doing business in the usa 2015

UNITED STATES OF AMERICA 2015 DOING BUSINESS IN THE

WeiserMazars LLP is an independent member firm of Mazars Group.

DOING BUSINESS IN THE UNITED STATES OF AMERICA2

TABLE OF CONTENTS

Entering The American Market

Foreign Business Restrictions

Investment Incentives

Work Permits and Visas

Taxation

Federal Taxation of Corporations

Employment

Audit and Accounting

About WeiserMazars

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WeiserMazars – Building a Bridge to Better CommunicationDoing business in an international context can be daunting. WeiserMazars serves as a bridge between the United States and the global markets, making doing business easier and less risky for our clients. We connect overseas clients with American professionals and service the tax, transaction services and financial reporting needs of foreign entities based in the U.S.

DOING BUSINESS IN THE UNITED STATES OF AMERICA 3

ENTERING THE AMERICAN MARKET

Entering the American market can be achieved through either the purchase of an existing entity (the “buy” option) or the creation of an entirely new one

(the “build” option). Buying can be attractive because the purchased company will have already incurred most of the start-up costs and risks. While generally reflected in the acquisition price, the buyer acquires a going concern with all of its work force and assets in place.

Having senior management in place and being integrated into a particular community can be of significant benefit in dealing with cultural barriers to foreign investors entering the U.S. economy. When opting to “build,” the market entrant usually already has a strong existing brand and business structure, which it is more advantageous to leverage. Other viable ways to enter the U.S. market with less initial investment include joint ventures or alliances with American companies.


Location: Northern America

Capital City: Washington, DC (-5 GMT)

Chief of State: President Barack H. Obama

Head of Govt.: President Barack H. Obama

Currency: United States Dollar (USD)

Major Languages: English 82.1%, Spanish 10.7%

GDP $16.72 trillion

GDP Growth 2.2%

Inflation 1.6%

Population 316M

GDP per Capita $52,800

World Bank Ease of Doing Business Rank 4

FOREIGN BUSINESS RESTRICTIONS Foreign investors in the U.S. face little in the way of government regulations or restrictions on their investment and there are relatively few controls over foreign exchange transactions.

Approval by the U.S. Department of the Treasury or other authorities is not required for foreign persons to make an investment. A foreign-owned business may invest capital, pay interest and royalties, and repatriate profits and capital to a foreign investor without government limitation or authorization, subject to certain tax requirements. The U.S. government does, however, monitor foreign exchange transactions of U.S. and foreign persons, generally for amounts greater than $10,000. Foreign investors, generally, enjoy equal access to federal and state investment incentives and benefits.

THE UNITED STATES AT A GLANCE


The regulations and restrictions that do exist are limited to specific activities and interests. Major items for consideration are:

• The1988OmnibusTradeandCompetitivenessAct— This Act gives authority to the President of the United States to review certain acquisitions, mergers, and takeovers of U.S. businesses by foreign persons when there is credible evidence that the foreign person might take action that threatens to impair U.S. national security.

• TheInternationalInvestmentSurveyActof1976 — Requires foreign-owned enterprises to make periodic, direct investment reports to the U.S. Department of Commerce when 10% or more of certain enterprises are owned by a foreign person.

• TheHart-Scott-RodinoAntitrustImprovementsActof1976 — For both foreign and U.S. acquirers, this Act requires that, prior to a merger, notification be filed with the U.S. Department of Justice and the Federal Trade Commission. The notification requirements are subject to certain size of party thresholds. The filing thresholds as of February 24, 2014, will generally be met if one party to the transaction has total assets or net sales of $151.7 million or more and the other party to the transaction has total assets or net sales of $15.2 million.

• ForeignInvestmentinRealPropertyTaxAct — Foreign persons investing in real estate are required to make certain reports to U.S. tax authorities under this Act. In addition, the acquisition and transfer of agricultural land must be reported to the U.S. Department of Agriculture. Real estate acquisitions may also give rise to other state or local reporting obligations.

