International Tax Law and Its Impact

Domestic businesses and individuals that invest or operate in foreign markets must comply with multiple overlapping domestic and foreign tax regimes. Tax regimes include income tax, value-added tax, and customs tax, among others, encompassing tax reporting, compliance, and accounting. At best, if left unadvised, a domestic business will incur at least double taxation of its foreign income. At worst, a company may attract civil and criminal sanctions for noncompliance. 

What Is International Tax Law?

International tax law is the comparative study of the tax laws and tax accounting rules of trading countries, the potential application of tax treaties to alleviate taxation, and strategies for multinational tax burden and risk management planning.

Governments that want to attract foreign investment often enter into tax treaties with trade partners that may eliminate or at least mitigate double taxation. Also, trading blocs, like the European Union, have enacted rules that address the taxation of cross-border, worldwide income. 

Moreover, companies with foreign subsidiaries with intra-group transactions or shared services, whether recorded or not for accounting purposes or that share intellectual property and intangibles, must apportion, pursuant to transfer pricing rules, income and deductions associated with the intragroup transactions among themselves. Regarding such intragroup transactions, a tax authority may use transfer pricing rules to restate the income, deductions, and earnings subject to a tax of its domestic taxpayers and impose substantial penalties. Since 2013, the incidence of such restatements by tax authorities, encompassing multiple years of a taxpayer, has increased more than tenfold.

Individual

Individuals may live, work, and invest in another country or multiple countries. For example, a U.S. citizen works in wealth management in Luxembourg, lives in Germany 45 minutes away from the financial firm, and personally invests in several foreign financial markets. A U.K. national made a small investment in a Canadian company that, in the next two years, will go public on the U.S. NASDAQ exchange and potentially generate a ten million dollar gain if the U.K. investor sells the investment. Multiple tax regimes apply to both individuals as well as tax compliance regimes.  

Corporate

Caterpillar corporation has over 100 subsidiaries operating in more than 100 countries. Caterpillar manufactures equipment, sells or leases it, provides maintenance agreements, and finances its customer and international operations, among many other activities. Caterpillar's tax and finance departments are responsible for managing Caterpillar's tax and compliance burden, assessing risks, and determining how tax and risk may impact Caterpillar's earnings and financial statements.  

International Tax Law and the Worldwide Economy

International tax law is a complex and ever-evolving area of law that impacts the worldwide economy. Because businesses and individuals are increasingly mobile, and countries have different tax laws and regulations, it is essential for companies and their advisers to understand international tax law. The rules governing international taxation are constantly changing, so staying up to date on the latest developments is vital. As the global economy continues to grow and become more interconnected, international tax law will likely become even more critical in the years to come.

What Is a Tax Treaty?

Tax treaties are agreements between countries to allocate rights to tax income and investment. Tax treaties provide double tax relief measures, such as tax credits and reduced withholding tax rates, when both countries can tax the same taxpayer or income. Tax treaties also provide a procedure for a taxpayer to request that the national tax authorities enter into discussions with each other to relieve double taxation that arises in the context of the tax treaty. 

How International Companies Are Impacted

International businesses that pay more tax on the same earnings than market competitors are potentially less competitive regarding earnings after tax available for research, investment, shareholders, price management, and labor compensation. Moreover, tax compliance requirements and costs, along with tax risks such as the uncertainty of applying tax rules, have increased dramatically since 2015. Companies have incurred shareholder suits for significant tax account restatements after an audit.

U.S. Tax Treaties

The United States has treaties with several other countries. These treaties are designed to promote economic and trade relations between the two countries by eliminating double taxation of income earned in one country by residents of the other country. For example, if a U.S. citizen earns income from a business in Canada, the treaty between the United States and Canada allows the citizen to exclude that income from their U.S. taxes. Similarly, a Canadian citizen who earns income in the United States can exclude that income from Canadian taxes. 

Tax treaties also provide for reduced tax rates on certain types of income, such as dividends, interest, and royalties. While the specific terms of each treaty vary, they all aim to encourage cross-border economic activity. As a result, tax treaties can play an important role in fostering growth and investment.

What Is Tax Risk Management?

