International Tax Planning

International Tax Planning is the process of strategically managing the international tax liabilities of a business to minimize tax burdens. This can involve the implementation of the strategies by using tax-efficient structures, tax treaties, and implementing transfer pricing policies. 

With effective international tax planning, businesses can optimize their tax positions and minimize the risk of fines and penalties for failure to comply with tax regulations.

There are different international tax responsibilities that businesses comply with the tax laws and regulations in which countries they operate. Individuals and businesses must ensure that they do not engage in tax evasion because it can result to fines, penalties, and legal action. 

Income Tax

The Internal Revenue Service (IRS) collects taxes that corporations, partnerships, self-employed contractors, and small businesses earn. Depending on the business structure, the corporation, its owners or shareholders report their business income and then deduct their operating and capital expenses. 

However, the IRS has released tax brackets for the year 2023 which is 7% higher than the brackets for 2022 returns.

Transfer Pricing

Transfer pricing is determining how two or more related parties will price goods, services and other assets they provide when transacting with each other. Section 482 of the Code authorizes the IRS to adjust the income, deductions, credits, or allowances of commonly controlled taxpayers to prevent evasion of taxes or to clearly reflect their income.

With this, it is important for businesses to ensure that their transfer prices are compliant with national laws and regulations. 

International Enforcement

If taxes are not paid timely, and the IRS is not notified why the taxes cannot be paid, the law requires that enforcement action be taken, which could include the following:

  • Issuing a notice of levy on salary and other income, bank accounts or property (legally seize property to satisfy the tax debt)
  • Assessing a trust fund recovery penalty for certain unpaid employment taxes
  • Issuing a summons to the taxpayer or third parties to secure information to prepare unfiled tax returns or determine the taxpayer’s ability to pay.

It’s essential you act to avoid potential enforcement action, which can include seizing your assets or wages. Enforcement action may include the filing of a notice of federal tax lien, which could affect your credit score and ability to borrow.

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