Considerations for Dealing with International Investors

The international thing comes into play not all the time but quite a few times and there’s always the same kind of concerns and not concerns but things you really have to think about. Again, just remember, it’s not your job to know every single statute out there and every single law. That’s what your attorney’s for, it’s really your job, mostly just sort of identify and say hey, wait a minute, that may be an issue, let me pick up the phone and call my attorney and maybe your attorney doesn’t even specialize in that area but then they can refer you to somebody else but again, your job is to identify these issues. I think just in really broad strokes, the first thing you’ve got to recognize is that most countries, they’re not – may not necessarily be as robust. Most countries have their own securities laws. Whenever you’re dealing with international investors, you just got to be cognizant of that. Some countries like Canada, a very developed securities laws and they’re kind of similar to ours but you’ve got considerations. I’m guessing if you go to Afghanistan, they probably don’t have as robust securities law. Just keep that in mind. Especially if you’re traveling. Most likely, if you're doing it here in the US and you’re staying in the US and somebody just happens to somehow, maybe they’re listening to your podcast from other country and they somehow connect with you. That may be fine but if you’re travelling abroad, you know, maybe down to Mexico or if you’re from another country and you travel to your own country and do a presentation and try and raise funds from international folks. Just keep that in mind. You want to make sure you’re complying with this securities laws of that countries. That’s kind of step one.

Listen to full podcast episode: https://lifebridgecapital.com/2019/09/ws317-considerations-for-dealing-with-international-investors-with-mauricio-rauld/

Doing presentation, you need to understand what the regulation is in that country. I mean, the last thing you want to do is get in trouble while you’re abroad. I guess if you’re in the US, Canada’s got some really robust, I think Mexico’s pretty good. Always keep that in mind too when you're dealing with international investors, just think about the tax and make sure you talk to a tax professional in that particular country because I have no – very little knowledge on – I know enough knowledge to be dangerous by US tax law and obviously a tax professional but certainly have no clue about Mexican tax law or Canadian tax laws. The main thing I think you want to remember, keep in mind is – I say this not really jokingly, it really is true. When you accept money from an international investor, somebody who is overseas, physically overseas and let’s go with an example. Let’s say you’ve got an investor in England. Somehow contacts you, they want to wire over $100,000 and they want to invest in your project. The first thing you got to realize is that you really do become an agent of the IRS. That is because you have a requirement, a legal requirement to withhold 30% of whatever money goes back to England, your responsibility is to withhold that 30% and send it on along with some forms to the treasury department.

I’m not well versed in the technicalities and what forms they are and how that mechanics works, definitely check with your CPA but it’s really important to be working with a CPA who understands international transactions because that is a requirement of yours and if you think about it, the reason that that is there is the international investor is going to owe taxes in the US most likely based on whatever profits they generate here in the US. But they have zero incentives to come over and file a tax return at the end of the year and pay their taxes. What this does, it forces the investor to actually – if they want to get some of that money back to file their tax return here in the US. It’s not a 30% tax, it’s a 30% withholding just like any withholding. It may be that the investor owes less than 30% but they have to come in, file the tax returns, you get that refund. Obviously if they own more, they’re probably not going to have any tax or anything. But the key thing to remember is that you are going to be legally responsible, if you don’t withhold that money, they don’t file a tax return, they don’t pay their taxes, you are technically on the hook for that so it’s really important to be checking in with your CPA, let the CPA know that this is what you’ve done and hopefully they understand what to do and if not, I recommend you either consulting with somebody who has experience in cross border taxation or maybe switch your CPA if your CPA isn’t up to speed on that.

Listen to full podcast episode: https://lifebridgecapital.com/2019/09/ws317-considerations-for-dealing-with-international-investors-with-mauricio-rauld/