Ownership by foreign persons in certain industries is restricted or regulated by the federal government or some state governments. Restricted industries include defense, banking, insurance, radio and television broadcasting, U.S. air or water transportation, and fishing. Foreign buyers considering investment in any of these industries should consult with U.S. legal counsel regarding these restrictions.

INVESTMENT INCENTIVES

The tax credits and incentives at the federal, state and local level are too numerous and various to list. All of them focus on development of productive capacity through investment in capital assets and workforce development. Programs that create or retain jobs, or develop the skills of the workforce (training) can attract significant grants and credits. Most local governments in the U.S. are funded through property and sales and use taxes – very often, incentives can take the form of abatement of or exemptions from these taxes. Some state and local programs are statutory and can be claimed without significant processes, others may be negotiated and require advance approval. It is particularly important that you enter into negotiations in advance of reaching your decision to invest.


U.S. federal tax incentives are not as varied. There are several that focus on specific activities like research and development, alternative energy and energy efficiency, and manufacturing. Some of the more significant include:

DomesticProductionActivitiesDeduction —The American Jobs Creation Act of 2004 created a tax deduction for domestic production activities. The deduction is based on 9% of the lesser of qualified production activities income or taxable income. In general, the amount of deduction allowable for any taxable year is limited to 50% of W-2 wages paid by the taxpayer.

Research&ExperimentationTaxCredit— Also known as the R&D Tax Credit is a general business tax credit for companies that incur R&D expenses in the United States. The R&D Tax Credit was originally introduced in the Economic Recovery Tax Act of 1981. Since the credit’s original expiration date of December 31, 1985, the credit has expired eight times and has been extended 14 times. The current extension expires on December 31, 2013, but is likely to be extended as part of budget resolutions.

TheR&DTaxCreditallowsforthreealternativecalculationmethods — The Traditional Credit Calculation and Start-Up Credit Calculation provide a credit of 20% of the taxpayer’s qualified research expenditures that exceed a calculated base amount. The Alternative Simplified Credit is equal to 14% of the taxpayer’s qualified research expenditures that exceed a calculated base amount. Regardless of calculation method, the base amount cannot be less than 50% of the taxpayer’s current year qualified expenditures. Modified Accelerated Cost-Recovery System - Under the federal Modified Accelerated Cost-Recovery System (“MACRS”), businesses may recover investments in certain property through accelerated depreciation deductions.

WorkOpportunityTaxCredit — The Work Opportunity Tax Credit (“WOTC”) is a Federal tax credit incentive to private-sector businesses for hiring individuals from 12 target groups who have consistently faced significant barriers to employment.

Foreign-TradeZones— A foreign-trade zone (“FTZ”) is a designated location in the United States where companies can use special procedures that allow delayed or reduced duty payments on foreign merchandise, as well as other savings. The primary benefits of a Foreign Trade Zone are:

• DutyExemption—No duties or quota charges on re-exports. • DutyDeferral—Customs duties and federal excise tax deferred on imports. • InvertedTariff—In situations where zone production results in a finished product that has a lower duty rate than

the rates on foreign inputs (inverted tariff), the finished products may be entered at the duty rate that applies to its condition as it leaves the zone.

• LogisticalBenefits—Companies using FTZ procedures may have access to streamlined customs procedures. • StateandLocalBenefit—Foreign and domestic goods held for export are exempt from state/local inventory

taxes. FTZ status may also make a site eligible for state/local benefits which are unrelated to the FTZ Act. There are also non-tax financial incentives related to subsidized or guaranteed financing for which investors may qualify.


WORK PERMITS AND VISASU.S. immigration law is a major concern for non-resident aliens wishing to do business in the country. Administered by the

Department of Homeland Security, the Immigration and Nationality Act contains the body of law relating to the entry of

aliens. Under immigration law, an alien is any person who is not a citizen or a national of the United States.

