Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski, and I’m back again with Danielle Supkis Cheek, a Director at PKF Texas and one of our Certified Fraud Examiners. Danielle, welcome back to the Playbook.

Danielle: Thanks for having me.

Jen: So, Houston’s an international city—we’ve had Frank Landreneau, one of our international tax directors on the program. There’s a lot of opportunity for fraud. What are you seeing in the international space?

Danielle: One of the concerns with the international space and fraud is actually the existence of the Foreign Corrupt Practices Act. It says you can’t bribe officials, which is a pretty obvious matter for international foreign officials.

Jen: One would think you don’t want to bribe people. So, what does the FCPA actually cover?

Continue Reading Understanding Fraud in International Business

Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski and I’m back again with Frank Landreneau, one of our International Tax Directors. Frank, welcome back to the Playbook.

Frank: Thanks, Jen. It’s great to be back.

Jen: Last time we talked about the GILTI tax. Remind our viewers, if they didn’t watch last time, what does it stand for?

Frank: What GILTI stands for – it’s an acronym for Global Intangible Low Tax Income, and the whole idea is that some level of foreign earnings should be taxed on a current basis in the U.S.

Jen: How does GILTI actually work?

Frank: First of all, you take a look at the foreign corporations’ earnings in its totality. And then, there are a bunch of carve outs, which you take a look at, and then that is the income that would be subject to the GILTI tax.

In theory, it’s supposed to work where a routine return, a normal operating return from normal operations, would be not taxed under GILTI. Any return so called “excess returns,” this would be returns earned through the fact that you’ve got special processes, intellectual property – that type of thing would be subject to the GILTI tax. That’s where the name comes from. There’s a lot of gyrations and calculations needed to get to that amount.

Jen: Are there particular industries that are impacted by this more so than others?

Frank: That’s a great question. Because of the way the Congress decided to spell out this legislation, it’s a mechanical test in how the computation works. Industries with very little or few fixed assets, such as service industries or distributing companies, would be hit more hard than manufacturing companies.

Jen: Would this be something that a company would consider maybe restructuring to a different structure?

Frank: There are some planning ideas. One thought would be for companies that are owned by individuals outright, or what’s common in the U.S. is ownership through pass through entities. Those entities are thinking perhaps putting a domestic corporate blocker entity between the individual owner and the form corporation. There’s some special considerations that are beneficial if you do that structure.

Jen: And does this take in effect already, because of the new tax reform?

Frank: Absolutely. It took effect technically from January 1, because the legislature was signed into law back in December.

Jen: Perfect. Well, we’ll get you back to talking a little bit more about some international tax reform.

Frank: Thank you. There’s plenty to talk about it.

Jen: All right, great. To learn more about other international topics, visit pkftexas.com/internationaldesk. This has been another Thought Leader Production brought to you by PKF Texas The Entrepreneur’s Playbook. Tune in next week for another chapter.

Jen: This is the PKF Texas Entrepreneur’s Playbook.  I’m Jen Lemanski, and I’m back again with Frank Landreneau, one of our international tax directors. Frank, welcome back to the Playbook.

Frank: Thank you. It’s great to be back.

Jen: So last time we had you here, you were talking a little bit about tax reform, how it impacts international companies. There’s a territorial tax system now. What is that?

Frank: That’s right. With tax reform we’ve replaced the worldwide tax system with what really is called a quasi-territorial tax system. And what that means is that while corporate shareholders can get dividends from specified core corporations tax free, there still are some hurdles that they have to go through such as dealing with this so-called GILTI tax that’s now in the law.

Jen: GILTI. So, I assume that’s not like “guilty,” but it’s probably an acronym?

Frank: It is, guilty as changed. It’s an acronym for Global Intangible Low Taxed Income, and the idea is that corporations will be taxed on foreign earnings when they operate in low tax jurisdictions.

Jen: So, what happens if they operate in high tax jurisdictions? Will they be taxed in that?

Frank: That’s actually a great question, because the name is deceiving that you’d only be taxed in lox tax jurisdictions. The interesting thing is that for corporate tax payers, they may still pay some tax if they’re in high tax jurisdictions, because of the fact that there’s certain business expense rules and you can only offset this GILTI income tax against 80% of foreign tax credits. So, you never really know where you end up. Now, for individuals, you don’t get this type of treatment for corporations, so that the actual tax bite is higher.

Jen: Okay, well I definitely have some more questions. We’ll get you back to talk a little bit more about the GILTI tax next time. Does that sound good?

Frank: Sounds great. Thank you.

