18 Mar/14

The Rite of Spring- Corporate Tax Filing for Foreign Companies

tax translation projectsTaxes are one of the two certainties in life. In 2014, however, it seems safe to say that we can add another certainty to the list: globalization. While every individual is, at least at some point, affected by both taxes and globalization, only businesses that operate in 2 or more countries really understand the balancing act that takes place between globalizing effectively and managing taxes.

Effective globalization for an individual company is all about creating demand and then meeting that demand in a way that maximizes profits. In the past, this was relatively simple: if you wanted, for example, a Volkswagen, you went to the VW dealership which imported the cars from Germany. While this worked for a time, as the costs to make and transport a good to its market increased and began cutting into profits, the system changed. Currently, in order to cut costs and maximize profits, it is more sensible for a manufacturer to make a product closer to the intended market, which is why most Volkswagens sold in North America are either made in Tennessee or in Puebla, Mexico. As a result of this trend all major car manufacturers competing for U.S. customers, from Toyota to Mercedes, now have production facilities in the United States.

While, in most cases, taxes are not the sole reason for moving production, they often play a major role, notably for businesses looking to have a presence in the United States. What makes the United States so different from other countries is its tax structure. A simplistic explanation would be that, in other countries, a business is taxed solely based on operations on the ground; however, in the United States, a business is taxed on global income. So, in general, an Italian company in Italy is only taxed for its activities in Italy, whereas an American company is taxed for its activities in the US, Italy, China, or anywhere else.

For American-based companies, this is just a fact of life, but for foreign companies attempting to do business in America, this can be a minefield. If subsidiaries aren’t properly managed and if the lines between the American company and the parent company are somewhat blurred, issues can quickly arise, resulting in unnecessary expenses ranging from inflated tax bills to legal fees. Evidence of the potential pitfalls for foreign companies can be seen in the recent reopening of the IRS investigation of Tyco Financing, in which Tyco is charged with evading over $1 billion in federal taxes and penalties due to allegedly misrepresenting an inter-company loan as an outside debt.

Obviously, to lessen the risk of arousing suspicion regarding your company’s American taxes, it makes sense to keep operations between subsidiaries and the parent company as distinctly separate as possible and avoid any financial conflations between parent company and subsidiary that could be misinterpreted by authorities. Recent convictions in tax fraud cases have shown that often the inadequate preparation and/or faulty, or even missing, translation of foreign language tax documentation were the reason for a company’s tax troubles.

Avoid this common mistake and let the tax translation department at EVS Translations help you translate your documents swiftly and reliably. EVS Translations offers a full range or language services and certifications in line with all relevant jurisdictions.

If you would like to discuss your upcoming multilingual tax translation projects, inquire about prices, delivery times and our additional language services call our Atlanta office today at +1 404-523-5560 or send us an email: quoteusa(at)evs-translations.com.
Call our Nottingham office today at +44-115-9 64 42 88 or send us an email: quoteuk(at)evs-translations.com.