NEW BUSINESS OPPORTUNITIES                      IN THE UNITED STATES                                                     T...
GENERAL CONSIDERATIONS                                 Payroll         Employees                                  TaxLiabi...
THE U.S. MARKET• 3.7 Million Square Miles• GNP - $12 Trillion• Free Trade Agreements  - NAFTA, CAFTA, WTO, OECD, APEC, OAS...
REGULATORY ENVIRONMENTOpen Competition vs. Consumer & Employee Protection     Interstate Commerce vs. Intrastate Commerce ...
INTELLECTUAL PROPERTY PROTECTION• Trademark• Copyright• Patent• Trade Secret                 5
ACCOUNTING• Tax Accounting• Financial Accounting                         6
US BRANCH VS. US INCORPORATION     US Branch           US Incorporation    Foreign Entity         Foreign Entity     US Br...
WHERE TO INCORPORATEDelaware                        California           vs.            vs.                 Nevada        ...
CHOICE OF ENTITY     Which one is right for you?• Limited Liability Company (LLC)• Limited Partnership (LP)• C Corporation...
EFFECTIVELY CONNECTED INCOME• Income effectively  connected with a US  trade or business• Dependent agent                 ...
TRANSFER PRICING•   Code section 482•   “Controlled" entities•   Arms length standard•   Understatement penalties – 20% or...
TRANSFER PRICING                       BUY-SELL MODEL Parent                   • Buy SellCompany                          ...
TRANSFER PRICING                  COMMISSION MODEL       Parent      Company                                    ProductsSa...
IP HOLDING COMPANIES                   Technology and Parent         Intellectual PropertyCompany                         ...
CAPITALIZATION ParentCompany                   • Debt                              • Deductible interest, but must        ...
EARNINGS STRIPPING                            Parent               Interest    Company     Loan              Payments• Loa...
EMPLOYEES                        • Secondment Agreement       Parent      Company                        • Limitations on ...
FOREIGN PERSONNEL• VISA Requirement• Non-Resident Alien or Resident for Tax      - Green Card      - Substantial Presence ...
EMPLOYEE RIGHTS• Minimum Wages & Maximum Hours• Non-Discrimination• Pension Rights – ERISA & Social Security• Health and S...
INTER-COMPANY AGREEMENTS• Shipping Terms• Payment Terms• Risk of Loss & Title Passage• Insurance• Most Favored Nation Clau...
REAL ESTATESECTION 897 – FOREIGN INVESTMENT IN REAL  PROPERTY TAX ACT OF 1980 (FIRPTA)                   21
WITHHOLDING TAXES                   TREATY EFFECT• Dividend• Interest• Royalties• Service Income                         22
TREATIES                     OTHER• Permanent Establishment Required for Tax on  Business Profits• Information Exchange• C...
COST SHARING                    US                  Company    Buy In    Ownership   Payment   of Intangibles             ...
ANTI-DEFERRAL REGIMES     SubPart F                                                   Effectively(Controlled Foreign      ...
INTERNATIONAL E-COMMERCE                             Transfer PricingWitholding                                           ...
INTERNATIONAL E-COMMERCE              OPERATIONS                                 US or                    Cost        Fore...
IP HOLDING COMPANY STRUCTURES                                Founder      Preferred                 Optionees             ...
IP HOLDING COMPANY STRUCTURES                                Founder      Preferred                 Optionees             ...
IP HOLDING COMPANY STRUCTURES                          US Company                                                         ...
STATE TAX ISSUES•   Employees•   Admin, legal and commercial         California•   Registrations, enforcement           Pa...
CALIFORNIA “ECONOMIC” NEXUSRevised Section 6203 of the CA Revenue and Taxation Code• Taxpayers “doing business” in Califor...
EXON-FLORIO REVIEW BY CFIUSCommittee on Foreign Investment in the United States (CFIUS):• The Exon-Florio Amendment to the...
APPENDIX   34
APPENDIX   35
PALO ALTO              LOS ANGELES               SAN FRANCISCO1717 Embarcadero Road   11150 Santa Monica Blvd.,       135 ...