Jen: Perfect, thank you. To learn more about other international topics, visit PKFTexas.com/internationaldesk. This has been another Thought Leader production brought to you by PKF Texas The Entrepreneur’s Playbook.

Jen:  This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemsamski, and I’m back with Frank Landreneau, one of our international tax directors. Frank, welcome back to the Playbook.

Frank: Well, thanks for having me. I appreciate it.

Jen: So, I’ve heard a little bit about a so-called toll or repatriation tax; can you explain to me what this is?

Frank: That’s right. Basically, under the new tax laws, it’s the change of regime of foreign earnings accumulated without being taxed until the earnings are brought back to going to more of an exemption system. So, the idea is we’re going to cleanse all foreign earnings by taxing it, and so anything that comes over as a repatriated dividend from this point forward most likely won’t be subject to tax.

Jen: What size company does that really affect? Is it middle market? Is it the big guys?

Frank: That’s a good question, because a lot of people think that tax reform was really only for the big guys. It really affects everybody who may have had a foreign corporation operating as an active trader business activity overseas.

Jen: So, for a middle market company, is it too late to do something about it or what’s the timeframe they need to be focusing on?

Frank: None at all. Actually, there are some considerations that need to be looked at. While tax liability on repatriated earnings need to have been made by April 15th in most cases for business entities, the final calculation most likely has not been determined. So now is the time to look at, “Have we been computing foreign earnings properly? Do we have our tax pools in order?” And while you may have paid a repatriation tax upon extension of your return that may not be the final tax you pay, so therefore there’s more that needs to be done before that final filing is made.

Jen: So, it sounds like they need to call you if they haven’t looked into it yet.

Frank: Absolutely. There’s definite things to look at. Like accounting methods that may have been done or taken or missed or different things like that, so there are things to look at.

Jen: Great. Well, we’ll get you back to talk some more international business with us soon.

Frank: Thank you very much. Appreciate it.

Jen: To learn more about other international topics visit PKFTexas.com/internationaldesk. This has been another Thought Leader production brought to you by PKF Texas Entrepreneur’s Playbook.

Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski, and I’m here today with Frank Landreneau, one of our International Tax Directors. Frank, welcome back to the Playbook.

Frank: Well, thanks, Jen. It’s great to be back again.

Jen: Last time we talked a little bit about tax reform—how it impacts international businesses—and so, what were they doing before and then what does the tax reform mean to them now?

Frank: The landscape has truly changed, because before, middle market companies with overseas operations were really trying to shift earnings to overseas operations to minimize tax. That’s commonly known as a deferral strategy. You don’t pay tax on that income until you repatriate it back to the U.S. That was the crux of all international tax planning, particularly for middle market companies.

Jen: Now, with the new reform, what is that going to look like?

Frank: Now, the tax planning has kind of turned on its head with a lot of different provisions of excluding foreign dividend income from taxation and making those changes permanent. Companies are now looking at what can we do to actually shift some production to the U.S. with lower tax rates and minimize exposure overseas, if that’s in their game plan.

Jen: Is there a timeframe where they need to get all their ducks in a row, or is it just kind of an ongoing type thing?

Frank: Now is the time to re-look at everything that they’re doing, whether it’s supply chain, entity structuring; there’s incentives. The new tax reform heavily favors the domestic corporation type of entity. It’s one area that entities that are doing business as partnerships and S corporations are really taking a look at, should we change entity types, or should we do a different type of entity for a particular type of activity, etc.

Jen: Well, that sounds great and I know we’ve got a lot more to talk about this. We’ll get you back next time.

Frank: Great, thank you.

Jen: Thanks, Frank.

Frank: I appreciate it.

Jen: To learn more about other international topics, visit pkftexas.com/internationaldesk. This has been another Thought Leader Production brought to you by PKF Texas the Entrepreneur’s Playbook. Tune in next week for another chapter.

Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski, and I’m here today with Frank Landreneau, one of our International Tax Directors at PKF Texas. Frank, welcome back to the Playbook.

Frank: Thank you, Jen. It’s great to be back.

Jen: So, tax reform has been in the news a lot. What are you seeing for middle market companies in the international space? How is it changing the way they do business?

Frank: Because of the incentives created through the tax reform, many middle market companies are starting to rethink all types of aspects of their operations, including their supply chain, areas of production, really refocusing on different areas of where they are operating and placing strategic activities.

Jen: And is that for inbound and outbound as well?

Frank: It is. Primarily, a lot of this tax reform was centered around US companies and how they do business in the US, but it does have incentives for inbound companies as well.

Jen: And what types of industries is this going to impact most? Is it manufacturing or is it all across the board?

