The recent Congressional hearings on taxation of multinational corporations drew a lot of focus on the low tax rates and low taxes paid (relative to revenue). Congress expressed outrage that the largest companies in the world pay modest rates of tax. The outrage is quizzical. The Congress has the power to change the rules if it is so inclined. What it cannot do is change global tax rules, that is the laws of other nation states, What the multinationals are doing is what all businesses that operate internationally can and should do.
The obligation of all skilled tax practitioners is to understand the business transactional dynamics of their clients, and make suggestions on the most effective tax planning options. Often this type of planning involves tax treaty rate analysis, tax incentives and tax treaty issues. The world is a competitive market. The result of this analysis is a plan and method of doing business that maximizes the profit potential of the business. Another and critical part of the planning is U.S.. tax compliance and reporting.
The importance of proper compliance with income tax and Bank Secrecy Act rules cannot be overstated. Failure to timely file information returns like a Report of Foreign Bank or Financial Account (FBAR) can have severe civil and criminal consequences.Failure to file a Return of a Controlled Foreign Corporation, (Form 5471) or Statement of Specified Foreign Financial Assets (Form 8938) have important penalties as well.
Individuals planning on applying for or who have EB-5 or other visas (Green Card holders) have the same income and estate and gift tax reporting obligations as other U.S.. taxpayers. So, when planning for investment into the US. from abroad, or expanding from the U.S.. internationally tax planning including compliance process is essential. What taxpayers need to do is map out both the business tax advantages and the compliance requirements for each step in international activity. Apple and GE have large full-time staffs dedicated to tax planning and compliance. It is the compliance activities that make the planning side work. and avoid penalties. An opinion letter from counsel skilled in the area, and familiar with the facts can go a long way to avoid or mitigate potential penalties.