Tax Planning Strategies for Foreign Inbound Investment

by | Jul 29, 2019 | PKF Texas - The Entrepreneur's Playbook®

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

Frank: Thanks for having me again. It’s a pleasure.

Jen: We’ve covered all sorts of international topics, but one thing we haven’t touched on is tax reform for tax planning strategies for multinational companies coming inbound.

Frank: That’s right. The rules have changed and tax reform, you know, the biggest development is the change in our tax rate for corporations since most inbound companies do business as a corporation and we’ve gone to 21% tax rate. There are revised rules for interest expense deductions and new rules regarding our net operating loss carryforwards.

Jen: Is there any kind of things people should be aware of for a financing strategy for when they’re coming inbound?

Frank: That’s a good question. In fact, that’s a question that is often overlooked, because, traditionally, inbound companies start out with advances that may not be paid back. Or they leverage through, totally through debt exclusively, and try to strip out earnings from the U.S. company. With tax law changes, that’s really not the best strategy, because you could be trapped – those expenses could be trapped.

Jen: Oh gosh. Now, with the debt financing, are there some common mistakes that you see that these companies are making?

Frank: Yeah, the most common thing is not formalizing their debt. So, for example, they may make short-term loans that end up becoming long term loans that don’t accrue interest, because they didn’t really think of them as long-term and don’t have the loan documentation. And so, one of the issues that comes along with it is, what is it? Is it debt or equity?

Jen: Right. Interesting. Well, I think we’ll need to get you back to talk a little bit more about some more mistakes, because I think there are a few more, aren’t there?

Frank: Yeah, there are a few more.

Jen: All right, well, we will get you back.

Frank: Thank you.

Jen: Thanks, Frank. I appreciate it. To learn more about other international topics, visit This has been another Thought Leader Production, brought to you by PKF Texas – The Entrepreneur’s Playbook. Tune in next week for another chapter.


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