Tax risk management is an aspect of a business's operational risks. At best, a tax risk that materializes only impacts a business's earnings. At worst, a tax risk materializes that requires substantial adjustments to a business's financial statements, incurs civil and criminal liability, and impacts the business' brand. The interaction and application of multiple countries' tax systems are complex and often opaque, even to experienced tax advisors, leading to uncertainty. 

Thus, a tax department assesses and manages tax risks associated with the corporation's businesses. Tax risk is managed like operational risk, including a risk control framework, risk assessment tools, and mitigation strategies. Like operational risk, tax risk requires a clear delineation of roles and functional responsibilities, documentation, testing, monitoring, and reporting, among the other aspects of risk management. For example, a tax risk insurance market has evolved to remedy transfer pricing adjustments for intragroup transactions. 

Online Tax LL.M. and MLS Programs

At Texas A&M Law, we pride ourselves on offering premier online master's degrees in taxation law. Our approach is multidisciplinary and industry-based, with a focus on risk management. Both the international tax Master of Laws (LL.M.) and Master of Legal Studies (MLS) are vetted by corporations, large firms, and governments, so you can be sure you're getting the best education possible that focuses on the needs of those you'll be serving professionally.

Texas A&M University is a Tier-1 research institution and one of the largest public universities in the United States, and our law degrees are recognized worldwide. The online LL.M (for lawyers) and MLS (for non-lawyers) in International Tax curricula are designed for tax professionals whose careers demand an understanding of international taxation and related issues.

The MLS ​in International Tax is a 30-credit-hour program, and the LL.M. in International Tax is a 24-credit-hour program. Whichever path suits your career, our international tax program provides you with a competitive advantage, whether you're a lawyer, accountant, or economist. You'll graduate ready to advise clients on business and investment decisions impacted by international tax law.

Benefits

At Texas A&M, you'll benefit from an industry-responsive curriculum that gives you a leg up on the competition. The program was developed and is led by Professor William Byrnes, a globally recognized tax authority and online education pioneer. Alongside him, our experienced faculty come from many backgrounds, including law, accounting, and data science, with renowned authors, academics, tax executives of multinational corporations, and tax advisors from large firms among their ranks. And with our small class sizes, you'll be sure to get the individualized, personal attention from industry leaders that is hard to come by in most programs. Small class sizes also mean you develop relationships with fellow students, forging professional connections that will help launch your career.

Flexibility

The flexible online format of our international tax program allows you to study when and where you want. We designed our curriculum with working professionals in mind, so you can complete your coursework on your schedule and continue working.

Diverse Networking Opportunities

The relationships you build with fellow students will do more than make your online classes more engaging. As you advance your career, these relationships will form a solid foundation for your professional network. The students you meet will work in diverse professions, opening the door to career possibilities you had perhaps never considered before. Forging relationships throughout your program will allow you to hear about new job opportunities and have a wealth of potential references. 

And don't neglect to get to know your professors. With faculty coming from diverse backgrounds, you'd be remiss not to take advantage of the wealth of experience and networking potential your instructors will bring to the classroom. 

The strength of the Aggie network cannot be overstated. With over 500,000 former students, you'll be in a position to connect with fellow Texas A&M grads past, present, and future.

Career Growth

Attorneys and non-attorneys alike may accelerate their career advancement by pursuing an LL.M. or MLS with a focus in International Tax from Texas A&M Law. The program is designed to give students the skills and knowledge they need to work effectively with clients who have international businesses. For lawyers, an LL.M. in International Tax can help you develop the skills and expertise necessary to counsel clients on cross-border transactions, tax treaties, and other issues related to international tax law. For non-lawyers, an MLS with a focus in International Tax can provide you with the ability to work as a paralegal or legal assistant in a law firm specializing in international tax law. In addition, an MLS with a focus in International Tax can also lead to career opportunities in accounting, banking, and finance. 

As the global economy becomes increasingly interconnected, the need for tax lawyers and professionals knowledgeable about international tax law is on the rise. Regardless of your previous experience or education, an LL.M. or MLS from Texas A&M Law can help you take your career to the next level.

Career Opportunities for International Tax Professionals