Business Without Borders – International Business and Tax Planning Blog

Archive for the ‘Business and Tax Planning’ Category

The Government Accountability Office was asked to review the Internal Revenue Service 2009 Offshore Disclosure Program and issue a report on its findings.  The report, IRS Has Collected Billions of Dollars, but May be Missing Continued Evasion, GAO-13-318 (March 27, 2013), can be found here.  The report describes the nature of the noncompliance of taxpayers who participated in 2009 OVDP and addresses the extent to which the IRS has used the 2009 OVDP to battle taxpayer noncompliance in failing to file the FBAR and declare offshore income.  It also discusses the IRS’ continued efforts to bring noncompliant taxpayers into the U.S. taxing system.

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The American Tax Relief Act of 2012, signed into law by President Obama, breathed new life into a languishing Section 179 equipment expense deduction for businesses. Without ATRA 2012 (aka the “Fiscal Cliff Bill”), the Section 179 write off would have dropped from US$139,000 to $25,000 for 2013.  Not only does Section 179 now raise the limit to $500,000 for technology and other equipment purchases made in 2013, but it also applies retroactively to such purchases made in 2012. The beauty of the Section 179 deduction is that a business may deduct the full Section 179 amount, now $500,000, in one year rather than over the typical depreciation MACRS schedule for equipment/hardware which is five years. The total purchase price of technology (including software) and equipment that can be placed in service before a reduction in the $500,000 is triggered is now $2,000,000. Purchases beyond that amount is subject to normal depreciation rules. Both new and used equipment qualify for Section 179. Rules for determining eligible Section 179 Property can be found here.

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This is the second post in a series of posts intended to provide a high level overview of the business, structural, tax, employment and legal considerations for conducting business in India, written in collaboration with Manish Mishra, Executive Director of Meritas Indian member firm Khaitan & Co.

By no means do our posts address every aspect and consideration for conducting or seeking to conduct business in India. To address any specific business structure, joint venture, employment or consulting relationship, tax issue or dispute, we recommend that you contact your legal or tax advisor.  The information contained in this blog is provided on an ‘as is’ basis on the date of publication.

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This week in international business, we have an update on relations between Apple and China.  We also cover news on  efforts in Japan to achieve 2% inflation rate, impact of Puerto Rican bonds on the U.S., and revelations on who is taking advantage of offshore tax shelters.

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So, just when you thought Cyprus would fall below the radar for a while, today Cyprus Finance Minister Michael Sarris resigns.  Sarris’ resignation comes just days after the European financial community bucked up Cypriot banks with a 10 Billion Euro bailout. Some in the Cypriot political community believe that the deal should have come sooner and it remains to be seen whether Sarris has become the fall guy for the bailout taking as long as it did. Cyprus did get some concessions on an extension from three to five years to meet the fiscal conditions of the bailout, as well as the preservation of healthcare for 170,000 Cypriots. Cypriot government spokesman Christos Stylianides noted that the agreement “should have taken place a lot sooner, under more favourable political and financial circumstances.” But he noted that the situation in Cyprus is now “normalizing,” paving the way for the economy to get back on solid footing.

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While I post here from time to time on international economic and tax matters, most recently on economic and financial issues facing Cyprus and Greece, our Meritas affiliates are on the ground in those and many other EU member countries.  In the March 2013 Meritas Tax Newsletter, from their perspective, it seems that many European nations are refocusing on national tax priorities.  Meritas explains:

With a continuation of the general downturn in Government finances across much of Europe, greater efforts are being made to open up the tax base, to clamp down on evasion and reassess the most aggressive avoidance schemes. The result is new, more targeted legislation, say lawyers, at both the individual and corporate level.

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We previously wrote a blog post on the program the IRS launched in September of 2012 for certain taxpayers with offshore income who might qualify for a program which is an alternative to the Offshore Voluntary Disclosure Program. On February 27, 2013, the IRS issued an informative publication giving guidance on issues taxpayers considering entering the program for non-resident, non-filers should consider.

Of course, any potentially affected taxpayer should consult with their tax professional to see if their case fits within the narrow exceptions.

The Fed wrapped up its March 2013 meeting this afternoon with Fed Chairman Bernanke trimming the Fed’s economic growth forecast for the balance of 2013, although projecting an increase in jobs. Bernanke projected the economy to grow at a slower pace than previously projected, with the projection now at 2.3% to 2.8% by the end of the year. Bernanke also projected the unemployment rate to fall to 7.3% to 7.5% by the end of the year. The current unemployment rate is 7.7%.

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With the Federal Reserve Bank Chairman Ben Bernanke about to deliver his remarks following the conclusion of the Bank’s current two-day meeting, Cyprus is in turmoil … again.  Yesterday, the Cypriot parliament blocked a €10 billion bailout by the European Union by rejecting a tax on bank deposits that would help fund the rescue. Cypriot officials are in emergency talks with EU Central Bank, the European Commission, and the International Monetary Fund officials to develop a plan to keep Cyprus from falling off the economic cliff.  Cyprus promised to raise to raise €5.8 billion to prevent the country’s debt from exploding.

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BERNANKE AND HIS FED COLLEAGUES MEET TODAY AND TOMORROW – WILL QE AND INTEREST RATE SUPPRESSION CONTINUE?  HAVE A BANK ACCOUNT IN CYPRUS, WATCH OUT!

The U.S. economy continues to recover and grow, but probably not fast or solid enough for Bernanke and the Fed to table its Quantitative Easing (QE) policy or allow interest rates to rise.  The Fed seems to believe that notwithstanding the growth in the job market and modest recovery in the housing sector that the economy continues to be weak behind the obvious numbers.

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