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Nevada Commerce Tax Return

Nevada Commerce Tax Return

Nevada enacted the state’s first business activity tax – the “Commerce Tax” in 2015. Opponents of this new tax regime tried very hard to repeal it but the efforts were unsuccessful.  The Commerce Tax is a gross receipts tax that is imposed on gross revenue sourced to Nevada.

Effective July 1, 2015, all taxpayers (including C corp, S corp, LLC, Parternship, Trust, and Individuals) engaged in business in Nevada are required to file Form TXR-030.01 by August 15, 2016 for the initial report cover year from July 1, 2015 through June 30, 2016.  A 30-day extension can be requested if additional time is required.  This gross receipt tax is imposed on Nevada source gross revenue in excess of $4 million, but the return filing requirement is nevertheless required for taxpayers with Nevada source gross revenue lesser than $4 million.

Tax Form: http://tax.nv.gov/uploadedFiles/taxnvgov/Content/Commerce/COM_Tax_Return.pdf

Instructions: http://tax.nv.gov/uploadedFiles/taxnvgov/Content/Commerce/Commerce_Tax_Instructions_June16_2016.pdf

FASB Decision to change Income Tax Accounting for Intra-entity Assets Transfers

FASB Decision to change Income Tax Accounting for Intra-entity Assets Transfers

FASB decided to require an entity to recognize income tax impact of an intra-entity asset transfer, other than an intra-entity asset transfer of inventory.

An intercompany sale or purchase of assets between entities in different taxing jurisdictions is a taxable event for the seller and a new tax basis for the buyer. Under current guidance under ASC 810 and 740, intra-entity balances, transactions, and profit or loss on assets remaining within the consolidation group be eliminated and the related tax impacts (i.e., tax payable on gain by the seller and deferred tax asset related to tax basis adjustment to buyer) are not recognized for US GAAP based financial statement purposes.

However, this non-recognition treatment will be eliminated from US GAAP, except for intra-entity asset transfer of inventory. This amendment is expected to be effective annual reporting periods beginning after December 15, 2017 for public entities and December 15, 2018 for all other entities. Early adoption is permissible.

Please see the attached FASB meeting minute below.

Intra-Entity Asset Transfers.pdf

Annual Report Requirements for Multinational Companies

Annual Report Requirements for Multinational Companies

Added to the already overwhelming various international information disclosure requirements, the IRS issued final regulations requiring large US multinational companies to file annual report disclosing certain information on a country-by-country basis related to their income and tax payments. The regulations are issued in connection with the BEPS implementation by the US government.

Generally, the filing requirement apply to US taxpayers that are the ultimate parent entities of multinational enterprise group with prior year annual revenue in excess of $850 million. The regulations are effective tax years beginning on or after July 1, 2016.

Click below link to see a copy of 1.6838-4 for your reference.

Final reg Country-by-country report.pdf

Proposed Section 385 Regulations

Proposed Section 385 Regulations

In April 2016, IRS issued proposed regulations under IRC section 385 which would dramatically change the treatment of intercompany debt issued among the members of certain corporate groups. The proposed regulations would apply to debt instruments issued on or after April 4, 2016 if finalize. Based on the President’s public remarks targeting corporate inversions, tax professionals expect IRS to finalize this package before the end of the Obama Administration. In general, the proposed regulations would:

• Treat as stock certain related-party interests that otherwise would be treated as indebtedness for federal tax purposes.
• Authorize the IRS to treat certain related-party interests in a corporate as indebtedness in part and stock in part for federal tax purposes.
• Established extensive documentation requirements in order for certain related-party interest in a corporation to be treated as indebtedness for federal tax purposes.

If the documentation and information requirements are not satisfied on a timely basis, then the instrument will be treated as equity for federal income tax purposes. The documentation and information that must be prepared on a timely basis to satisfy the requirements of this section include written documentation establishing:

• That the issuer has entered into an unconditional and legally binding obligation to pay on demand at one or more fixed dates,
• That the holder has the rights of creditor to enforce the obligation,
• That, as of the date of issuance of the instrument and taking into account all the relevant circumstances, the issuer’s financial position supported a reasonable expectation that the issuer intended to, and would be able to, meet its obligations pursuant to the terms of the instrument,
• Evidence of payments of principal and interest, and in the event payments were not made, the holder’s efforts to assert its rights as creditor.

    Take Away

When companies issue debt instruments to related corporations and partnerships, the instruments must have characteristics in form and in substance, and must fulfill documentation requirement provided under the 385 regulations to avoid any complicit with taxing authorities.

FATCA Reporting Requirement for Domestic Entities

FATCA Reporting Requirement for Domestic Entities

IRS has announced about the final regulations of 6038D requiring a “specific domestic entity” to make an annual disclosure of its specific foreign financial assets. This regulation is effective for taxable years beginning after December 31, 2015.

The final regulations extend the Form 8938 reporting requirement to specific domestic entities. A specific domestic entity is defined as a domestic corporation, domestic partnership or a domestic trust “formed or availed” of for purposes of holding (directly or indirectly) specific financial assets.

