crossing the atlantic slovenia march 9
TRANSCRIPT
CROSSING THE ATLANTIC
Roger RoyseRoyse Law Firm, PC
California, USA
IRS Circular 230 Disclosure: To ensure compliance with the requirements imposed by the IRS, we inform you that any tax advice contained in this communication, including any attachment to this communication, is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to any other person any transaction or matter addressed herein.
The Slon Hotel March 9th, 2012
U.S. Commercial Service of The American Embassy
in Ljubljana, Slovenia
and
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THE U.S. MARKET
• 3.7 Million Square Miles• GNP - $12 Trillion• Free Trade Agreements- NAFTA, CAFTA, WTO, OECD, APEC, OAS
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U.S. STRATEGY
Non-US Parent Company
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U.S. STRATEGY
US Investor Non-US Investor
Non-US Parent
US Company Non-US Parent
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GENERAL CONSIDERATIONS
US BusinessLiability Protection
Capitalization IntellectualProperty
Transfer Pricing
Employees
Accounting
Tax
Regulatory
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REGULATORY ENVIRONMENT
Open Competition vs. Consumer & Employee Protection
Interstate Commerce vs. Intrastate Commerce
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INTELLECTUAL PROPERTY PROTECTION
• Trademark
• Copyright
• Patent
• Trade Secret
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ACCOUNTING
• Tax Accounting• Financial Accounting• US GAAP vs IAS
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US BRANCH VS. US INCORPORATIONUS Branch US Incorporation
Foreign Entity
US Branch
Foreign Entity
US Sub
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PERMANENT ESTABLISHMENT
• Fixed place of business
• Agents and Officers
US PE
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WHERE TO INCORPORATE
Delaware
Nevada
California
vs.vs.
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CHOICE OF ENTITY
• Limited Liability Company (LLC)• Limited Partnership (LP)• C Corporation• S Corporation • Statutory Trust
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TRANSFER PRICING
• Code section 482• “Controlled" entities• Arm's length standard• Understatement penalties – 20% or 40%• Adequate documentation (i.e. a transfer price study)
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TRANSFER PRICINGBUY-SELL MODEL
US Customers
US Profit
• Buy Sell• Just-in-Time Inventory
SystemProductsServices
$
ParentCompany
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TRANSFER PRICINGCOMMISSION MODEL
Sales & Product Support
Sales Support Services
US Customer
Products Services
ParentCompany
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IP HOLDING COMPANIES
License
Technology and Intellectual Property
Royalty
• Deferral• Worldwide Tax
Rate• Withholding Tax
Issues
ParentCompany
IP Holding Company
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CAPITALIZATION
• Debt• Deductible interest, but must
pay or accrue• Must be repaid • “Deep Rock Doctrine”
• Equity• Not required to be repaid• Dividends are nondeductible
• Thin Capitalization Rules• Earnings Stripping
$DebtEquity
ParentCompany
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EMPLOYEES
Fee EmployeesServices
• Secondment Agreement
• Limitations on Authority
• Tax Withholdings
• Tax Gross-Ups
• Totalization
ParentCompany
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FOREIGN PERSONNEL
• VISA Requirement• B-1• H-1B• EB-5• EB-6 (pending)
• Non-Resident Alien or Resident for Tax- Green Card- Substantial Presence Test- Treaty Definitions
• Estate and Gift Tax- Domicile
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EMPLOYEE RIGHTS
• Minimum Wages & Maximum Hours• Non-Discrimination• Pension Rights – ERISA & Social Security• Health and Safety• Unemployment• Sexual Harassment• Mass Layoffs (WARN Act)
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INTER-COMPANY AGREEMENTS
• Shipping Terms• Payment Terms• Risk of Loss & Title Passage• Insurance• Most Favored Nation Clauses• Price Protection• Indemnity• Warranty• Trademarks & Marking
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REAL ESTATESECTION 897 – FOREIGN INVESTMENT IN REAL
PROPERTY TAX ACT OF 1980 (FIRPTA)
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WITHHOLDING TAXESTREATY EFFECT
• Dividend
• Interest
• Royalties
• Service Income
TREATIESOTHER
• Permanent Establishment• Information Exchange• Competent Authority• Non Discrimination• Limitation of Benefits
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ANTI-DEFERRAL REGIMES
SubPart F (Controlled Foreign
Corporations)
Passive Foreign Investment Company
Transfer Pricing
Effectively Connected Income
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INTERNATIONAL E-COMMERCE
Super Roylaty
Tran
sfer
Pric
ing
Witholding
Anti-DeferralRegimes
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IP HOLDING COMPANY STRUCTURES
US Sales
US Company
Contract R&DProduct sales
Tax Haven
Technology License
100%Products
Service Fees
ContractManufacturing(or License)
Manufacturer
100%LocalDistributors
Local Sales
Domestic Company Holds Technology
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STATE TAX ISSUES
CaliforniaParent
Nevada IPHolding Co.
IP Transfer
LicenseBack
Services Income
• Income Tax Nexus• Sales Tax Nexus• IaaS, PaaS, SaaS• IP Holding
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ACQUISITION
TaxEmploymentSecuritiesCorporate/FiduciaryRegulatory Issues (Exon-Florio, Hart Scott Rodino)Business issues (e.g. earnouts)
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APPENDIX
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APPENDIX
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PALO ALTO1717 Embarcadero Road
Palo Alto, CA 94306
LOS ANGELES11150 Santa Monica Blvd.,
Suite 1200Los Angeles, CA 90025
SAN FRANCISCO135 Main Street,
12th FloorSan Francisco, CA 94104
www.rroyselaw.comwww.rogerroyse.com
E-mail: [email protected]: roger.royse