Legally speaking, all visitor applicants are presumed to be applicants for immigration. To qualify for a nonimmigrant visa, ap-

plicants must state the purpose and specific length of their trip and show that they have binding ties outside the U.S. There

are two broad categories of visa – temporary nonimmigrant and permanent resident.

The following summarizes the significant aspects of the U.S. federal income tax system as it relates to foreign-based entities

doing business in the U.S. Taxation of foreign individuals and of businesses at the state and local level are extremely

complex and should be discussed with your professional advisor. For purposes of this discussion, we assume a foreign-based

multinational that is subject to U.S. income tax. The question as to when a foreign entity is subject to U.S. income tax is a

matter of U.S. domestic law and, where applicable, the treaty between the U.S. and the country within which the foreign

based entity is resident. U.S. income tax treaties do not, generally, apply to state and local tax jurisdictions.

Foreign-based entities doing business in the United States have to decide whether they want to operate through an entity

that is treated as a branch, partnership, or corporation for U.S. federal income tax purposes. A joint venture can be operat-

ed in either the partnership or corporate form. An attractive aspect of the U.S. income tax system is that all of these entity

forms can provide limited liability protection even for individual investors. This is effectively accomplished through the use

of a Limited Liability Company (“LLC”) that gives the investor the option to elect its status for federal income tax purposes.

TAXATION

A Visas → Government & Diplomatic Officials

B Visas → Temporary Visitors for Business or Tourism

E Visas → Treaty Traders or Treaty Investors

F, J & M Visas → Students, Interns, Scholars, Teachers

H-1 B Visas → Professionals in a “Specialty Occupation”

L Visas → Intra-company Transferees

An alien under a permanent resident visa is allowed to lawfully work and live in the United States for an indefinite period of time. There are three primary ways to obtain this status: through a job opportunity from a U.S. company, through a substantial investment or through a relationship with a U.S. citizen.

TEMPORARY NONIMMIGRANT PERMANENT RESIDENT VISAS


Essential Entity Characteristics

Limited Liability Company Branch Joint Venture Corpora�on Partnership Sole Proprietorship

Business Owned by Length of Existence

Liability

Management

Income Taxes

Audit

Legal Requirements

Raising Capital

Dissolu�on

1 person ownership Partners Members Shareholders

When owner dies or ceases business Depends on partnership

agreement Depends on State Perpetual

Limited to stock investments Unlimited Partners equally liable

(Unlimited) Limited

From the unique owner From the partners Stocks & various instruments From the members

Paid by the owner Paid by the partners except

if under corporate tax system

Paid by the corpora�on Paid by the Members

Easy Easy Complex Complex

Owner Partners Board of Directors Members or Elected Manager

No No No No No No unless subject to SEC Regula�ons

Numerous A Few A Few A Few

Partners

Terminated when goals are achieved

Similar to that of a Partnership






Parent Company

Parent Company

PPaid by Parent Company

on Global Income + Branch Profits

A Few

Perpetual

Easy

From the parent company

FEDERAL TAXATION OF CORPORATIONS Corporations are taxable business entities taxed on net profits at the corporate level. A domestic corporation is one created or organized under the laws of the United States, any constituent state or the District of Columbia. Domestic corporations are subject to taxation on their income worldwide. A foreign corporation is one created or organized in any other jurisdiction. A foreign corporation is subject to taxation based on its U.S. activities.


[Gross Income Exempt Income Deduc ons] Applicable Tax Rate [Gross Income Exempt Income Deduc ons]

Taxable Income

Broadly defined as income from any source

Interest, deprecia�on, Domes�c Product Activi�es, other business expenses

FEDERAL TAX

0 $50,000 75,000

100,000 335,000

10,000,000 15,000,000 18,333,333

Taxable Income Over:

$50,000 75,000

100,000 335,000

10,000,000 15,000,000 18,333,333

-

But not Over: 0.00 +15%

$7,500 + 25% 13,750 + 34% 22,250 + 39%

113,900 + 34% 3,400,000 + 35% 5,150,000 + 38%

35%

Tax Is 0

$50,000 75,000

100,000 335,000

10,000,000 15,000,000

0

Of the Amount Over:

