Whether you’re selling or transferring assets from one country to another, gaining a better understanding of international tax complexities and your disposition options can help improve your bottom line.
Sale of Non-US Assets
Knowing your after-tax rate of return: For US companies or individuals disposing of non-US business or investment assets, this is crucial. What’s more, many transactions involving non-US assets require a number of foreign disclosure forms, which, if not completed properly, can result in significant penalties.
Structuring your dispositions for maximum benefit can mean the difference between a poor investment and a profitable one. This includes fully understanding:
- The character of gains or losses
- The ability to use foreign tax credits
- The availability of tax treaty benefits
- The disclosure requirements
- The impact on your international financial statements
Sale of US Assets
Two of the most important considerations for non-US companies disposing of US real estate are withholding under the Foreign Investment in Real Property Tax Act (FIRPTA) and available treaty benefits.
Generally, FIRPTA imposes a withholding tax on the gross proceeds of a sale when a non-US person sells US real estate (or a company that owns US real estate). This can impair the seller’s liquidity. Also, depending on the countries involved, there may be treaty benefits available that could reduce the worldwide effective tax rate on the disposition.
Inbound and Outbound Transfers
If your transactions are structured correctly, you can move assets or business units across borders in tax-free, tax-deferred, or tax-efficient ways. If your transactions are structured incorrectly, or if you don’t take tax considerations into account, you may have negative tax consequences that could affect your global operations and your bottom line.