Tax planning and compliance is hard enough to do in your home country. When you begin operating in another country it becomes even more complex. Questions invariably arise, such as:
- Where should we perform our R&D?
- Where should we hire employees?
- Can we shift income to a low tax jurisdiction?
- How much should we pay related entities for goods and services?
- Does withholding tax apply to intercompany transfers?
Aware of companies’ incentives to shift income to lower tax jurisdictions by inappropriate pricing of related party transactions, almost all countries have instituted transfer pricing laws and regulations. The term “transfer price” refers to the price at which one company sells goods or services to a related affiliate in its supply chain. Thus, “transfer pricing” is the system of laws and practices used by countries to ensure that goods and services transferred between related companies are appropriately priced, based on market conditions, such that profits are correctly reflected in each jurisdiction. The principal tax policy concern is that profits from a related-party transaction may be artificially shifted to low-tax jurisdictions through aggressive transfer pricing that does not reflect an arm’s-length result. Most countries retain the right to adjust the intercompany payment amounts if the taxing authority disagrees with the transfer pricing analysis used by the taxpayer.
Our international tax planning service analyzes your companies’ current organization and its proposed operations in order to formulate a tax efficient structure. This tax structure takes into account, among other things, domestic and foreign country income tax rates, transfer pricing, controlled-foreign-corporation (CFC) rules, U.S. subpart f and PFIC rules and withholding tax obligations.