Complex Tax Issues
International Tax Issues
Key Takeaway
Cross-border transactions involve treaty positions, transfer pricing, and Subpart F rules that create tax exposure in multiple jurisdictions simultaneously. International tax planning requires coordinating U.S. and foreign counsel from day one.
Cross-Border Taxation Is a Minefield Without the Right Guide.
The U.S. taxes its citizens and residents on worldwide income — regardless of where it’s earned. If you’re doing business internationally, employing foreign workers, receiving income from foreign sources, or investing abroad, you face a complex web of U.S. tax rules on top of foreign tax obligations.
Double taxation, transfer pricing, foreign tax credits, Subpart F income, GILTI, BEAT — the complexity is overwhelming. Mistakes in any of these areas can result in significant unexpected tax liability and penalties that far exceed the underlying tax.
We help clients structure their international operations for tax efficiency while maintaining full compliance with both U.S. and foreign tax obligations.
From Our Practice
In our practice, we’ve advised clients on cross-border transactions involving treaty positions, transfer pricing, and Subpart F income across dozens of jurisdictions. International tax planning requires coordination between U.S. and foreign counsel, and we serve as the quarterback for the entire engagement.
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What We Handle
International Tax Services
Foreign Tax Credit Planning
Maximize your foreign tax credits to avoid double taxation on international income. We plan credit utilization, carry-forward strategies, and treaty-based relief.
Controlled Foreign Corporations
Subpart F, GILTI, and Section 956 create complex tax obligations for U.S. shareholders of foreign corporations. We plan structures that minimize these inclusions.
Transfer Pricing
Intercompany transactions between U.S. and foreign entities must be at arm’s length. We design and document transfer pricing policies that comply with IRS requirements and minimize audit risk.
Tax Treaty Planning
The U.S. has tax treaties with dozens of countries. We structure transactions to take advantage of reduced withholding rates, permanent establishment rules, and treaty-based exemptions.
Inbound Investment
Foreign persons and entities investing in the U.S. face FIRPTA, branch profits tax, and withholding requirements. We structure inbound investments for tax efficiency.
Outbound Structures
U.S. businesses expanding internationally need structures that balance operational needs with tax efficiency. We design holding company and operating structures for global operations.
Understanding the Landscape
International Tax: Key Concepts
What is GILTI and why does it matter?
Global Intangible Low-Taxed Income (GILTI) is a U.S. tax on certain income earned by controlled foreign corporations that exceeds a 10% return on tangible assets. It was designed to prevent profit-shifting to low-tax jurisdictions, but it affects many businesses with legitimate international operations.
We help minimize GILTI exposure through entity structuring, high-tax exclusion elections, and foreign tax credit planning.
How do foreign tax credits prevent double taxation?
The U.S. allows a credit for taxes paid to foreign countries on the same income. This credit generally prevents being taxed twice on the same income. However, the credit has limitations based on income categories, foreign tax rates, and timing rules that require careful planning.
We maximize foreign tax credit utilization through entity structuring, income category management, and strategic timing of income and deductions.
What is transfer pricing?
When a U.S. company does business with a related foreign entity — buying, selling, licensing, or providing services — the IRS requires that the pricing reflect what unrelated parties would charge in similar transactions. This is the arm’s length standard.
Transfer pricing adjustments are one of the largest sources of international tax controversy. We design and document transfer pricing policies that meet IRS requirements and withstand audit.
Do I need to worry about FIRPTA?
If you’re a foreign person selling U.S. real property, FIRPTA imposes a special tax and withholding requirement. The buyer is required to withhold 15% of the gross sales price unless an exemption or reduced rate applies. We help foreign investors plan transactions to minimize FIRPTA exposure and recover excess withholding.
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Why Brotman Law
International Tax Expertise for a Global Economy
Comprehensive Knowledge
We handle both compliance and controversy — from structuring international operations to defending against IRS examination of international returns.
Treaty Expertise
We leverage tax treaties to reduce withholding, prevent double taxation, and optimize cross-border transactions.
Entity Structuring
The right holding company and operating structure can save significant international tax. We design structures tailored to your operations.
Audit Defense
International tax audits are complex and high-stakes. We defend against IRS challenges to foreign tax credits, transfer pricing, and CFC reporting.
Compliance Solutions
We establish reporting systems that keep you compliant across all international filing requirements — annually and ongoing.
Cross-Disciplinary Approach
International tax intersects with domestic tax planning. We optimize your total tax position, not just the international piece.
Learn More
International Tax Guides & Resources
International Tax Compliance
FBAR, FATCA, and international reporting requirements — our compliance practice.
Read the Guide →Free GuideBusiness Tax Optimization
Optimize your domestic and international business tax position together.
Read the Guide →Free GuideFree Tax Resources
Guides on international tax topics including foreign income and reporting obligations.
Read the Guide →Frequently Asked Questions
International Tax FAQs
I’m a U.S. citizen living abroad. Do I still owe U.S. taxes?
Yes. The U.S. taxes citizens on worldwide income regardless of where they live. However, the Foreign Earned Income Exclusion, Foreign Housing Exclusion, and Foreign Tax Credits can significantly reduce or eliminate your U.S. tax liability.
What is the Foreign Earned Income Exclusion?
For 2026, qualified U.S. citizens and residents living abroad can exclude up to approximately $130,000 of foreign earned income from U.S. taxation. You must meet either the bona fide residence test or the physical presence test to qualify.
Do I need transfer pricing documentation?
If your U.S. business engages in transactions with related foreign entities, you should maintain contemporaneous transfer pricing documentation. The IRS can impose penalties for failure to maintain adequate documentation, even if the pricing itself is correct.
What is Subpart F income?
Subpart F income is certain categories of passive or easily-movable income earned by controlled foreign corporations that must be included in the U.S. shareholder’s income currently — regardless of whether the income is distributed. Categories include foreign personal holding company income, foreign base company sales income, and foreign base company services income.
How does the GILTI high-tax exclusion work?
The GILTI high-tax exclusion allows U.S. shareholders to exclude CFC income that was subject to a foreign effective tax rate exceeding 18.9% (90% of the 21% corporate rate). This election can significantly reduce GILTI inclusions for CFCs in moderate-to-high-tax jurisdictions.
Can tax treaties override U.S. tax law?
Tax treaties can modify certain U.S. tax provisions — reducing withholding rates, modifying permanent establishment rules, and providing tie-breaker residency rules. However, under the ‘treaty override’ doctrine, later-enacted U.S. legislation can override treaty provisions.
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