0

$50,0 000

7577 ,5 000

100,0 000

335,5 000

10,0 000,0 000

15,5 000,0 000

18,8 333,3 333

TaTT xable IncomeOver:

$50,0 000

7577 ,5 000

100,0 000

335,5 000

10,0 000,0 000

15,5 000,0 000

18,8 333,3 333

-

But not Over:

0.00 +15%

$7,77 500 + 25%

13,3 7577 0 + 34%

22,2 250 + 39%

113,3 900 + 34%

3,3 400,00 000 + 35%

5,5 150,00 000 + 38%

35%

TaTT x Is

0

$50,0 000

7577 ,5 000

100,0 000

335,5 000

10,0 000,0 000

15,5 000,0 000

0

OfO the AmountOver:

The Internal Revenue Service (IRS) is authorized to allocate or apportion income, deductions, or credits between or among related taxpayers whenever it is determined that non-arm’s length dealing has distorted the income of any of them. Parties that are under common control must therefore deal with each other on a basis that achieves the same economic results as if they were not under common control. Thus, when a foreign-based multinational sells inventory to its corporate subsidiary in the United States, it must do so at a price that reflects what an unrelated party would pay, if the product were sold to that party on the same terms.

A federal income tax return of a corporation must be filed within 2-1/2 months after the end of its taxable year. For partnerships and individuals, the income tax return must be filed within 3½ months after the year end. Automatic extensions of the time allowed to file such returns are routinely granted for up to six months.

U.S. tax returns are potentially subject to audit. Not all tax returns are audited, and the level of audit can vary. The IRS can spot-check returns for specific issues. If the IRS has audited a return, it issues a revenue agent’s report of proposed changes. Taxpayers who disagree with a change in their reported tax liability are allowed to have an independent review and several levels of appeal through the courts.

Assessment of any internal revenue tax must generally be made within a three-year period, beginning with the later of the date a return is filed or the date the return is due. The tax generally must be assessed within the succeeding three-year period after that date. This general period of limitations on assessments applies to interest and penalties as well as tax. If no return is filed or if the return is fraudulent, there is no statute of limitations on assessment and collection of the tax as well

Corporate Income Tax Calculation


EMPLOYMENT

Employment RegulationDepartmentofLabor— The DOL has the “purpose to foster, promote and develop the welfare of wage earners of the US, to improve their working conditions and to advance their opportunities for profitable employment.”OccupationalSafety&HealthAdministration — OSHA deals with workplace safety and health threats, including toxic chemical exposure, excessive noise levels or unsanitary conditions. It issues and enforces standards to prevent work-related injuries, illnesses and deaths.EqualOpportunity— U.S. Law prohibits discrimination on the basis of race, color, sex, age, religion or national origin. Equal pay must be provided to workers performing the same job.Immigration— Non U.S. citizens/permanent residents may need to apply for an Employment Authorization Document (EAD)

Employee CompensationMinimumWage— The federal Fair Labor Standards Act mandates a Minimum Wage of $7.25 per hour and a 40-hour work week. Any hours in excess must receive an overtime pay rate of 1.5 of the regular rate.LaborUnions — In the U.S., labor unions are legally recognized representatives of workers and are active in many industries. Their primary role is to collectively bargain on their members’ behalf in regards to wages, benefits and working conditions. UnemploymentCompensation — Workers who lose their jobs are often eligible for compensation at the time of their unemployment.UnemploymentInsurance— UI programs provide benefits to eligible workers who become unemployed.ExecutiveCompensation— Executive compensation centers on: base salary, short-term incentives, long-term incentives, retirement and deferred compensation plans, and employee benefits and perquisites.

