International Corporate Ownership and Subsidiaries
International Business and Tax Attorneys Based in San Diego
Allen Barron is uniquely positioned to serve and advise US domestic and international corporate ownership as well as their subsidiaries. What entity or entities are required to accomplish your international business goals, and how will the companies be associated to one another (if at all)? How will you manage transactions between companies, as well as those with external customers and vendor supply chains? What impact will international corporate ownership have upon your taxes?
We help with international business formation and the development of accounting and tax strategies for all aspects of domestic and offshore business. Business is global – and Allen Barron has expertise in international business and tax law. Our accounting services team can design, implement and support complex accounting and tax reporting systems for a single entity or a multi-national global concern. We work to simplify the management of international corporate ownership while ensuring maximum profitability and compliance with all US and foreign laws.
International Corporate Ownership Lawyers
International corporate clients value the counsel and support services that guide the implementation and management of international operations, cross border transactions, transfer pricing, compliance with domestic and foreign tax treaties and reporting requirements. The recent expansion of inter-reporting agreements between the IRS, foreign banks and investment houses and offshore sovereign tax agencies requires additional sophistication – in terms of corporate structures, accounting and reporting systems, and international tax compliance.
Allen Barron further advises clients on critical international business strategies such as the licensing of intellectual property, joint ventures and international employment contracts and policies. We assist with all areas of corporate compliance, and ensure compliance with international, federal, state and local regulatory agencies and laws.
Compliance with FATCA and FBAR Reporting
Allen Barron advises our international corporate ownership clients and their employees on compliance with IRS FBAR reporting requirements, as well as compliance with the completion of US tax returns for permanent residents and business owners with offshore and international tax reporting requirements. We help our clients to come into full FATCA compliance through the IRS OVDP or Offshore Voluntary Disclosure Program. We work to reduce exposure to heavy taxation, penalties and interest associated with the failure to fully and accurately report offshore asset ownership, accounts and income.
Tax Implications of Owning an Interest in a Foreign Corporation
The international business environment has substantially changed over the past several years. The IRS and the US Justice Department are tightening reporting and taxation of those with offshore corporate ownership and offshore assets, investments and accounts. It is important to come into full compliance with FBAR reporting requirements as well as disclosures required on IRS form 8938.
US taxpayers have deployed foreign corporations in an attempt to defer taxation in the past. Due to recent changes brought about primarily by FATCA, if you own an interest in a foreign corporation or company, there are significant reporting requirements relating to your ownership interests and the financial activities of your company.
If you have an offshore company, or you own a controlling interest or any portion of a foreign corporation, you are required to disclose your ownership position within the company at the end of each calendar year, and provide informational disclosures pertaining to income and balance sheet reports. You may be required to file IRS Form 5471, the “Information Return of U.S. Persons With Respect to Certain Foreign Corporations.” There are complex attribution aspects of US tax laws that mean a taxpayer can have an “attributed” or “constructive” ownership in a foreign corporation even though they don’t have an actual (or indirect) ownership in the company. The failure to file the Form 5471 can expose the taxpayer to extensive penalties for being non-compliant.
Categories of Foreign Corporate Ownership – IRS Form 5471
Category 2 Filers
A US citizen or resident who is an officer or a director of a foreign corporation is required to be a Category 2 filer if any US resident or citizen, domestic partnership, estate, trust or corporation (termed a “US Person” in the form) has purchased 10% or more stock ownership by “value or vote.” Category 2 filers are required to report ownership interest acquisitions by a US Person in the foreign corporation regardless of whether the Category 2 filer has an ownership interest in that foreign corporation or not. Category 2 filers must not only know and identify those who have “constructive” ownership in the company, but those who have actual or indirect ownership in the company.
Category 3 Filers
A US taxpayer is required to file form 5471 under category 3 when they already own stock and acquire an additional interest which accumulates to 10% or more of the stock of a foreign corporation. If someone who already meets the “10% Stock Ownership Requirement” becomes a “US Person” they would be required to file form 5471 under this category.
Category 4 Filers
If you are a “US Person” and owned more than 50% of a foreign corporation’s stock for an uninterrupted period of 30 days or more during the fiscal year of the company, you are required to file form 5471 under this category. There are different “constructive ownership” rules under category 4 than in other categories of the form.
Category 5 Filers
US shareholders who own stock in a foreign corporation that is defined as a “Controlled Foreign Corporation” or CFC for 30 days uninterrupted during the fiscal tax year of the foreign corporation, and owned stock on the last day of that tax year would be category 5 filers. A CFC is defined as a foreign corporation where US shareholders own or control more than 50% of the CFC.
Contact Us To Learn More About Allen Barron Tax Services
For more information or to discuss your tax, legal and accounting needs contact Allen Barron or call 866-631-3470 for a free and confidential initial consultation. Learn about the importance of integrated business strategy and coordination across legal, tax and accounting systems.
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