Frank: It’s really going to impact everything across the board, because a lot of the crux of the tax reform has to do with the reduction of tax rates, and so, therefore, it will transcend industries and the entity types as well.

Jen: I know there’s going to be a lot more to talk about this and dive into with the international tax. Can I get you back?

Frank: Absolutely. I’d love to do that.

Jen: Perfect. Well, thanks. To learn more about other international topics, visit pkftexas.com/internationaldesk. This has been another Thought Leader Production brought to you by PKF Texas The Entrepreneur’s Playbook. Tune in next week for another chapter.

The U.S. Department of Commerce estimates that for every $1 billion in U.S. manufacturing exports, 5,210 jobs are supported and for every $1 billion in U.S. service exports, 7,033 jobs are supported.

As the top exporting metropolitan region in the U.S. ($131.5 billion in 2014), Houston’s exports to the global marketplace play a significant role in the global economy. Exports create jobs, generate income, profits and tax receipts for tens of thousands of Houstonians. These include petrochemical plants, truck drivers, warehouse operators, the three Class I railroads serving Houston, freight forwarders, industrial parks, custom brokers, shipping lines, dock workers, lawyers, bankers and accounting firms.

Read the more in-depth article, which ran in the Houston Business Journal, to learn more about how exports are fueling Houston’s economy.

The newest ideas, insights and perspectives you’ve come to rely on for your business are ready to be accessed any time, anywhere at LeadingEdgeMag.com/PKFTexas.
If you have topics you would like us to cover, please connect with us. As always, we enjoy receiving comments and feedback from our clients and the friends for our firm.

Spring Issue Highlights:

LEA Icon

Texas Business to Benefit From Panama Canal Expansion

The Panama Canal is undergoing a $5.25 billion expansion, and as the leading goods export state and metropolitan region in the US, Texas and Houston are well positioned to take advantage of the expansion. More…

LEA Icon
What You Need to Know About Compilations, Reviews and Audits to Obtain a Loan or Line of Credit

Many new or existing business owners seeking a loan or line of credit face may be required by the issuing financial institution to have a compilation, a financial review or an audit. We look at the differences between the three. More…
LEA Icon
Empowering Middle Management to Achieve Success

PKF Texas’ newest team member Andy Ray shares how he works with middle managers in order to allow C-level executives to focus is on the next big thing, instead of day-to-day operations and continuous improvement. More…

LEA Icon
Cubester® Chat: The Challenges Companies Face When They Recruit Young Professionals

“Mentor” is a popular buzzword in any business environment, and as an action and a title, it conveys a sense of trust and knowledge. Our Cubesters® take a look at the role of a mentor early in a career. More…

LEA Icon
Team First: The ingredients for building and maintaining winning teams in business   

No matter what industry you’re in or how your organization is set up, effective team-building is among the most important skills that any manager or executive can possess. More…

LEA Icon

Tips for Doing Business in Portugal

Portugal is a stable, developed country, but with recent economic upheaval. If you’re thinking about conducting business or running a company in Portugal, here are some things to remember. More…

 

Karen: This is PKF Texas Entrepreneur’s Playbook, I’m Karen Love, the host and Co-founder. Today I’m here with Frank Landreneau, one of our International Tax Directors and I’d like to welcome Frank back to the Playbook.

Frank: It’s wonderful to be here, thank you Karen.

Karen: Thank you. Well I’m very intrigued by the international business that you live and breathe on a daily basis and I really think the description that you’ve had of this international business life cycle is completely captivating so can you go into that a little bit more for us?

Frank: Absolutely, I’d love to do that. Well one of the things we’ve found when working with entrepreneurial clients here in Houston, particularly manufacturers and distributors, is that their first step is obviously to gain traction and market share here in the U.S. market. After they’ve been very successful in doing that we find that clients want to do more for their business and that typically means exporting their goods to other markets outside the U.S. They do that for a period of time and then we find that once they’ve gained some traction in particular jurisdictions they will often want to set up a more permanent office in that foreign location. So it does tend to migrate into a life cycle of business.

Karen: Well and it sounds like you know about those life cycles and can be of assistance to people in companies that are doing that.

Frank: Exactly. Well for example, one of the things that we do is we help them register in those foreign jurisdictions or set up a company to do business more effectively.

Karen: Wow, so there’s a lot more to it and we need to have you back to hear about that.

Frank: I’d love to do that.

Karen: Thank you. So for other international topics visit PKFTexas.com/InterntionalDesk. This has been another Thought Leader Production brought to you by the PKF Texas Entrepreneur’s Playbook.