Cross Border Tax Regulations and Law

Are you looking to find the best understanding of Cross Border Tax Regulations? United States citizens are taxed on their income even when working in Canada and Mexico. Tax laws governing Cross-border transactions can be very complex and understood by Tax Accountants with extensive cross border training. 

The Cross-border Tax Accountant must be very familiar with Basic tax rules that apply to both U.S. and foreign persons.

  • Outbound Transactions: -Transactions by U.S. taxpayers are transactions processed in other countries. Rules for outbound transactions capture foreign income for U.S. tax purposes and are intended to prevent tax avoidance using foreign entities
  • Inbound Transactions – Transactions of foreign taxpayers within the United States. The tax rules governing inbound activities impose a tax on income from sources within the United States. Income effectively connected with the conduct of a trade or business within the United States. Some inbound income of a non-resident alien (e.g., capital gain income) is not taxed unless the individual is in the United States for more than 183 days during the tax year.

Tax Impact on Tax Rules

There are default rules that impact taxing Cross-border transactions. Note: The tax treaties between the U.S. and other countries take priority over the default rules. 

When you hire a Cross Border Tax Accountant, they have to assess the tax impact of Cross-border activity, which requires familiarity with any applicable tax treaty as well as with the default rules in the Code.

The Global Village 

The world is a global community because electronic media (T.V. and the Internet) has reduced distance and isolation. Small firms inside this ‘Global Village’ must master the Cross-border tax issues to serve their clients as well as larger firms. 

Cross-border transactions are more complex and frequent. The kind of entity involved and proper filing can dramatically affect the taxation of Cross-border income.  

Services that Cross Border Tax Accountants provide:

  • Individual Tax Return Preparation -You have a U.S. citizen living in Canada or a Canadian living in the U.S. who may need to file taxes in both countries. Could be income, other compensation, capital gains, or real estate, the complexities of the tax and compliance regulations require a serious understanding of the U.S.-Canada tax treaty.
  • Corporate Tax Return Preparations - A Canadian business owner with operations in the U.S. or an American business owner with operations in Canada, requires realistic solutions and practical tax strategies that address the tax payer’s needs. Getting the right advice from an expert team of Cross-border taxation professionals will avoid filing error penalties but also ensures the taxpayer to receive every available deduction.
  • Partnership Tax Preparation - Cross-border partnership structures can entail a complicated tax situation. Consider this; businesses taxed as a partnership in one country and a corporation in another. This situation could lead to double taxation of income. A trusted and experience Cross-border Tax Account can evaluate the companies’ structure to determine which tax rules apply to maximize your tax benefits in both countries.
  • Trust Tax Preparation - Foreign trusts on taxes is a very complex aspect of tax law. A trusted and experience Cross-border Tax Account will identify the issues relevant to the trust plan in place. They will prepare and submit the proper forms and make sure the company presents the correct tax amounts to the tax authorities in each country.
  • Sale or Rental of U.S. Real Property - Foreign owners of real estate property in the U.S. are subject to U.S. tax and FIRPTA withholding for non-residents when selling or renting that property. The payment generates a foreign tax credit, which can be used to reduce the foreign tax payable on the sale — knowing how to apply that credit requires a well-educated Cross-border Tax Accountant to give you the best possible tax outcome.
  • Estate tax and gift tax regulations may impact U.S. Estate or Gift Tax preparation - the U.S. and non-U.S. citizens who live, work, or own property in the United States. Where you establish your residency and domicile choices, play a significant role in the tax implications and your potential tax consequences.
  • IRS Streamlined Filing - All U.S. citizens and green card holders do not consistently file tax returns with the IRS in compliance with the Internal Revenue Code every year, even though they are required to do so. The IRS offers a program to assist delinquent taxpayers in becoming compliant without significant penalties. A trusted and experience Cross-border Tax Account will help you navigate this program on your behalf.

Canadian Example:

FBAR and FATCA reporting in the U.S. and foreign reporting in Canada

The ownership in out-of-country financial accounts (including bank accounts, brokerage accounts, retirement accounts, and mutual funds) can be very complicated. It must be reported to the IRS and CRA. Canadian corporations operating in the U.S. and vice versa must complete a Foreign Bank Account Reporting (FBAR) form and a Foreign Account Tax Compliance Act (FATCA) form. A trusted and experience Cross-border Tax Account will identify all concerns and ensure compliance.

Category: Tax

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