Do you know how to file your taxes if your company operates abroad?

If your business operates abroad or is planning to expand into global markets, you need to have an understanding of international tax. Otherwise, your profits could be in jeopardy.

Given how complicated the international tax system is, we’ve outlined six strategies below that could help you complete them.

1. Stay Informed

With international streams of revenue, businesses will need to develop new tax strategies as many international markets run differently compared to the United States.

Without an understanding of how foreign taxes work you could unknowingly be violating the law by not meeting your tax obligation. This could lead to your company carrying a heavy tax burden, and being fined or reported for non-compliance issues.

To prevent tax implications from impacting you, it’s important to keep track of tax laws, both where you operate and where you are expanding, as they can change yearly.

2. Explore BEPS

Base erosion and profit sharing (BEPS) occur when companies use things like tax havens, loopholes or other strategies to minimize their tax liability. Owners are encouraged to explore these practices as they could reduce their tax liability. But, although BEPS are not illegal, they do take a professional to understand as they can be risky. That’s why we suggest hiring a tax professional, like us at A.P Accounting & Tax Services who can suggest options that could work for you. 

3. Distribute Income

Depending on where you operate, you can reduce your tax liability by distributing your income to different markets. This is ideal for multinationals who can transfer pricing from one region to another as a way to save money. This could be done when a subsidiary buys goods or services from a parent or other subsidiary. In turn, moving money paid by the subsidiary from a high-tax jurisdiction to a low-tax one.

4. Consider Operating Offshore

If you can move a part of your business offshore you might be able to capitalize on tax costs. Offshoring allows certain businesses to reduce their tax burden and other costs such as labor and raw materials.

Keep in mind that there are only certain places that act as tax havens, and are designed specifically to attract business owners. However, many countries have caught on to this idea and are reconsidering their offshoring laws. Therefore, if you’re thinking of operating offshore, it might be a good idea to speak with a professional first as any changes to their tax law could have a significant impact on you.

5. Prevent Double Taxation

In international tax law, double taxation could occur when two jurisdictions claim the right to tax a single transaction. This could occur when one country is claimed to be the home country for the transaction but another country is claiming it as the location of the exchange. Or it could occur when both countries are claiming to be the home country and when both countries are claiming to be the location of the transaction.

Regardless of where the mistake occurs, having a tax plan could reduce the risk of double taxation and an ultimate loss of funds. 

6. Use Proactive Tax Strategies

Ultimately, planning can save you tons of money and time when it comes to preparing your taxes. That’s why we always suggest having the help of a professional by your side.

Our team of experts can make sure your tax season is stress-free, and that you are fully informed of what you owe. That way, you can rest assured that you won’t get a huge bill come tax season. If you’d be interested in learning more, give us a call at 407-328-5001.

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