International Taxation for US Individuals
The USA is one of the very few countries in the world that levy tax on the income generated by US corporations in foreign countries. Though, if properly managed, a lot of international tax can be saved using legitimate methods. The main issue that arises in case of individuals is that they don’t have deep pockets to pay professionals to get their compliances, on-time tax filings, etc sorted which really takes away the peace of mind to enjoy that extra income.
We at USAIndiaCFO have been managing international and cross-border tax issues for many High Net Worth Individuals (HNWIs) like Bollywood stars in the US, top-notch corporate executives, investors, which has enabled us to develop an efficient service model to serve even single individuals at optimum rates.
US Tax Rates on International Income
Presently, the persisting tax rate of income above 10% of the return is 10.5% (half of the US corporate tax on domestic income) till 2025 and 13.13% afterwards, along with 80% tax credit on income tax paid in foreign. On income via the passive assets and on some specific form of easily transferable assets, it is a whopping 21% with 100% tax credit on income tax paid in foreign.
There are several complications in tax filings and compliances for international income. For instance, identifying the type of income on the basis of its sources like Subpart-F income (passive income & specific kind of easily shiftable profits), income from royalties, the income representing a normal return from tangible assets, Global Intangible Low Tax Income (GILTI), etc. Then on the basis of this identification, you also need to bifurcate which part of the profit is taxable and which is exempted.
If that was not enough headache, then you also need to calculate and claim tax credit from on GILTI, which is also no child’s play because that is where the real tax saving comes from where you have to also consider the depreciation on the assets and accounting standards followed. Not to mention the special provisions regarding the income generated from intellectual properties, like Foreign Derived Intangible Income (FDII) in the USA or Patent Boxes prevalent in Europe.
On top of that, to curb ill-practices of tax evasion and tax avoidance using accounting chicanery by the corporates, the Department of The Treasury and the Internal Revenue Services have very strict tax surveillance and scrutiny systems and the slightest mistake can land you in some serious legal trouble.
Penalties for Non Filing
Failure to file information required by Section 6046 and the related regulations like Form 5471 and Schedule O.
Anyone who fails to file or report all of the requested information under section 6046 will be liable to a penalty of USD 10,000 per failure for each reportable transaction. If this failure story continues beyond 90 days after official notification from IRS, an additional penalty of USD 10,000 is imposed for every 30 day period or fraction thereof during which the failure prolongs after the expiration of 90-day period though it is limited to USD 50,000.
Further, there are criminal penalties as well under Sections 7203, 7206, and 7207 which may be applicable upon failure to file the required information by Sections 6038 and 6046.
Issuing Body for DSC
Controllers of Certification Agencies (CCA) officially appointed eight Certification Agencies only have the permission to issue DSC in India. These agencies are:
Please note that one is allowed to only use the valid DSC issued to him / her and it is illegal to use DSCs of someone else. The fraudulent use of DSC is punishable by INR 1 lakh or 3 years of imprisonment or both.
We have more than 5+ years of experience in the arena of business and financial consultancy and have been fortunate to be working with some remarkable individuals. While handling their federal and international tax matters, we have gained great insights on how to ensure expeditious filing process, coordinate with various authorities and fetch accurate information, how to effectively calculate and claim tax credits, how to avoid any scrutiny by IRS, etc with our personal favourite niche being the international tax on income from intellectual properties.
We have handled various complex tax issues, to list a few:
- Foreign Holding (Form 5472)
- Having assets abroad (FinCen 114, 8938)
- Foreign Disregarded Reporting (Schedule C entities having a foreign owner)
Give us a call on 7727887799 (also available on WhatsApp) or drop us an email on email@example.com in case of any further query. Cheer 🥂!
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