The International Tax Corner: Edition 1
What is International Tax?
The term International Tax is a misnomer. At least from a US perspective, we use the Internal Revenue Code and its regulations; we use IRS guidance and US court cases. That’s domestic law. We simply use the portions of domestic law that focus on international items. Why do we care? We think people lose sight of the big picture – that people want to know their cash flow after global tax, not just US tax.
For example, a middle school student could calculate the gain on the sale of US real estate. Often US advisors stop there, whether because they have a limited scope engagement, they don’t know any different or their client misses the big picture. Suppose a non-US person resident in Australia wholly-owns a US LLC that sells real property. We like to ensure our Australia client knows, for instance,
- Of course, any federal and state income US tax.
- Whether and how Australia taxes.
- Where the client desires the cash, in what currency and how deployed.
- And more.
It’s all these items, and more, that make one a good international tax advisor. Sometimes coming up with a good US-centric tax answer doesn’t get the client the best global tax answer.
Treaties are another source of guidance. These are more international in flavor; yet a country’s domestic law determines when treaty guidance applies (although it’s not always free from doubt).
So, what we tell our clients is – Forget you’re an entrepreneur, a business owner, a logical, rational thinker – or perhaps a company or other legal entity – take off that logical thinker hat. We’re in a different world – that of international tax. So, buckle up. The domestic provisions of the Internal Revenue Code are complicated enough. Adding cross-border items makes things even more complex.
We hope to start a series of short, easy to digest blogs, designed to provide an overview of how the US taxes international “stuff”.
As a starter, the US taxes its citizens on worldwide income. For next time, what’s the only other country that has a citizen-based worldwide tax?
About Schwartz International
The International Tax Nerds at Schwartz International team with individuals, companies of all sizes and other accounting and law firms to provide practical international tax, compliance, and legal advice.
We live and breathe international tax daily, and since we’ve lived in various countries, we understand the diverse cultural challenges you face. We work in four key areas: International Tax Advisory; International Tax Compliance; Cryptocurrency; and Law via our sister company, The Schwartz Law Firm.
Visit our website to learn more at International Tax Nerds or email us at info@internationaltaxnerds.com.
We welcome questions and feedback!