquisition vehicle and where to place debt when debt is being introduced.
US entrepreneurs and businesses emigrating or expanding to Europe. Setting up in Europe can be a daunting task and managing the various tax jurisdictions requires significant attention to detail. We regularly help US entrepreneurs with European structuring and can even point them to consultants for legal and other professional services. - Advising US taxpayers on delinquent filings and other amnesties. All US citizens and green card holders must file US tax returns annually. The penalties for late filing and payment can be quite high. The IRS Streamline procedure allows US taxpayers to in effect “come in from the cold” and get up to date by filing 3 years of delinquent returns and 6 years of reports of foreign bank accounts. We regularly assist such taxpayers to get up to date as quickly and painlessly as possible.
US citizen investing in the EU? Got a question about our outbound tax consultancy services?
Inbound tax consultancy services
Issues considered in investing and/or expanding to the US
- Structuring US real estate investment including optimising use of debt.
- Providing optimal tax structures for US expansion with a focus on US federal and state tax on short and a medium-term cash flow and long-term exit strategy. For example, a US business that will reinvest profit into growing the US business is likely better placed to be structured as a US corporation enjoying the lower US corporate rate (21%) than using (for example) a partnership owned by individuals taxed at higher US individual income tax rates (currently to 37%).
- Planning for withholding tax. US withholding tax rates are currently at 30% for interest, dividends, royalties, etc. There are a number of exceptions to these domestic rates that may be available through proper planning
- Treaty analysis – There are over 60 US tax treaties that Inbound taxpayers can access to reduce US withholding and other federal tax.
- Optimising the overall tax position through inter-company charges. US tax may be mitigated through a review of the overall business and, where possible, having non-US affiliates charge fees to a US enterprise for items such as use of IP, management and other services, etc.
- Planning with intellectual property – Intellectual property, being a highly “mobile” asset may, sometimes be placed in an optimal tax jurisdiction to enhance the overall tax position of the group.
- Assisting with pre-immigration planning for high-net worth individuals. Individuals moving to the US can enhance their overall US tax position by looking at what they own in the way of business interests, investments and consider what measures should be taken prior to US arrival achieve US tax “basis” step ups, or otherwise mitigate the impact of US anti-tax deferral rules including the Controlled Foreign Company and Passive Foreign Investment Company regimes.
- Advising on disposals of interests in US real property. The US imposes a 15% withholding tax on the disposal of various interests in US entities, real estate, etc. this withholding can be reduced prior to a disposal through proper planning or compliance.
- Financing US operations and investments. Proper planning with financing a US operation or investment can yield significant overall tax efficiency which most often needs to be implemented at the beginning of the investment or expansion.