Expanding into the U.S. market presents significant opportunities for foreign businesses, but it also introduces a complex tax landscape that differs substantially from many other jurisdictions.
Our latest webinar discussed recent federal tax developments, complex state and local tax requirements, and the practical planning considerations that foreign-owned businesses should address as they establish or expand U.S. operations.
Federal Tax Changes Create New Planning Opportunities
Several provisions under the One Big Beautiful Bill Act (OBBBA) significantly reshape the tax environment for inbound companies. While some international provisions take effect beginning in 2026, many domestic changes are already in place for the 2025 tax year, creating immediate planning opportunities.
Among the most impactful changes are:
- The permanent return of the EBITDA-based limitation under Section 163(j) allows many businesses to deduct more interest expense
- Permanent 100% bonus depreciation for qualified property placed in service after January 1, 2025
- Immediate expensing for domestic research and experimental (R&E) expenditures, while foreign R&E continues to require 15-year amortization
Since these provisions interact with one another, companies should evaluate them together rather than independently. Modeling different scenarios can help identify opportunities to improve cash tax positions while avoiding unintended impacts on other tax attributes.
International Tax Provisions Continue to Evolve
The legislation also introduces several important international tax changes affecting foreign-owned U.S. operations.
- Changes to the GILTI and FDII regimes, including revised calculations and deduction percentages
- A permanent BEAT rate of 10.5%
- Reinstatement of Section 958(b)(4), reducing unnecessary controlled foreign corporation (CFC) reporting in many structures
- Improved foreign tax credit mechanics
Companies should begin evaluating how these changes may affect their structures, effective tax rates, and future planning strategies.
State Tax Obligations Extend Far Beyond the IRS
For many inbound companies, state taxation is often one of the biggest surprises.
Unlike many countries that operate under a single national tax authority, businesses operating in the U.S. may face tax obligations across thousands of separate state and local jurisdictions — each with its own rules, filing requirements, and tax bases.
Understanding where your business has nexus is the first step. Nexus can be established through:
- Physical presence, including offices, employees, inventory, or contractors
- Economic activity, such as exceeding state sales thresholds
- Remote employees working from home
Each state applies its own standards, making a comprehensive nexus review an essential part of any expansion strategy.
Sales Tax Compliance has Become Increasingly Complex
Sales and use tax continues to be one of the most administratively demanding areas for companies entering the U.S. market.
Following the Supreme Court’s Wayfair decision, many states now require businesses with no physical presence to collect sales tax based solely on economic activity within the state. As a result, companies should understand:
- Where economic nexus thresholds have been met
- Whether products or services are taxable in each jurisdiction
- Marketplace facilitator rules
- Exemption certificate requirements
- Ongoing filing and remittance obligations
State Income Taxes Don’t Always Follow Federal Rules
A common misconception among inbound businesses is that federal tax treatment automatically applies at the state level. In reality, many states:
- Do not recognize double tax treaty protections
- Decouple from certain federal tax provisions
- Apply different methods for calculating taxable income
- Use varying apportionment formulas
As a result, companies may have state income tax obligations even when federal treaty protections significantly reduce or eliminate federal tax liability.
Remote Work Creates Additional Tax Exposure
The continued prevalence of remote work has added another layer of complexity, as employees working from different states can create:
- Additional nexus for the business
- State income tax withholding obligations
- State unemployment insurance requirements
- Additional payroll tax compliance responsibilities
Proactive Planning Remains the Best Strategy
Successfully navigating the U.S. tax environment requires more than understanding federal rules alone. Companies should regularly evaluate both their federal and state tax positions as their operations evolve.
Key areas for ongoing review include:
- Nexus studies
- State registration and filing requirements
- Transfer pricing considerations
- Sales tax compliance processes
- Technology and automation opportunities
- Voluntary disclosure programs for historical exposure
As tax laws continue to change, regular modeling and proactive planning can help foreign-owned businesses manage compliance obligations while identifying opportunities to improve tax efficiency.
If your organization is entering the U.S. market or expanding existing operations, GTM can help evaluate your tax footprint and develop practical strategies that support long-term growth.
