2019 Minsk Seminar: US International Corporate Tax Reform | GILTI & FDII
On August 28, 2019, Mr. Eugene Sherayzen, the owner and founder of Sherayzen Law Office, Ltd, gave a seminar at Minsk City Bar Association (“MCBA”) in Minsk, Belarus. The focus of the seminar was on the 2017 Tax Cuts and Jobs Act (“2017 TCJA” or “2017 tax reform”) changes in the US international corporate tax law. Let’s discuss this 2019 Minsk seminar in more detail.
2019 Minsk Seminar: Organizational Aspects
The 2019 Minsk seminar was held at a location owned by MCBA in Minsk, Belarus. The seminar was well-attended by Minsk lawyers of various specializations, not just tax attorneys. Mr. Sherayzen conducted the seminar in the Russian language.
2019 Minsk Seminar: Structure of the Seminar
The seminar consisted of four parts: introduction to Sherayzen Law Office’s international tax practice, discussion of five important concepts of US international tax law, explanation of certain aspects of US international business tax law prior to the 2017 tax reform and the 2017 TCJA changes to US international corporate tax law. Throughout the seminar, Mr. Sherayzen made certain digressions into individual international tax law as well as general business tax law in order to better explain certain aspects of the 2017 tax reform to the audience.
2019 Minsk Seminar: Sherayzen Law Office International Tax Practice
During the seminar, Mr. Sherayzen introduced his law firm, Sherayzen Law Office, Ltd., to the audience. He explained that the focus of his practice is on US international tax law. After explaining what “US international tax law” meant, the attorney described the four main sub-areas of his practice: offshore voluntary disclosures, IRS international tax audits, annual compliance and international tax planning.
2019 Minsk Seminar: Five Concepts
After describing his practice, Mr. Sherayzen discussed in detail five relevant concepts of US international tax law. He first introduced the concept of “US tax residency” and generally described the categories of US tax residents. In response to a question from an attendee, the attorney distinguished US tax residency from immigration residency.
Then, Mr. Sherayzen discussed the principle of worldwide income taxation of US tax residents. The fact that US tax residents must report their worldwide income even if they reside overseas caused consternation among some attendees.
The discussion of the concept of income recognition resulted in a lively exchange between the speaker and the audience. At that point, Mr. Sherayzen alluded that this topic would be relevant to the his explanation of the anti-deferral regimes during the second part of his lecture.
The rest of this part of the seminar focused on the taxation powers of the US congress and the source of income rules. The attorney introduced certain general source-of-income rules, but warned about the enormous amount of exceptions in this area of law.
2019 Minsk Seminar: Pre-Tax Reform US International Corporate Tax Law
Mr. Sherayzen adopted a general historical approach to the explanation of US international corporate tax law prior to the 2017 TCJA. He commenced with a description of the progression of law since the 1920s, explaining the incentives that existed for the accumulation of cash overseas. Then, the attorney discussed the modifications to the law enacted by Congress throughout the years in order to combat tax avoidance by US corporations.
At that point, Mr. Sherayzen introduced the two main anti-deferral regimes: Subpart F rules and PFIC rules. He explained these regimes in a general manner, warning the audience that there were many specific rules and exceptions to these general rules. The attorney also discussed why these two anti-deferral regimes failed to stop tax avoidance and the continued accumulation of corporate cash in foreign subsidiaries.
2019 Minsk Seminar: 2017 Tax Reform
The discussion of the 2017 TCJA consisted of three parts: (1) reasons for the reform; (2) new rules to combat tax avoidance; and (3) tax incentives with respect to returning production to the United States and exporting from the United States.
After introducing the audience to the historical and political context in which 2017 TCJA was enacted, Mr. Sherayzen discussed the new tax avoidance prevention rules, focusing on the Section 965 tax and Global Intangible Low-Taxed Income (“GILTI”) tax. Then, the attorney explained the new tax incentives introduced by the 2017 tax reform, including lower corporate tax rates, full participation exemption and Foreign-Derived Intangible Income (“FDII”).
2019 Minsk Seminar: Conclusion
At the end of the seminar, there was an extensive Q&A session. Questions ranged from re-classification of shareholder loans during an offshore voluntary disclosure to certain aspect of the 2017 tax reform and its impact on corporate restructuring.