1. CROSSING THE ATLANTIC
U.S. Commercial Service of The American
Embassy
in Ljubljana, Slovenia
and
Roger Royse
Royse Law Firm, PC
California, USA The Slon Hotel
March 9th, 2012
IRS Circular 230 Disclosure: To ensure compliance with the requirements imposed by the IRS, we inform you that any tax advice contained in this communication,
including any attachment to this communication, is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of (1) avoiding penalties
under the Internal Revenue Code or (2) promoting, marketing or recommending to any other person any transaction or matter addressed herein.

2. THE U.S. MARKET
• 3.7 Million Square Miles
• GNP - $12 Trillion
• Free Trade Agreements
- NAFTA, CAFTA, WTO, OECD, APEC, OAS
2

3. U.S. STRATEGY
Non-US Parent
Company
3

4. U.S. STRATEGY
US Investor Non-US Investor
US Company Non-US Parent
Non-US Parent
4

5. GENERAL CONSIDERATIONS
Accounting
Employees Tax
Liability Protection US Business Transfer Pricing
Capitalization Intellectual
Regulatory Property
5

6. REGULATORY ENVIRONMENT
Open Competition vs. Consumer & Employee Protection
Interstate Commerce vs. Intrastate Commerce
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7. INTELLECTUAL PROPERTY PROTECTION
• Trademark
• Copyright
• Patent
• Trade Secret
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8. ACCOUNTING
• Tax Accounting
• Financial Accounting
• US GAAP vs IAS
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9. US BRANCH VS. US INCORPORATION
US Branch US Incorporation
Foreign Entity Foreign Entity
US Branch US Sub
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10. PERMANENT ESTABLISHMENT
• Fixed place of
business
• Agents and Officers
US PE
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11. WHERE TO INCORPORATE
Delaware California
vs. vs.
Nevada
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12. CHOICE OF ENTITY
• Limited Liability Company (LLC)
• Limited Partnership (LP)
• C Corporation
• S Corporation
• Statutory Trust
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13. TRANSFER PRICING
• Code section 482
• “Controlled" entities
• Arm's length standard
• Understatement penalties – 20% or 40%
• Adequate documentation (i.e. a transfer price study)
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14. TRANSFER PRICING
BUY-SELL MODEL
Parent • Buy Sell
Company
• Just-in-Time Inventory
System
Products
Services
US Customers
$
US Profit
14

15. TRANSFER PRICING
COMMISSION MODEL
Parent
Company
Products
Sales Services
Support
Services
US Customer
Sales & Product Support
15

16. IP HOLDING COMPANIES
Technology and
Parent Intellectual Property
Company
• Deferral
IP Holding • Worldwide Tax
Company Rate
Royalty • Withholding Tax
Issues
License
16

17. CAPITALIZATION
Parent
Company • Debt
• Deductible interest, but must
pay or accrue
• Must be repaid
Debt • “Deep Rock Doctrine”
$
Equity • Equity
• Not required to be repaid
• Dividends are nondeductible
• Thin Capitalization Rules
• Earnings Stripping
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18. EMPLOYEES
• Secondment Agreement
Parent
Company
• Limitations on Authority
Fee Employees • Tax Withholdings
Services
• Tax Gross-Ups
• Totalization
18

19. FOREIGN PERSONNEL
• VISA Requirement
•B-1
•H-1B
•EB-5
•EB-6 (pending)
• Non-Resident Alien or Resident for Tax
- Green Card
- Substantial Presence Test
- Treaty Definitions
• Estate and Gift Tax
- Domicile
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20. EMPLOYEE RIGHTS
• Minimum Wages & Maximum Hours
• Non-Discrimination
• Pension Rights – ERISA & Social Security
• Health and Safety
• Unemployment
• Sexual Harassment
• Mass Layoffs (WARN Act)
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21. INTER-COMPANY AGREEMENTS
• Shipping Terms
• Payment Terms
• Risk of Loss & Title Passage
• Insurance
• Most Favored Nation Clauses
• Price Protection
• Indemnity
• Warranty
• Trademarks & Marking
21

22. REAL ESTATE
SECTION 897 – FOREIGN INVESTMENT IN REAL
PROPERTY TAX ACT OF 1980 (FIRPTA)
22

23. WITHHOLDING TAXES
TREATY EFFECT
• Dividend
• Interest
• Royalties
• Service Income
23

24. TREATIES
OTHER
• Permanent Establishment
• Information Exchange
• Competent Authority
• Non Discrimination
• Limitation of Benefits
24

25. ANTI-DEFERRAL REGIMES
SubPart F Effectively
(Controlled Foreign Connected Income
Corporations)
Passive Foreign Transfer Pricing
Investment Company
25
25

26. INTERNATIONAL E-COMMERCE
Transfer Pricing
Witholding
Super Roylaty
Anti-Deferral
Regimes
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26

27. IP HOLDING COMPANY STRUCTURES
US Company
Domestic Company
US Sales Holds Technology
Contract R&D
Product sales
Local 100%
Technology License
Distributors
100% Tax Haven
Products
Local Sales
Service
Fees
Contract
Manufacturer Manufacturing
(or License)
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28. STATE TAX ISSUES
• Income Tax Nexus
• Sales Tax Nexus California
• IaaS, PaaS, SaaS Parent
• IP Holding
IP License
Transfer Back
Nevada IP
Holding Co.
Services Income
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29. ACQUISITION
Tax
Employment
Securities
Corporate/Fiduciary
Regulatory Issues (Exon-Florio, Hart Scott Rodino)
Business issues (e.g. earnouts)
29 29

30. APPENDIX
30 30

31. APPENDIX
31 31

32. 32

33. PALO ALTO LOS ANGELES SAN FRANCISCO
1717 Embarcadero Road 11150 Santa Monica Blvd., 135 Main Street,
Palo Alto, CA 94306 Suite 1200 12th Floor
Los Angeles, CA 90025 San Francisco, CA 94104
www.rroyselaw.com
www.rogerroyse.com
E-mail: rroyse@rroyselaw.com
Skype: roger.royse
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