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New business opportunities in the us romania

  1. 1. NEW BUSINESS OPPORTUNITIES IN THE UNITED STATES The United States Commercial Service of The American Embassy in Bucharest, Romania and Roger Royse Royse Law Firm, PC California, USA March 5th, 2012IRS Circular 230 Disclosure: To ensure compliance with the requirements imposed by the IRS, we inform you that any tax advice contained in thiscommunication, including any attachment to this communication, is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of (1)avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to any other person any transaction or matter addressed herein.
  2. 2. GENERAL CONSIDERATIONS Payroll Employees TaxLiability Protection US Business Transfer Pricing Capitalization Intellectual Regulatory Property 2
  3. 3. THE U.S. MARKET• 3.7 Million Square Miles• GNP - $12 Trillion• Free Trade Agreements - NAFTA, CAFTA, WTO, OECD, APEC, OAS 3
  4. 4. REGULATORY ENVIRONMENTOpen Competition vs. Consumer & Employee Protection Interstate Commerce vs. Intrastate Commerce 4
  5. 5. INTELLECTUAL PROPERTY PROTECTION• Trademark• Copyright• Patent• Trade Secret 5
  6. 6. ACCOUNTING• Tax Accounting• Financial Accounting 6
  7. 7. US BRANCH VS. US INCORPORATION US Branch US Incorporation Foreign Entity Foreign Entity US Branch US Sub 7
  8. 8. WHERE TO INCORPORATEDelaware California vs. vs. Nevada 8
  9. 9. CHOICE OF ENTITY Which one is right for you?• Limited Liability Company (LLC)• Limited Partnership (LP)• C Corporation• S Corporation• Statutory Trust 9
  10. 10. EFFECTIVELY CONNECTED INCOME• Income effectively connected with a US trade or business• Dependent agent US PE• Effects? 10
  11. 11. TRANSFER PRICING• Code section 482• “Controlled" entities• Arms length standard• Understatement penalties – 20% or 40%• Adequate documentation (i.e. a transfer price study) 11
  12. 12. TRANSFER PRICING BUY-SELL MODEL Parent • Buy SellCompany • Just-in-Time Inventory System$ Products Services US Customers $US Profit 12
  13. 13. TRANSFER PRICING COMMISSION MODEL Parent Company ProductsSales ServicesSupportServices US Customer Sales & Product Support 13
  14. 14. IP HOLDING COMPANIES Technology and Parent Intellectual PropertyCompany • Deferral IP Holding • Worldwide Tax Company Rate Royalty • Withholding Tax Issues License 14
  15. 15. CAPITALIZATION ParentCompany • Debt • Deductible interest, but must pay or accrue • Must be repaid Debt • “Deep Rock Doctrine”$ Equity • Equity • Not required to be repaid • Dividends are nondeductible • Thin Capitalization Rules • Earnings Stripping 15
  16. 16. EARNINGS STRIPPING Parent Interest Company Loan Payments• Loans from the foreign parent to the US Sub requiring the payment of deductible interest back to the foreign parent 16
  17. 17. EMPLOYEES • Secondment Agreement Parent Company • Limitations on AuthorityFee Employees • Tax Withholdings Services • Tax Gross-Ups • Totalization 17
  18. 18. FOREIGN PERSONNEL• VISA Requirement• Non-Resident Alien or Resident for Tax - Green Card - Substantial Presence Test - Treaty Definitions• Estate and Gift Tax - Domicile 18
  19. 19. EMPLOYEE RIGHTS• Minimum Wages & Maximum Hours• Non-Discrimination• Pension Rights – ERISA & Social Security• Health and Safety• Unemployment• Sexual Harassment• Mass Layoffs (WARN Act) 19
  20. 20. INTER-COMPANY AGREEMENTS• Shipping Terms• Payment Terms• Risk of Loss & Title Passage• Insurance• Most Favored Nation Clauses• Price Protection• Indemnity• Warranty• Trademarks & Marking 20
  21. 21. REAL ESTATESECTION 897 – FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT OF 1980 (FIRPTA) 21
  22. 22. WITHHOLDING TAXES TREATY EFFECT• Dividend• Interest• Royalties• Service Income 22
