Tax Talk with an International Tax Planner (Part 1)

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Category: IM Interviews

Published on Wednesday, 15 February 2012 11:00

Written by Ryan Losi

Today, we're happy to bring you the following conversation with Ryan Losi, a Virginia-based tax accountant who specializes in helping American expats manage their financial and reporting requirements back home. He also works the other way too - helping "inpats" entering into the US structure themselves and navigate the bureaucracy and regulations of the US market.

Tax Talk with an International Tax Planner (Part 1)

IM: Tell us a bit about yourself.

RL: Sure. My name is Ryan Losi and I'm currently a CPA licensed in the states of Virginia and New York.

I started my career during the 90's at KPMG. It was a time when globalization was happening at a faster pace. In my opinion, globalization started in the 50's and 60's with international trade, but it really was limited to your very, very large companies. Air travel wasn't as fast. We didn't have the means to communicate in such a quick, real-time fashion.

In the mid 90's when the internet was being made available to everyday folks - and therefore trickling down to small and mid-sized businesses - all the sudden globalization didn't seem like just something the Fortune 500 did. I saw that the world was becoming more connected, and that meant in every aspect, including taxation.

As an accountant (and in particular working specifically in tax law),I thought, "Gosh, if this is the way of the future, if the US is going to be interconnected with all these other countries and we have these additional tax laws and we have all these treaties and all these complexities, there's probably going to be a need for that in the future. Why not go with that route versus doing something that the majority of tax professionals in the US do, which is practice domestic tax law?" So I jumped over to an international team just a couple years out of being in practice with KPMG.

I did that for a number of years, and then I had the opportunity to do the same thing but on a larger scale with PwCon a national team out of New York. I ended up doing the same kind of international work, but serving the top 50 companies in the US.

But while I thought much of that firm, my heart was in Virginia where I had gained my undergraduate degree.

So, after some time, I ended up moving back here and joining a former colleague of mine.

He was my first manager at KPMG - a domestic tax guy who had left the firm to start his own practice three or four years prior. He had a boutique practice with a fledgling group of international clients - a side of the business he wanted to grow. My role was to come in and be the partner in charge for the international practice. I've been here ever since.

IM: Can you share a little bit about your company and what they do?

RL: Sure. We've been around for just over 10 years and have 16 professionals on hand in total. We started from zero and now enjoy serving some 700 clients in 22+ countries, which we consider a very good growth pattern.

Basically, there are two philosophies we believe that have helped us to grow to where we are today.

The first is flat fees. For maybe 95% of our engagements we commit to a flat fee or at least a "not-to-exceed fee" on the engagement. Clients like that. They really like being able to budget what their accounting fee or tax fee is going to be for a specific project, or even on an annual basis. It removes the uncertainty. It also removes the risk that if the professional is not efficient, the client doesn't have to bear that additional cost. It's a very client-friendly approach.

At the same time, it also encourages us to make sure we have efficiencies in our process, while still serving the clients well - from the largest system to the smallest routine. For example, we will track the efficiency of how we get an email from a client, how we get back with our advice, and how do we do that in a timely basis and measure that up to the metrics with all other professional accounting firms.

Also included in that flat fee is what we term as "Routine Tax Consulting" (RTC). Basically, this means that any time spent on routine tax consulting during the first hour of every day is not billed to a client. It's not something that accrues, that's one hour every day for 365 days a year, but it's more like spending 15 minutes here or an hour here, or "I need you to come to this meeting," or "I need you to review this contract for any kind of tax provisions". Any of those things that you could think about that a business owner or a high net worth individual could have and would want to have an advisor or another business owner look at, that first hour of every day we do not bill our clients.

Those two things - having a fixed fee and then having an advocate that's not going to nickel and dime -has really allowed us to gain a lot of favorability in the marketplace.

Another point of differentiation is our focus. We picked four areas to be market leaders in and be known for nationally, or at least regionally.

The first area is international tax. The second one is professional athlete tax practice. The third one is real estate taxation, and the fourth one is medical practice physician taxation.

We don't try to be everything to everybody, and we think that a well-defined deep knowledge of serving those clients bodes better for us from a strategic and economic standpoint than it does if we try to service everyone.

IM: Now before we get into the details of tax discussion for internationalized Americans, I find it interesting that you also help people from overseas invest in the US itself. Can you tell us a little about your work in that sector?

RL: Many people don't know that the US is actually the largest tax haven of any country in the world.

While there are a couple of programs, the grandest of them all allows foreign nationals - that is, non-resident aliens - who have US bank deposits, to earn interest which is tax-exempt in the US and is not reported back to anyone. Granted, that interest is not very much now, but historically, it's been in the 3-6% range.

You have a lot of people in the world who still see the US dollar as a strong currency. And then the fact that it's not reportable to any authority, it's not reportable to their home country, there's no obligation for the financial institution to report that, and then it's exempt from US taxation… it causes a lot of capital to flow to the US.

Also, "portfolio interest" such as income from bonds again is tax-exempt for these same investors and follow the same rules as bank deposits.

Just those two programs there have attracted a tremendous amount, over decades and decades, of capital flow to the US. It still continues to.

What I don't know is how much longer that's going to be the case. If you follow international tax law you recognize that the US is forcing a lot of other jurisdictions - in particular tax-favorable or tax haven countries - to disclose the accounts of US deposit holders having deposits over there.

When those countries will request the same of their nationals having deposits in US bank accounts is the question. That bridge has yet to be crossed, but if it comes, it may have a very negative impact on the capital flow in the US.

There are other incentives. We have tax treaties with many nations. These allow foreign nationals or investors or foreign corporations to come into the US, set up a business or investment, and have the earnings from that business or investment repatriated back in a very tax-friendly or tax-favorable rate, with reduction in local withholding tax laws based on the treaties that are negotiated.

For instance, take the UK-US income tax treaty. In this case, dividends between the two countries of companies paid out from each one has a 0% withholding tax. The US has a statutory 30% withholding tax unless a treaty reduces it, so one of the most favorable ways to attract investment is to have our UK brethren invest in the US, which allows for a 0% tax rate on any dividend income repatriated to the UK. Obviously, that can increase the overall return for those investors.

With its trading partners, the US has negotiated various treaties, and in particular the income tax treaties, as yet another way to accelerate and attract inbound investment or foreign investment into the US.

That brings us to the end of the first part of our interview with Ryan Losi. Next week, he will dive into a couple of tax deferral strategies available to American citizens and green card holders living overseas.

Tags: international tax law , interview , Ryan Losi , tax accountant , tax haven