May 2015 | Al Sonander, Head of the U.S. Inbound Tax Services Group, KPMG LLP, discusses some of the key tax issues that companies investing in the United States need to consider prior to investment.
Hi, my name is Al Sonander. I'm a tax partner in the New York practice office and I also lead the U.S. Inbound Tax Network. Prior to joining KPMG, I was the Global Head of Tax Strategy for Thomson Reuters and was also a board member for the Organization for International Investment, so I have spent a lot of years of my career focused on inbound tax issues.
I think some of the important issues for non-U.S. companies looking to invest in the U.S. are getting that capital structure right at the starting point of whatever transaction that they're looking at. In addition, I think it's very important that they focus on the intellectual property ownership. The U.S. being such a high tax rate jurisdiction, it's very important not to let intellectual property that can be owned outside the U.S. be taxed within the U.S. taxing map.
The challenges that are presented from the capital structure that a non-U.S. company employs in the U.S. will be defending it on audit, and as far as the intellectual property, that's not something that you can just do once and walk away. It requires constant monitoring and making sure that you grow with the structure as the business changes and evolves, that the company addresses how those changes are occurring and make sure that the tax strategy still makes sense.
The top three things that should be considered when you invest in the U.S. is making sure that that capital structure is appropriate, the right level of debt versus equity because that will drive the financial return from the investment in the U.S. In addition to that, the ownership of the intellectual property, it's very important to get that right at the outset, and we know that the IRS has come out and said that inbound investment is going to be a particular area of focus for the IRS, and as a result very important that companies adequately document and make sure that they maintain that documentation so that they can support it on audit.
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The above information is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser