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Emerging markets, tax changes spell relief for business abroad

May 28, 2014

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Emerging markets and positive fiscal changes are two bits of good news for those doing business overseas. Here at Clark Schaefer Hackett, we spend a fair amount of time keeping a close eye on new trends and information in the international business sector, so we can better advise our clients on how to overcome cultural barriers and grow as a company. Fortunately, a number of developing events have popped up across the world, possibly coming as a boon to organizations with significant operations abroad.

As a member of an international business yourself, these trends may signal that increased opportunities to flourish and prosper lie ahead. For example, we’ve recently noticed that Mexico has shifted away from a country that once presented substantial risk to one of ample growth potential. Better yet, we’ve also found that new, shifting tax requirements could relieve some burden placed on your business.

Amid the many industry reports out there, here is some more information that may be of help to you:

Positive changes reported in Mexico
Over the past several years, Mexico hasn’t exactly been home to large amounts of good news. For international businesses, there have been plenty of other countries that have offered similar growth opportunities with less risk. However, that may be changing as of late.

According to the McKinsey Global Institute, Mexico now presents a number of opportunities for companies looking to expand operations abroad. Part of this change is due to the surge back home. Expanding U.S. markets are a plus for the exporting industry of our neighbor to the south. In addition, a new sector has emerged in Mexico – one characterized by high productivity and modern, globally competitive organizations.

Unfortunately, challenges do remain for the nation. The McKinsey Global Institute reported that two Mexicos currently exist. One is the new sector, and the other is more traditional, with low productivity and minimal wages for workers. This other side will hinder international business growth for the time being, unless the country can create a level playing field and increase the access to capital needed to blossom.

FATCA changes could help international businesses
Some global businesses may see some financial relief in the near future, thanks to a recent change to the Foreign Account Tax Compliance Act announced by the U.S. Department of Treasury. This law is currently designed to prevent U.S. citizens from using offshore accounts to hide taxable income.

According to Forbes, FATCA compliance is often a main concern for many international businesses. Since its implementation several years ago, a lack of clear guidelines and IRS regulations have clouded the decision-making processes for some organizations. With that in mind, this recent news that the IRS is relaxing enforcement efforts to give foreign firms more time to adapt to these new rules requiring them to share information on U.S.-owned accounts may come as a breath of fresh air.

Forbes noted that it seems unlikely that the IRS will strictly enforce FATCA compliance for the near future. That means financial institutions here in the U.S. with significant operations abroad will have fewer administrative headaches for a while. Instead, the IRS will focus on making sure that foreign banks share all relevant data as quickly as possible.

US, Hong Kong agree to terms on FATCA
Since the announcement that all foreign banks will have to send over any information on accounts held by Americans, the U.S. government has been working with many nations to come to an agreement on the information-sharing. Recently, one country to come to terms has been Hong Kong.

Reuters reported that this is one of roughly 60 such deals to help financial institutions comply with FATCA, and increase the focus on offshore tax dodging by American citizens. With Hong Kong, the intergovernmental deal must be finalized before the end of calendar year 2014.

Robert Stack, the U.S. Treasury’s deputy assistant secretary for international tax affairs, noted that each subsequent deal takes this country one step closer to preventing tax evasion and closing the tax gap, according to Reuters.

As a member of an international business, your focus is often on the trends and shifts that appear, both overseas and at home. At Clark Schaefer Hackett, we understand the pressures and demands of your industry, and are well-positioned to help. Contact us today to speak to one of our many expert professionals about overcoming cultural and financial hurdles impeding your growth.

© 2014

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

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