In today’s uncertain economic times, businesses are looking for any advantage they can get in helping ensure cash flow, investment opportunities, and tax advantages. Tax reform has created various opportunities for businesses with an international presence to prosper and be able to put the profits reaped from overseas trade to work in the United States.
For many years, businesses worked to shield their income from foreign transactions, or any other business conducted overseas due to the stiff tax consequences they would face if they tried to link it to any United States-based transaction. However, businesses now have an opportunity which did not previously exist to invest overseas earnings in U.S.-based operations. At MKS&H, we offer international tax and accounting services that will enable you to maximize your business’ potential for growth.
What does this mean for income I earn overseas?
In one phrase, it means that repatriation of profits is now much more affordable for businesses which earn income overseas. This signifies for many that they may no longer need to wait on long-awaited upgrades for their business operations or other priorities in the United States. For example, if your operations and profits in India will more than pay for any redevelopment or reinvestment in your U.S.-based base of operations, you are now able to divert that money to support the U.S. side of your business.
However, to balance this, a onetime tax on 15.5% of liquid assets – such as cash – and an 8.5% tax on illiquid assets – such as real estate – was imposed. Luckily, this tax is payable over a span of eight years thus businesses are able to space out the payments that are made to the Treasury Department and hopefully come out on top in this tax reform.
Some business owners may attempt to understand how to navigate these international tax hurdles, and the tax advantages this reform has created, on their own. However, given the complexity that still exists in the tax code, MKS&H can help ensure you are in total compliance and are getting the largest benefit possible.
What does this mean for the economy long-term?
Although we are currently facing an unprecedented economic challenge, tax reform as a result of the Tax Cuts and Jobs Act has been helpful to economic growth. The ability to repatriate profits from overseas has led to reinvestment in the United States. However, the largest growth in the economy is due to lower overall taxes instead of the ability to repatriate money more freely and with lower taxes.
What should I do if I have questions about tax reform and how it impacts my business’ income from overseas?
Business owners across the state have a multitude of questions about tax reform and how it impacts their international business that only an experienced and professional accounting firm can answer. Contact our tax professionals at MKS&H today to see how we can plan for the tax implications and benefits of how you grow your business