Foreign Corrupt Policies Act: Are you in compliance?

by AJ Iafrate on January 16, 2017

The Foreign Corrupt Policies Act (FCPA) prohibits companies from bribing foreign officials. While it’s been in place since 1977, the Securities and Exchange Commission and the Department of Justice have accelerated the pursuit of companies in violation. Consider the recent Biomet case that resulted in a $30 million penalty — and they’re not the only company under the microscope. At the close of 2016, there were 81 companies subject to ongoing and unresolved FCPA-related investigations. This begs the question, is your company in compliance?

Although avoiding bribes may seem like a common-sense measure, as U.S. companies increase their worldly influence, the U.S. government has expanded the definition of what can be considered bribery. In addition to obvious violations, companies can be penalized for activities like filling prestigious positions with unqualified candidates who are related to government officials or purposefully doing business with known prohibited foreign companies.

With a lot of room for interpretation, if your company has middle-market operations abroad, it’s important that you make FCPA monitoring a high priority. At minimum, companies should have a written FCPA policy that’s shared and explained to employees. This is particularly important in countries with state-owned enterprises that acquire private businesses. FCPA compliance has also become a concern in M&A due diligence, since legal liability for violations will be inherited by the buyer.

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What does Ford’s announcement mean for internationally minded businesses?

by Daron Gifford and Lou Longo on January 3, 2017

Just yesterday, Ford announced that it’s cancelling plans to build a new plant in Mexico, instead opting to invest $700 million in Michigan, creating 700 new jobs.

As CNN Money points out, this is surprising—“a major U-turn for Ford.” While it is a “vote of confidence” in president-elect Donald Trump as CEO Mark Fields states, the decision is also likely a reflection on Ford’s overall concern of an economic recession and the fact that they have too much overall production capacity in North America.  This allows them to reduce their future production capacity by (1) not building the Mexico plant, (2) reducing their capex spend, and (3) managing toward a smaller, more cost-efficient, NAFTA operation.

So what does this mean for other internationally minded businesses?  We’re advising our clients that this is a time for caution and flexibility. Leaders must know their risk points — for example, intellectual property or infrastructure — when considering overseas expansion. And, since the international tax landscape is also changing, businesses need to identify the best strategies while still being compliant. To learn more, check out our post-election international update.

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Final Section 987 regulations provide guidance to certain qualified business units

December 28, 2016

On December 7, 2016, the IRS and Treasury Department released final and temporary regulations to Section 987, which provides guidance on taxable income of a qualified business unit (QBU) operating in a functional currency other than the U.S Dollar. Following are the highlights: Final Regulations The final regulations closely resemble proposed regulations issued in 2006, […]

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Have you been waiting for a Tax Repatriation Holiday?

December 28, 2016

While President-elect Trump’s tax plan is expected to lower the top corporate tax rate from 35 percent to 15 percent, the plan also calls for a repatriation of foreign corporate profits at a reduced rate –– providing a onetime tax rate of 10 percent on corporate profits abroad. While specific details of this plan are […]

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New information fields for Mexican payroll CFDI (electronic invoices) required

December 14, 2016

The Mexican Tax Administration Service (“SAT” per its Spanish acronym) recently published new standards for CFDI Payroll information requirements, which will be mandatory for all employers effective Jan.1, 2017. The new Payroll CFDI information requirements are as follows: Individual: Must include their CURP (personal identification number) Corporation: Must include their RFC (Federal Taxpayer ID) For […]

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China releases the Common Reporting Standard (“CRS”)

December 6, 2016

On January 01, 2017, China Mainland and Hong Kong will adopt Common Reporting Standards (CRS) –– a new method used by governments around the world to create transparency on cross-border information. CRS was introduced by the Organization for Economic Co-Operation and Development in 2014 as part of the standard for Automatic Exchange of Financial Account […]

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The Mexican tax authority (“SAT”) and the Internal Revenue Service (“IRS”) have announced a joint agreement to expedite the Advanced Pricing Agreement process for maquiladora operations in Mexico

October 25, 2016

After two years of negotiations, the SAT and the IRS have announced a new transfer pricing methodology intended to expedite open Advanced Pricing Agreement (“APA”) applications for maquiladora operations. In an attempt to apply fair tax methodologies and avoid double taxation for US companies with subsidiaries located in Mexico operating under the maquiladora structure, the […]

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Mexican court ruling may have significant impact on certain tax structures

September 15, 2016

A recent Mexican court ruling may have significant impact on certain operating structures A Mexican court has recently issued a ruling intended to clarify the rules surrounding certain personal services structures commonly used in Mexico (e.g. outsourcing, insourcing, and subcontracting services). Companies that utilize a dual Mexican entity structure or a third party outsourcing company […]

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Apple ruling spells uncertainty for European cross-border tax planning

September 9, 2016

In a tax ruling handed down by the European Union, Ireland must recover unpaid taxes from Apple equivalent to 14.6 billion U.S. dollars. The European Commission’s ruling finds fault with the company’s perceived diversion of profits to two Irish home office “shell” companies, which paid little or no taxes under the specific provisions granted by […]

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M&A investment opportunities in Latin America

August 29, 2016

Increased labor and logistics costs have made it less attractive for U.S. companies to manufacture consumer goods in China and Southeast Asia –– instead, companies are setting their sights on Latin America (LATAM). While regions like Brazil and Argentina are facing economic uncertainty, they offer opportunities for both strategic acquirers and long-term private equity investors. […]

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