Taxation of electronic commerce from offshore has two main aspects, the United States tax regime from an international perspective and the effect of bi-lateral treaties upon that regime. A previous writing addressed the first consideration, the general dynamics of the United States tax regime for entry taxation of a non-resident alien or foreign corporation. (1) The United States is engaged in more than fifty bi-lateral income tax treaties with other sovereigns. In a general statement, those treaties are designed to mitigate the effects of double taxation.
Income that is generated by a foreign party from activity in the United States can be taxed from the source country, the United States in that case, and the residence foreign country, creating risks of multiple taxation. Treaties are designed to alleviate that conflict. The Read More
United State taxation of electronic commerce from offshore is to be approached from two perspectives, the United States tax regime from an international perspective and bi-lateral treaties. This writing addresses the first consideration, the tax regime. As stated in a previous segment, international sourced based taxation poses particularly difficult legal risks. (1)
One risk is the electronic commerce and taxation implications. Those issues grapple with electronic commerce and taxation implications when melded with the notion of jurisdiction. Cross-border taxation issues of the authority of a source and resident country Read More
In order to engage cross-border taxation issues of electronic commerce, an underlying foundation of the principles that govern basic judicial in personam jurisdiction, as generally applied in a domestic context, provides the foundation and the international pathway. These basic principles that established precedent to the electronic communications phenomenon were the content of a previous writing. (1) Cross border taxation of international enterprise incorporates two basic themes, one of which is the interpretation of the United States Commerce Clause and the Due Process distinction from jurisdictional analysis. Read More
Cross border taxation risks of international enterprise incorporates two basic themes, one of which is the interpretation of the United States Commerce Clause and the Due Process distinction from jurisdictional analysis. It is one of the two basic aspects that govern the authority of a source and resident country or state to tax international commerce.
In the electronic commerce world the courts have embraced an evolution of Due Process requisite of jurisdiction and of commerce. That analysis for both turns upon the judicial case law evolution that focuses on the contact with the state or country that imposes taxation from their border. Read More
International transactions pose particularly difficult legal risks because the international legal system is basically in its infancy. Foremost on the immediate horizon are the risks associated with electronic commerce and taxation implications when melded with the notion of jurisdiction, specifically the aspect of due process requisite to jurisdiction and the application of the commerce clause.
In order to appreciate cross-border electronic commerce legal risk associated with authority to tax, an underlying foundation of jurisdiction in general in an international context is required. This writing will approach these legal risks with two basic themes Read More
In making use of Offshore Financial Centers taxpayers will invariably have a structure of entities that are related taxpayers by virtue of common ownership. Because these related taxpayers engage in transactions among themselves, they present opportunities to shift items of income, deductions, and credits through the process of allocations in accounting for deductible items and income. (See TaxConnections, Introduction to Section 482 and International Financial Centers, April 24, 2014) These types of transactions between related parties are to be regulated to prevent what may be perceived to be abuse and avoidance of tax; Section 482 of the Code is designed to implement that regulation. Read More
Corporate structures in global enterprise find the use of conduit offshore corporate entities a requisite to accommodate the anomalies inherent in maximizing efficiencies and cost savings. Common ownership of inter-related corporate structures encounter arms length pricing scrutiny. (See TaxConnections April 24, 2014, Introduction to Section 482 and International Financial Centers.)
Arm’s length standards of Section 482 are applicable to a transfer of tangible property rights in transactions when deemed between controlled entities. When the possession, use or occupancy of tangible property that is owned or leased by one member of a group of Read More
Inter-company pricing embraces some basic concepts. Those principles emanate from virtues of corporate structures that have related ownership of entities. The dealings between related entities brings into play arms length standards applicable to related entities. (See TaxConnections, April 24, 2014, Introduction to Section 482 and International Financial Centers) These governing guidelines are promulgated by regulation particularly to conduit entities that provide sales, services, personal property, and intangible property entities that compliment global enterprise of a parent or subsidiary. This writing focuses upon the guidelines that establish the borders of intangible property. Read More
As an introduction to International Financial Centers and the pricing concepts between structures of entities, an integration of international law principles and taxation concepts is desirable. This is the essence and difficulty of understanding Financial Centers Offshore. It requires a melding of international financial law, international civil and criminal law, and international taxation rules. It is the bifurcation of these disciplines that makes International Financial Centers so elusive.
The foundation to a discussion of entity structure concepts is melding the taxation rules peculiar to foreign corporate entities; controlled entity rules, source of income Read More
A United States Settlor of an irrevocable Foreign Trust having a United States beneficiary is deemed to be the owner of the Foreign Trust. Subject to statutory exceptions, the Settlor is the taxable party regardless of whether the Settlor has released all dominion and control of the trust assets by an irrevocable transfer and the right to alter, amend, or modify the trust document. This is the income tax treatment of a United States Settlor by Section 679 of the Code. (1) Because the Settlor is treated as the owner of the trust assets, the transfer of appreciated assets to a Foreign Trust does not occasion a taxable event as contemplated by Section 684 of the Code. Read More
Syndications and Participation Concepts
One of the core benefits to be derived by virtue of Offshore Financial Centers relate to issues of regulation. The emergence of global capital markets has fostered cutting edge competitive financial environments. In efforts to avert cumbersome regulatory costs, participants in the global economy have sought Offshore Financial Centers to achieve a less burdensome regulatory regime.
Many Offshore Financial Centers have developed legislation to induce foreign financial market participants to avail themselves of a more cost efficient operation. Similarly, international bankers have sought an escape from reserve requirements, deposit insurance Read More
Overview of Reorganizations
Reorganization is a transaction aspect of foreign corporate entry and exit activity that can have great importance in the considerations accompanying financial planning. To provide an adequate foundation to the fundamental understanding of reorganization considerations, a cursory overview of basic domestic, reorganization concepts is helpful.
These concepts can be divided into three types of reorganizing transactions. First, there are reorganizations deemed to be exiting the taxing jurisdiction of the United States. Second, reorganization transactions occur in the transnational process of the reorganization of a foreign corporation within a United States taxing jurisdiction. This would be a transaction Read More