Global Tax Planning and Structuring and Planning International Transactions, Operations and Investments

If you are planning a cross-border transaction, operation or investment you must deal with a multitude of tax issues and a broad array of tax rules, with different and interdependent, short-term and long-term tax consequences. We help clients plan their cross border investments and activities in the most efficient way from a legal and tax standpoint.

Italy operates a corporate tax system which includes participation exemption for dividends and gains from sale of domesric and foreign stock; domestic and worldwide consolidation of affiliated corporations; election for fiscal transparency for Italian corporations and limited liability companies; limitations on deduction of interest in highly leveraged transactions; anti-abuse rules for investments and operations conducted in low-tax jurisdictions and for Italian-owned foreign holding companies; foreign tax credit for foreign taxes paid on foreign income taxable currently in Italy; specific provisions on classification and taxation of foreign and domestic trusts and pervasive reporting requirements for foreign investments and transactions.

Italy taxes nonresident persons on their Italian-source income under two different tax regimes depending on whether the income is portfolio or passive income (subject to a gross basis withholding tax reduced or exempt under tax treaties) or active business income attributable to direct business operations performed through a permanent establishment or local entity in Italy (subject to corporate tax on a net income basis at the rate of 27 percent).  

The U.S. operates a system that limits the ability of U.S. persons to defer U.S. taxation of income earned in foreign countries, and grant a tax credit in the U.S. for foreign taxes paid to foreign countries on foreign source income. The U.S. taxes foreign persons (foreign corporations and nonresident alien individuals) on income deriving from U.S. investments and activities. Foreign persons are subject to a gross basis withholding tax on their U.S. source passive income (reduced under tax trearies) and to net income tax at ordinary rates on  income effectively connected with a U.S. trade or business. State and local taxes may also apply depending on where and how a taxpayer does business and if its income producing factors are located in the U.S.  

The use of third country holding, trading or services companies can generate substantial tax benefits.

In such a complicated legal framework your choices, if not properly advised, may have negative effects on the tax results of your ventures. Among the factors to consider when planning your cross border investments are the form of entity you choose for your business and the way in which you want to operate your business in practice; the allocation of functions, risks and assets among the various components of your international business operation; the combination of debt and equity (and variations thereof) you use to fund your international operation, the way in which you structure the intra-group transactions, and the transfer pricing policy you set in place for the inter-company flows of values, services and goods within your global enterprise. They all have both immediate and long-term tax consequences, some direct and obvious and some indirect and hidden. The international context magnifies the importance of careful tax planning because you must comply with complex corporate rules at both domestic and foreign level.

Advising clients on properly planning and structuring their international transactions, business operations and investments is an essential component of our international tax practice. We counsel clients on tax-efficient structuring of cross-border inbound and outbound investments, including the optimum use of tax treaties and holding company structures, intra-group financing and financial instruments tax arbitrage, permanent establishment and foreign tax credit issues, tax deferral and entity classifications.

Our services in this area include:

• global tax planning through IP holding companies, trading or services affiliates;
• choice of entity;
• optimal use of equity and debt financing;
• entity formation and registration;
• entity day-to-day management and operation;
• tax domicile and representation;
• investment planning and structuring and intra-group contractual arrangements and transactions;
• intra-group payments and withholding tax issues;
• transfer pricing policy, documentation and implications;
• corporate restructuring as business considerations or tax rules change;
• cross-border mergers and acquisitions, reorganizations, liquidations and dispositions;
• international tax reporting and compliance.