US airlines such as Delta are finally reporting profits after years of continuous losses. While Delta and other airlines can set off current profits against past losses, they will be soon expected to pay taxes at 35 percent of profits. And the American President refuses to make America more competitive by lowering this tax that is the highest in the world.
America is not Competitive
When Delta CEO Richard Anderson was questioned about the airlines tax strategy he was not specific but has indicated that Delta was exploring and putting in place systems to transfer some of its profits to Virgin Atlantic and its Netherlands based joint venture with Air France-KLM and Alitalia.
Many pharmaceuticals and IT companies have already been shifting profits to lower tax countries such as the UK and Ireland. However, hard assets were much more difficult to transfer. This is not a problem for airlines as their assets are more mobile. In addition, as Delta has many transatlantic routes a part of its income or revenue is Euro-denominated making the shift in tax base easier to accomplish.
Legal Position on Retaining Profits Abroad
While there are plenty of opportunities for Delta to shift at least a part of its profits to lower corporate tax countries such as the Netherlands and the UK, this will not be very easy. The company will have to work with the IRS and likely pay some additional fees to achieve its goals. However, with careful structuring of the business it will be possible for Delta and other airlines in the US returning to profit to take advantage of the lower tax rates in other countries.
Tax Attorney with Restructuring Expertise
Companies have to work in multiple ways to increase their profits and value to shareholders. While increasing revenues by improving sales is one way of doing this, businesses also have to reduce expenses including taxes. One way in which US businesses can reduce their taxes is to transition some of their profits to countries with lower corporate taxes. US corporate taxes are at 35 percent and many countries such as the Netherlands, The UK, and Ireland have significantly lower corporate taxes.
In order to benefit from the lower tax rate in other countries businesses can work with an experienced tax attorney who will be able to leverage the assets held abroad to transfer some of the profits abroad. This will enable the business to reduce the tax outgo and increase returns to shareholders. Retaining profits abroad will entail restructuring the business to ensure that the company headquarters is now in a country with a lower tax rate.
In order to achieve this, the business might need to spend some money obtaining the requisite permits from the IRS. A knowledgeable tax attorney will be able to ensure that the business is properly restructured with minimal costs and yet enables it to pay lower taxes on profits.
A tax attorney who has experience in restructuring businesses enable the foreign unit to retain taxes will be able to save a company a lot of cash in the form of taxes whether it deals with intellectual property or hard assets.