An entity is “formed or availed” for purpose of this regulation if below two conditions are met:

1. The entity must be closely held – 80% constructive ownership requirement.
2. At least 50 percent of income or assets are passive in nature.

It is anticipated that the IRS will modify current Form 8938 to incorporate entity filers. Please refer to the Regulation section 6038D-6 (attached below) or contact our office for further detail.

6038D Final Reg.pdf

Surprise tax bills for Foreign Companies

Surprise tax bills for Foreign Companies

많은 외국계 기업들이 국제 조세협약을 통해 미 연방과세 없이 미국내에 매출을 발생시키고 있는데, 이는 “고정사업장”(“ PE”) 이라는 중요한 요인에 의해 결정된다. 즉, “PE” 를 야기시키지 않는다면 미 연방 정부 과세로부터 보호를 받을 수 있다는 것이다.

하지만 미국내의 50개주는 연방 정부 세법에 준하지 않으며, 각자 주별로 독립된 세법이 존재한다. 이러한 이유에서, 기업들은 연방 정부에는 과세의무를 가지고 있지 않더라도 주 정부 차원에서는 과세의무를 가질 수있다. 보통 주 정부의 과세 기준은 재고, 종업원, 고정자산, 창고 혹은 사무실등의 요소들이 실제로 존재하는가에 따라 결정된다 (“Physical Presence Test”). 하지만, 최근 약 40개의 주들이 각자 독자적인 경제 넥서스 (Economic Nexus) 라는 기준을 도입하였다. 각 주의 독자적인 경제 넥서스 기준에 따라, 기업들의 매출이 경제적 연관성을 가지고 있다고 보여진다면, 상기 요소의 존재 유무와 상관없이 그들에게 과세의 의무를 가지도록 하고있다.

예를 들어, California의 경제 넥서스 (Economic Nexus)는 기업이 실질적으로 주 내에 사업장을 가지고 있지 않더라도 연간 매출액이 $500,000 이상이되면 과세의 의무를 가지고 있다고 본다.

만약, 어떤 외국계 기업의 미국 내 자회사가 미국내에서 발생한 소득만을 보고하도록 하는 Water’s edge election(WE) 을 통해 과세소득을 보고한다. 그리고, 이 외국계 기업과 미국 내의 자회사가 경제 넥서스 (Economic Nexus) 기준아래 경제적 연관성을 가진 이익을 창출하고, 서로 동일한 회사 (Unitary Relation) 로 간주된다면, 주 세무 당국 감사자들은 자회사의 WE를 통한 미국 내 과세소득 보고는 무효화 될 수 있다고 보고있다.

또한, 이런 경우, 전 세계에서 발생한 매출을 기준으로 하는 과세의무와 단지 WE 에서 계산된 과세의무의 차이는 클 수 있으며, WE 방식으로만 계산된 과세의무는 무시될 수 있다. 최근, California 주 세무 당국 감사 요원들은 이러한 문제에 관해 교육을 받았으며, 감사시, 이 issue 에 대해 적극적으로 조사하고 있다.

현 경제 넥서스 (Economic Nexus) 기준에서는, 많은 외국계 기업들이 상당한 납세의무, 가산세, 이자에 잠재적으로 노출되어있다. 따라서, 미국내 매출이 많은 외국계 기업들은 주 과세를 계산하는 과정에서 생기는 이러한 혼란을 피하기 위해서 경제 넥서스 (Economic Nexus)로 인한 세무영향 및 Water’s Edge Election 의 잠재적 영향을 평가해 볼 필요가 있다.

Increase Enforcement of IRC Section 6038B Disclosure Requirements

Increase Enforcement of IRC Section 6038B Disclosure Requirements

The IRS Large Business and International (LB&I) division publicly announced that it will increase enforcement of IRC section 6038B disclosure requirement. A formal training material has been distributed to field agents, and each entity needs to ensure that it is in compliance of the disclosure requirement. https://www.irs.gov/pub/int_practice_units/fen9433_01_12r.pdf

Here is a quick summary of IRC section 6038B.

Under IRC section 6038B, a disclosure must be made with annual return when:

(1) US person (i.e. individuals, corporations, estates and trusts) transfer property to a foreign corporation in exchange for sections 332, 351, 354, 355, 356 or 361 (mainly stock related exchanges – see additional info below);
(2) US person contributes property to a foreign partnership; or
(3) US person makes a distribution under 336 to a person who is not a US person

Failure to comply with the reporting requirement may result in a penalty equal to 10 percent of the value of transferred property up to $100,000. Please ensure that you file Form 926 to fulfill the 6038B reporting requirement when applicable.

332 – liquidation
351 - in exchange for stock
354 – Reorganization
355 – Distribution
356 – Additional consideration
361 – nontaxable distribution
721 – partnership contribution
336 – property distribution in a complete liquidation

If you have any question regarding this update, please contact our office.

