Cross-Border Transactions

Cross-border transactions include both outbound and inbound transfers of property, stock, or financial and commercial obligations between related entities resident or operating in different tax jurisdictions.

Examples of cross-border transactions include:
  • Transfers of stock and assets in corporate reorganizations described under Code §§367-368 – including identification and quantification of the tax liability triggered or tax attributes affected by these transactions

  • International financing transactions and financial products – analyzed under U.S. debt/equity or earnings stripping rules

  • Transactions to achieve appropriate tax reductions afforded by the U.S. income tax treaty network

  • U.S. tax profiles and planning with respect to investment in the U.S.

The Firm practice emphasizes optimization and utilization of favorable tax attributes, such as N.O.L.’s.

Sample Representations

  • We planned and analyzed inbound financing of a U.S. business acquisition. This involved application of U.S. debt/equity rules and advice on meeting U.S. tax criteria for debt rather than equity treatment. Once debt treatment was assured, advice was given in order for the debt to qualify for the “portfolio debt” exemption from U.S. withholding tax obligations on the part of the debtor.

  • We advised a U.S. entrepreneurial group with respect to privatization of a publicly traded foreign corporation. We planned for appropriate foreign host country structuring and related entity classification elections to allow for favorable tax treatment of dividend flows from the overseas business operations. We also advised on deferred compensation planning with respect to investment advisory and management fees.

  • We analyzed a proposed international swap financial arrangement for an alternative investment and were able to structure it as a “notional principal contract.” This allowed the U.S. payor to claim an ordinary deduction with respect to payments made under the contract. It also characterized the payments received by the foreign recipient as foreign income, which is not taxable under U.S. tax law. In conjunction with this planning, we worked with outside valuation experts to arrive at an arm’s length value for all elements of the contract, as required under U.S. tax law transfer pricing rules.

  • We advised a European-based group on application of the limitation on benefits (L.O.B.) provisions of various income tax treaties. This enabled interest payments to be made without U.S. withholding tax to an affiliate able to benefit from existing operating losses. The parent company was resident in a country having an atypical L.O.B. provision in its income tax treaty with the U.S., and the provision limited derivative benefits under the income tax treaty applicable to the European group member.

  • We advised a European group operating a chain of restaurants outside the U.S. on a method to expand operations to the U.S. through franchise arrangements. The plan took into account U.S. domestic tax rules applicable to intangible property, U.S. income tax treaty provisions related to royalty payments, L.O.B. provisions of U.S. income tax treaties, and country-specific rules for intangible property “box companies” in Europe.

  • We advised an Asian-based group of companies on a plan to provide certain computer-based services to clients in the U.S. We rearranged the principal-client structure in order to reflect economic substance and took advantage of U.S. tax rules regarding the performance of services outside the U.S. by a foreign corporation.