doing business abroad

84 Pages·2017·3.01 MB·Italian

by  Leonardi Sara

DOING BUSINESS ABROAD
CPAs & ADVISORS
USA
experience clarity //
U.S. TAX REFORM PROPOSALS
Presented by: Robert J. Wagner, II, CPA
15-16 Giugno 2017
Managing Partner, National Tax Services | BKD, LLP
International Tax | SALT | Cost Segregation | R&D Tax Credit Services
CPAs & ADVISORS
experience clarity //
U.S. TAX REFORM PROPOSALS
Presented by: Robert J. Wagner, II, CPA
Managing Partner, National Tax Services | BKD, LLP
International Tax | SALT | Cost Segregation | R&D Tax Credit Services
Destination-Based Cash-Flow Tax Proposal
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AGENDA
I. Proposal
II. What is a Destination-Based Cash-Flow Tax (DBCFT) System with a Border
Adjustment Tax (BAT)?
III. Economic Considerations
IV. Legal & Practical Considerations
V. Transfer Pricing Considerations
VI. Where Are We Headed?
VII. President Trump’s Tax Reform Vision
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HOUSE REPUBLICAN PROPOSAL
Blueprint for tax reform: “A Better Way: Our Vision for a Confident
America” (Proposal)
Released in June 2016
Promotes a new “Destination-Based Cash-Flow Tax” (DBCFT)
Aim is to make U.S. Business taxation:
Simpler
Move toward a consumption-based taxation model
Includes a “Border Adjustment Tax” (BAT)
Occupies two pages of Proposal with little discussion on BAT
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WHAT IS A DBCFT SYSTEM WITH A BAT?
Radical change to U.S. business tax system
Move largely to a territorial system
Dividends from foreign subsidiaries exempted
Repeals much of Subpart F
Replaces with DBCFT with BAT:
Allows for full expensing of:
Capital investment
Labor costs
Other input costs
Disallows deduction for net interest expense & certain other deductions, e.g.,
Domestic production activities deduction
Allows R & D Credit
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WHAT IS A DBCFT WITH BAT? (CONT.)
BAT
Exports of products, services & intangibles exempt from U.S. tax
Imports of products, services & intangibles subject to U.S. tax (taxpayer is
denied a deduction)
20% tax rate applies
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This example illustrates the destination-based cash-flow tax mechanics:
Current Tax House Proposal House Proposal
System Example A Example B
Revenues
Export Sales $1,000 $1,000 $0
Domestic Sales $1,000 $1,000 $2,000
Total Sales $2,000 $2,000 $2,000
Costs
Domestic Items $500 $500 $0
Imported Items $500 $500 $1,000
Total Costs $1,000 $1,000 $1,000
Pretax Income $1,000 $1,000 $1,000
Taxable Income $1,000 $500 $2,000
Taxable Rate 35% 20% 20%
Tax $350 $100 $400
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ECONOMIC CONSIDERATIONS
Supporters say:
BAT will ↑exports & ↓imports
Provides a boost to U.S. business
Reduce U.S. trade deficit
Makes U.S. businesses more competitive in global markets—U.S. on equal footing with foreign
companies
Eliminate the benefits of abusive cross-border transfer pricing
Proponents say:
Currency exchange rates will adjust resulting in no net change in prices or quantities
U.S. $ will appreciate resulting in imports being cheaper than U.S. goods
Demand for U.S. goods in foreign markets will ↓ due to U.S. goods being more expensive
Both can not be correct
If U.S. FX rate ↑, what happens to the value of U.S. investments in foreign
countries?
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LEGAL & PRACTICAL CONSIDERATIONS
Will DBCFT with a BAT comply with WTO guidelines?
House Ways & Means Committee Chair, Kevin Brady, says “Yes”
“Economically equivalent to a VAT”
WTO has not previously ruled on whether DBCFT with BAT is compliant
OECD recently published VAT/GST guidance endorses the destination principle,
stating that goods & services should be taxed in the jurisdiction where they are
consumed
European Commission announced it will file a WTO complaint [drafting has
already started]
Impact on U.S. income tax treaties?
Likely viewed as a legislative override of the PE concept
New treaties would likely be required, a process that could take years to
complete
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