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December 3, 2021

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Avoid international tax mistakes

Tax obligations are complex enough for people conducting business domestically. When a business reaches an overseas market, the complications only increase. If you are doing business outside of the U.S., you can spare yourself significant trouble by avoiding a few common mistakes.

Not meeting reporting requirements

Your tax reporting requirements expand when you do business outside of the U.S. Actions that can trigger a reporting requirement in a new jurisdiction include opening a branch or even just establishing a local phone number in an overseas market. You must be aware of your reporting requirements in every jurisdiction you conduct business in.

Inadvertently creating a branch

It’s possible to establish a branch by accident, at least in the eyes of the law. By simply hiring an employee in a foreign jurisdiction or hosting your website in another country, you may be establishing a branch under the laws of that jurisdiction. A new branch requires a whole new slate of tax considerations, so make sure you do so only after sufficient planning.

Running afoul of transfer pricing laws

You must be very careful when buying and selling the same goods in international jurisdictions. If you buy your goods in a high-tax jurisdiction and sell them in a lower-tax jurisdiction, you could be in violation of tax laws. Unscrupulous actors may conduct such transactions on purpose, but it is all too possible to do so inadvertently, especially for someone who is new to conducting business internationally.

Careful legal planning can help you avoid tax mistakes so you can enjoy the potential of expanding your business into international markets.

Offshore Accounts/International Tax Disputes