In today's global environment, individuals and businesses may operate across several countries and jurisdictions at the same time. Such activity may create exposure to international taxation, tax regulation and tax-law requirements, including reporting obligations, tax calculations, source-of-funds documentation and coordination between different jurisdictions.
These issues are particularly relevant to individuals and businesses involved in international commerce, eCommerce, overseas investments, foreign bank accounts, foreign companies, cross-border payments or dealings with financial institutions that require structured documentation regarding the origin and nature of funds.
What Is International Taxation?
International taxation concerns the way different countries may tax income, assets and business activity where more than one jurisdiction is involved.
Examples may include an individual residing in one country while maintaining a bank account in another, a company incorporated abroad but managed from a different jurisdiction, or income generated from international sources.
The central questions are: Where are you considered a tax resident, where was the income generated, and where may a reporting or tax-payment obligation arise?
Tax Residency
Tax residency is one of the central issues in international taxation because it may affect the scope of an individual's reporting and tax-payment obligations.
A person may have connections to more than one country. A proper assessment may therefore consider factors such as the person's centre of life, place of residence, business activities, economic interests, number of days spent in each jurisdiction, family connections, property ownership and other relevant circumstances.
Foreign Companies & International Business Activity
Conducting activity through a foreign company may raise questions concerning management and control, the jurisdiction in which income is generated, reporting obligations, profit distributions, banking arrangements, commercial operations, transaction documentation and the relationship between the company and its shareholders or controlling persons.
In such cases, the structure should be reviewed not only from a tax perspective, but also from the perspective of banking compliance, source-of-funds requirements, corporate documentation and any applicable reporting obligations.
Foreign Bank Accounts & Cross-Border Transfers
Holding a bank account outside one's country of residence or receiving funds from abroad may require supporting explanations and documentation.
Banks and financial institutions may request documents such as tax returns, agreements, source-of-funds evidence, corporate documents, financial statements, accounting records or professional confirmations.
CRS / FATCA & International Information Exchange
International frameworks exist for the exchange of financial information between jurisdictions, including CRS and FATCA.
These frameworks are designed to increase financial transparency and assist tax authorities in identifying relevant accounts, income and financial assets held across different jurisdictions.
Key Areas
- Tax residency and centre-of-life analysis
- Foreign income and tax-reporting obligations
- Foreign companies, management and control, and international business activity
- Foreign bank accounts and cross-border transfers
- International eCommerce and merchant activity
- CRS / FATCA and international exchange of financial information
- Source-of-funds reviews for banks and financial institutions
- Annual tax returns, asset declarations and income disclosure
- Tax-exposure review and structured reporting preparation
Accountants, Tax Advisers & Tax Attorneys
International tax matters may require coordination between several types of qualified professionals.
A certified accountant will generally deal with financial statements, calculations, tax returns, accounting records and reporting matters.
A licensed tax adviser may assist with tax reporting, compliance and planning matters within the scope of the adviser's professional authority.
A tax attorney may be particularly relevant where complex legal issues arise, including disputes with tax authorities, interpretation of tax law, international corporate structures, potential legal exposure or the need for a formal legal opinion.
Support in Matters Involving Banks & Financial Institutions
International tax matters often overlap with banking and financial compliance requirements.
Where a bank requests an explanation regarding the source of funds, corporate documents, tax returns, inheritance, gifts, foreign income or international business activity, the supporting information should be presented in a clear, consistent and properly documented manner.
How Matters Are Reviewed
- Initial collection of documents and review of the activity.
- Identification of the relevant jurisdictions, accounts, companies and income sources.
- Review of potential reporting obligations, tax exposure and missing documentation.
- Referral or coordination with an accountant, tax adviser or tax attorney where required.
- Preparation of a structured response for a bank, financial institution or relevant authority.
Where appropriate, matters in this field are handled with or through certified accountants, licensed tax advisers or attorneys specializing in tax law , according to the circumstances of the matter, the available documentation and the applicable law.
