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    Inbound and Outbound Transactions

    Uploaded by

    Nayanika Bhardwaj
    The document distinguishes between inbound and outbound transactions for cross-border taxation. Inbound transactions refer to non-U.S. persons or entities with U.S. income or activities, such as a foreign company selling products in the U.S. Outbound transactions refer to U.S. persons or entities with non-U.S. income or activities outside the U.S., such as an American company selling products overseas. The categories are important because different U.S. tax rules apply to inbound versus outbound transactions.

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    Inbound and Outbound Transactions

    Uploaded by

    Nayanika Bhardwaj
    125 views5 pages
    The document distinguishes between inbound and outbound transactions for cross-border taxation. Inbound transactions refer to non-U.S. persons or entities with U.S. income or activities, such as a foreign company selling products in the U.S. Outbound transactions refer to U.S. persons or entities with non-U.S. income or activities outside the U.S., such as an American company selling products overseas. The categories are important because different U.S. tax rules apply to inbound versus outbound transactions.

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    inbound and outbound transactions

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    The document distinguishes between inbound and outbound transactions for cross-border taxation. Inbound transactions refer to non-U.S. persons or entities with U.S. income or activities, such as a foreign company selling products in the U.S. Outbound transactions refer to U.S. persons or entities with non-U.S. income or activities outside the U.S., such as an American company selling products overseas. The categories are important because different U.S. tax rules apply to inbound versus outbound transactions.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    125 views5 pages

    Inbound and Outbound Transactions

    Uploaded by

    Nayanika Bhardwaj
    The document distinguishes between inbound and outbound transactions for cross-border taxation. Inbound transactions refer to non-U.S. persons or entities with U.S. income or activities, such as a foreign company selling products in the U.S. Outbound transactions refer to U.S. persons or entities with non-U.S. income or activities outside the U.S., such as an American company selling products overseas. The categories are important because different U.S. tax rules apply to inbound versus outbound transactions.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 5

    DISTINCTION BETWEEN

    INBOUND AND
    OUTBOUND
    TRANSACTIONS
    CROSS BORDER OR INTERNATIONAL
    TRANSACTIONS

     An International Transaction or Cross Border Transaction can be


    defined as a transaction in an international trade between two
    or more entities beyond the territorial limits of a country or a
    transaction in a domestic trade in which at least one of the
    party is located outside the country of the transaction.
     Cross-border taxation can be subdivided into various categories
    based on the type of transaction being analyzed.  At the
    highest level, the categories include “inbound” and
    “outbound.”  These categories are useful because significantly
    different U.S. tax rules can apply to the different types of
    transactions.
    INBOUND TRANSACTIONS

     When viewed from the United States, “inbound” refers to non-U.S. persons
    (“persons” meaning both individuals as well as entities) with U.S. income
    and/or U.S. activities.  A typical inbound circumstance exists where a foreign
    corporation has income and/or activities in the U.S. 
     For instance, Toyota is a Japanese headquartered company.  However, Toyota
    sells its products in the United States.  Thus, Toyota is selling “into” the
    U.S., and Toyota would generally be considered in the inbound category.
     In order for a transaction to be considered inbound, however, it is not
    necessary for product to be imported into the U.S.  Continuing the example
    above, Toyota may decide it is better to manufacture product in the U.S. 
    Consequently, Toyota may form a U.S. subsidiary and have the subsidiary
    manufacture and sell the product in the U.S.  In this circumstance, there has
    been no product imported into the U.S.  However, it is still an inbound
    transaction because the parent company is from outside the United States
    and its subsidiary has activities in the United States.
    OUTBOUND TRANSACTIONS

     “Outbound” refers to U.S. persons with NON-U.S. income or


    NON-U.S. activities.  A typical outbound circumstance exists
    where a U.S. headquartered corporation has income or
    activities in other countries.  For instance, Wal-Mart is an
    American publicly traded company.  However, Wal-Mart
    purchases many of its products from suppliers located outside
    the United States.  Further, Wal-Mart sells many of its products
    outside the United States (either through foreign subsidiaries
    or otherwise).  Thus, Wal-Mart is a U.S. headquartered
    company with activities “outside” the U.S., and Wal-Mart would
    generally be considered in the outbound category.
     Typical cross-border tax issues related to outbound
    transactions can include: foreign withholding taxes, transfer
    pricing, foreign tax credits and foreign tax credit limitations,
    subpart F income, Code § 956 inclusions (a.k.a. investments in
    U.S. property), income tax treaties, etc.

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