The Protecting Americans from Tax Hikes (PATH) Act

The Protecting Americans from Tax Hikes (PATH) Act

President Obama signed into law The Protecting Americans from Tax Hikes (PATH) Act on December 18, 2015.  The PATH Act includes renewal of number of expired tax deductions, credits, and incentives as summarized below:

  • Research & Experimental Credit – Permanently extended retroactively January 1, 2015.  Certain eligible small business can now use the credit against alternative minimum tax liability and employer portion of their payroll tax liability.
  • Section 179 expense – The Act makes permanent the increased expensing limit to $500,000.
  • Subpart F exception for active financing income – The bill makes permanent the subpart F exception for certain foreign income derived in the active conduct of banking, financing, securities, or insurance business.
  • S-Corporation built-in gains tax recognition Period – The Law permanently reduced the S-corporation built-in gains recognition period from 10 years to 5 years.
  • 100% qualified small business stock gain exclusion – The Act makes qualified small business stock gain provision permanent.
  • Bonus depreciation – The bill extends bonus deprecation from 2015 through 2019:  50% bonus depreciation for assets placed in service in 2015 through 2017, 40% in 2018, and 30% in 2019.
  • Work opportunity tax credit (WOTC) – this hiring related tax credit is extended through 2019.
  • Solar energy investment tax credit – the extender renews investment tax credit for qualified expenditures on solar energy through 2019.
  • State & local sales tax deduction – individuals are allowed to deduct state and local sales taxes in lieu of income taxes permanently.
  • Earned income tax credit & child tax credit – the Act extends for individuals the earned income tax credit and child tax credit through 2017.

Please contact us for further detail of provisions included in the PATH Act.

Streamlined Offshore Domestic Procedure

Streamlined Offshore Domestic Procedure

한미 양 국간의 역외 탈세 방지를 위한 노력의 일환으로 시작된  FATCA (Foreign Account Tax Compliance Act)의 시행 연기는, 그 동안 각 과세 당국에 보고되지 않았던 해외자산과 수입에 대한 정보가 올해부터 대거 노출될 우려에 놓여있던 많은 한국 교민들에게는 (시민권자, 영주권자, 장기체류자, 주재원등) 이번 연기가 반가운 소식(?)이 아닐 수 없다.

하지만, 제도 자체의 실행을 전제로 시행 시기만 뒤로 미루는 이번 조치로 인하여 언제까지 마음을 놓고 안도할 수 만은 없는 노릇이다. 제도가 시행되면 그동안 보고되지 않았던 금융자산 및 소득에 대한 추적이 용이해져, 그 동안에 신고되지 않았던 탈루 소득과 해외자산에 대한 추가 징수는 물론 및 고의성 여부에 따른 형사 처벌의여부도 함께 문제될 수 있기 때문이다.

따라서, 한국에 금융 자산을 보유한 한국 교민들의 경우, 이번 연기를 기회로 음성화된 해외 금융 자산을 미리 양성화해 보고함으러써 추가적인 불이익을  막도록 할 필요가 절실하다.

이와 관련, 최근 미 국세청은 Streamlined Domestic Procedure 제도를 도입하여, 해외 미신고 금융자산에 대하여 비교적 저렴한 5% 의  Miscellaneous Offshore Penalty 만을  부과함을 전제로 양성화의 길을 열어놓고 있다.  적격자격에 따라 penalty가 전면면제될수도 있다. 물론 이러한  Penalty 가 전체 해외 금융 자산의 규모를 볼때 적은 금액이 아닐  경우가 많겠지만, 기존의 Offshore Voluntary Disclosure Program의 27.5%에 비해 과징세가 적고,  궁극적으로 한미 금융계좌 정보 교환법 아래에서는 미신고 금융자산이 과세 당국의 수면에 떠오를 수 밖에 없다는 점 및 자발적 신고가 아닌 과세 당국의 조사 결과 누락된 금융 자산이 포착될 경우, 기존의 미신고 소득에 대한 추가적인 세금 추징 및 기존 세금 신고에 대한  과징세  뿐만 아니라 고의성 여부에 따라 형사처벌의 발생 소지도  상존 한다는 점에서   Streamlined  Offshore  Procedure  을 적극 고려해 볼 만 하다.

무엇보다  Streamlined  Offshore  Procedure의 장점은 추후 한미 금융정보 자동 교환 협정에 따른  미 국세청의 해외 미신고 금융 자산의 추적과 소급적인 세금 추징, 예측할 수 없는 잠재적인 벌금과 형사 처벌의 근심과 걱정에서 한국 교민들을 단숨에 벗어날 수 있게 한다는 점에서  있다고 할 것이다.

피할 수 없다면 요행을 바라며 한없이 기다리기 보다는, 위기를 타개하게 위하여 능동적, 선재적으로 대처하는 자세가 무엇보다 필요한 때라고 판단된다.  Streamlined Offshore Procedure  절차에 대해 관심 또는 문의사항이 있으신 분들은 전문가나 저희 회계법인에 문의 하시길 바랍니다.