Doing Business Overseas

By: William J. Killory, CPA (Apr, 2012)

The annual meeting of CenterState CEO in early April featured speakers from the Brookings Institute and the Export Import Bank stressing the reality of the global economy and the need to increase export business in Central New York. We certainly live in a global economy when basic commodities such as oil, basic metals or grains are quoted on international exchanges and where bank loans are quoted using London Interbank Offer Rates as the basis for corporate finance. Events such as the Japanese tsunami or unrest in the Middle East can play havoc with our economic well being in Upstate New York.

Doing business overseas is not quite as simple as doing business in the other 49 states. Many of you already are involved in exporting, often to our neighbors both north and south. Operating overseas can be complicated as there are United States laws and regulations that must be observed such as the Foreign Corrupt Practices Act, various export controls and avoiding countries that are considered rogue regimes by the United States. Before you engage in export activity you should consult an expert that can guide you through the rules to avoid running afoul of our government and in the government of the country you intend to do business.

The tax consequences of operating in a foreign country vary depending on the level of contact you have and the agreements between the United States and the foreign country. One should be cognizant of the tax rules in each country. Quite often these rules are superseded by treaties that set the protocols for how transactions are to be taxed, by whom, at what rate and how payment is made. These treaties combine the complexity of tax law with vagueness of diplomacy and are usually finely detailed to capture most transactions that occur between people operating in foreign lands. The goal is, similar to multi-state taxation, for a transaction to be taxed once and for U.S. Individuals or entities to get credit for any tax paid to a foreign treasury. U.S. Citizens are subject to tax on a world-wide basis so it is important to understand the components of tax treaties and where you pay and how you get credit for what you do pay. 


The information reflected in this article was current at the time of publication. This information will not be modified or updated for any subsequent tax law changes, if any.

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