Legal aspects of it industry investments in the united states slovakia march 7
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Legal aspects of it industry investments in the united states slovakia march 7
- 1. LEGAL ASPECTS OF IT INDUSTRY INVESTMENTS IN THE UNITED STATES The Ambassador of the United States of America in Bratislava, Slovakia and Roger Royse Royse Law Firm, PC California, USA March 7th, 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 6
- 7. INTELLECTUAL PROPERTY PROTECTION • Trademark • Copyright • Patent • Trade Secret 7
- 8. ACCOUNTING • Tax Accounting • Financial Accounting • US GAAP vs IAS 8
- 9. US BRANCH VS. US INCORPORATION US Branch US Incorporation Foreign Entity Foreign Entity US Branch US Sub 9
- 10. PERMANENT ESTABLISHMENT • Fixed place of business • Agents and Officers US PE 10
- 11. WHERE TO INCORPORATE Delaware California vs. vs. Nevada 11
- 12. CHOICE OF ENTITY • Limited Liability Company (LLC) • Limited Partnership (LP) • C Corporation • S Corporation • Statutory Trust 12
- 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) 13
- 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 17
- 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 19
- 20. EMPLOYEE RIGHTS • Minimum Wages & Maximum Hours • Non-Discrimination • Pension Rights – ERISA & Social Security • Health and Safety • Unemployment • Sexual Harassment • Mass Layoffs (WARN Act) 20
- 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 23
- 25. ANTI-DEFERRAL REGIMES SubPart F Effectively (Controlled Foreign Connected Income Corporations) Passive Foreign Transfer Pricing Investment Company 25
- 26. INTERNATIONAL E-COMMERCE Transfer Pricing Witholding Super Roylaty Anti-Deferral Regimes 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) 27
- 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 28
- 29. ACQUISITION Tax Employment Securities Corporate/Fiduciary Regulatory Issues (Exon-Florio, Hart Scott Rodino) Business issues (e.g. earnouts) 29
- 30. APPENDIX 30
- 31. APPENDIX 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 33