Social SecuritySocialSecurityBenefits— These benefits are paid to a worker upon his or her retirement, disability or death. The benefits are funded by taxes levied on employers, employees and the self-employed.TotalizationAgreements— The U.S. has entered into international social security agreements with several countries. These provide relief from double social security tax – ensuring that only one country will impose its social security tax on an individual. Benefits for the individual are also totalized.

Medicare MedicareBenefits — These include hospital, medical and drug insurance. MedicareTax — 1.45% on both the employer and employee.

Employment TaxationFICA — 6.2% on both the employer and the employee, up to the FICA cap.SECA— For self-employed people, with earnings greater than $400. Rate is 15.3% up to FICA cap, and 2.9% above.


AUDIT AND ACCOUNTINGAll publically-traded companies registered with the SEC are subject to certain audit and accounting requirements including being legally required to disclose financial results on a periodic basis in financial statements filed with the SEC. Public companies’ year-end financial statements must be audited, and their quarterly financial statements reviewed by an independent, registered public accounting firm.

Annual Audited Financial

Statements

Balance Sheet

Equity Statements

Cash Flows

Income Statements

EquityStatements

BalanceSheet

CashFlows

IncomeStatements

Audited Financial Statements must be issued by an independent accoun�ng firm registered with the Public Company Accoun�ng Oversight Board (PCAOB)

Interim Unaudited Financial

Statements Balance Sheet

Income Statements

Interim Unaudited Statements of income & cash flows for any

stub period

Selected Financial Informa�on S-K Item 301

If proceeds from sale of debt or preferred equity used to repay outstanding debt or to re�re

other securi�es and change in ra�o > 10%, pro forma ra�o for the most recent fiscal years and

interim period

Selected income statements & balance sheet data for each of

the past 5 years – Fiscal year and any interim period included

A foreign private issuer is any issuer incorporated or organized under the laws of a jurisdiction outside the United States, unless more than 50% of its outstanding voting securities are directly or indirectly owned of record by U.S. residents and any of the following apply:

— The majority of its executive officers are U.S. citizens or residents— More than 50% of its assets are located in the U.S.— Its business is administered principally in the U.S.

KEY DIFFERENCES

• 1st time registration with SEC submission of state-ments on a confidential basis to SEC

• Financial Statements prepared under U.S. GAAP, IFRS, or Local GAAP

• No requirement to file quarterly statements with the SEC if home country reporting requirements do not call for them

• Financial Statements can be in any currency

• No submission on a confidential basis for a 1st time registration with SEC

• Financial statements prepared under US GAAP• Requirement to file quarterly statements with the

SEC• Financial Statements in USD

FOREIGN PRIVATE ISSUERS: DOMESTIC US ISSUERS:

WeiserMazars LLP is an independent member firm of Mazars Group.

CONTACTLouis Osmont Partner Head of International Services WeiserMazars LLP 212.375.6944 [email protected]

Since 1921, WeiserMazars LLP has provided a unique combination of foresight and experience when fulfilling client needs in accounting, tax and advisory services. Named a top U.S. accounting firm by Accounting Today, WeiserMazars’ team of professionals brings technical expertise, industry insight and an integrated, customized approach to dealing with the critical issues and competitive challenges facing the firm’s clients. Whether on the local level or internationally, the firm guides clients through their day-to-day operations and works with them to ensure they have the right financial structure in place to meet their business goals.

WeiserMazars’ team of over 100 partners and approximately 650 professionals is based out of eight U.S. offices, Israel and the Cayman Islands. As the independent U.S. member firm of the Mazars Group – a prominent international accounting, audit, tax and advisory services organization with over 14,000 professionals in more than 70 countries on six continents – WeiserMazars represents clients of all types, including owner-managed businesses, complex, multi-national organizations and high net worth individuals in a multitude of industries. - See more at: http://www.weisermazars.com/about-us#sthash.oMynNndO.dpuf

ABOUT WEISERMAZARS

Gene FerraroPartner Head of International Tax ServicesWeiserMazars [email protected]

doing business in the usa 2015

Economy & Finance