  23. 23. TREATIES OTHER• Permanent Establishment Required for Tax on Business Profits• Information Exchange• Competent Authority• Non Discrimination• Limitation of Benefits 23
  24. 24. COST SHARING US Company Buy In Ownership Payment of Intangibles Foreign Operations Company 24
  25. 25. ANTI-DEFERRAL REGIMES SubPart F Effectively(Controlled Foreign Connected Income Corporations) Passive Foreign Transfer Pricing Investment Company 25
  26. 26. INTERNATIONAL E-COMMERCE Transfer PricingWitholding Super Roylaty Anti-Deferral Regimes 26
  27. 27. INTERNATIONAL E-COMMERCE OPERATIONS US or Cost Foreign Sharing Company License Deemed Sale International Holding Company LocalCustomer Server License/RoyaltyFees/Sales Company Company Royalties Commission/Fees 27
  28. 28. IP HOLDING COMPANY STRUCTURES Founder Preferred Optionees Shareholder US Sales Foreign Company US Holds Technology Company Contract R&D 100% Service Fees Service Local Products Tax Haven Fees [PRC]Distributors Company Contract Manufacturer Manufacturing 28
  29. 29. IP HOLDING COMPANY STRUCTURES Founder Preferred Optionees Shareholder US Sales Foreign Company US Holds Technology Company Contract R&D 100% Service Fees Service Local Products Tax Haven Fees [PRC]Distributors Company Manufacturer Contract Manufacturing 29
  30. 30. IP HOLDING COMPANY STRUCTURES US Company Domestic Company US Sales Holds Technology Contract R&D Product sales Local 100% Technology License Distributors 100% Tax Haven ProductsLocal Sales Service Fees Contract Manufacturer Manufacturing (or License) 30
  31. 31. STATE TAX ISSUES• Employees• Admin, legal and commercial California• Registrations, enforcement Parent• R&D, commercialization IP License Transfer Back Nevada IP Holding Co. Services Income 31
  32. 32. CALIFORNIA “ECONOMIC” NEXUSRevised Section 6203 of the CA Revenue and Taxation Code• Taxpayers “doing business” in California are subject to tax in California. California• “Doing business” includes when a taxpayer: (1) - engages in any transaction for financial or pecuniary gain within California; or (2) - is organized or commercially domiciled in California; or (3) - has annual sales in California that exceed the lesser of $500,000 or 25% of total sales; or (4) - has real and tangible personal property in California with a value exceeding the lesser of $50,000 or 25% of total property; or (5) - has payroll in California that exceeds the lesser of $50,000 or 25% of the total payroll.• Activities of partnerships and LLCs are attributed to their owners for purposes of determining whether the owner is “doing business” in California.• Amount of tax still depends on apportionment. 32
  33. 33. EXON-FLORIO REVIEW BY CFIUSCommittee on Foreign Investment in the United States (CFIUS):• The Exon-Florio Amendment to the Omnibus Trade and Competitiveness Act of 1988 provides the President of the U.S. with authority to suspend or block transactions that would allow a foreign person to a control a U.S. business when there is “creditable evidence” that such transaction may “impair the national security”• CFIUS, an inter-agency cabinet level committee performs the review.• To determine whether a transaction is covered, ask: (1) - does the transaction involve a foreign person acquiring a U.S. business? (2) - does the transaction involve a “change of control”? (3) - does the transaction impair U.S. national security interests?• Review process could take up to 90 days. 33
  34. 34. APPENDIX 34
  35. 35. APPENDIX 35
  36. 36. PALO ALTO LOS ANGELES SAN FRANCISCO1717 Embarcadero Road 11150 Santa Monica Blvd., 135 Main Street, Palo Alto, CA 94306 Suite 1200 12th Floor Los Angeles, CA 90025 San Francisco, CA 94104 www.rroyselaw.com www.rogerroyse.com E-mail: rroyse@rroyselaw.com Skype: roger.royse 36

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