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AI Is Changing Accounting and Tax Firms: What Comes Next?

Artificial intelligence is reshaping professional services, but the real story goes beyond job cuts. It is changing how accounting and tax firms deliver work, price expertise, develop talent and compete for clients.

Deloitte UK provides a striking example of the pressures facing the profession. Reporting in October 2026 highlighted approximately 1,000 UK job reductions alongside Richard Houston’s £7.1 million remuneration package for the 2025–26 financial year. The figures intensified debate about executive rewards, workforce reductions and the future structure of professional services. However, it would be misleading to attribute every reduction directly to AI: cost management, restructuring and low staff attrition have also played a role. https://www.deloitte.com/uk/en/about/press-room/deloitte-uk-publishes-2026-financial-results.html

The deeper transformation is structural. Firms are reassessing how much work requires human intervention, how many junior professionals they need and where specialist judgment creates the greatest value.

Four areas illustrate what comes next.

1. Core Calculations: Precision Still Matters

Tax calculations, reconciliations and many accounting processes are already handled by established software and rules-based systems.

AI’s greatest contribution is not necessarily replacing those calculations. It is helping professionals interpret documents, identify relevant information, flag anomalies and connect data across complex workflows.

There is an important distinction between deterministic systems, which produce defined outputs from defined inputs, and generative AI, which can produce plausible but incorrect answers.

In tax and accounting, a confident answer is not necessarily a correct answer. Calculations, statutory references and material conclusions still require appropriate validation, reliable source data and professional review.

What comes next: Firms will increasingly combine automation with verification controls, using AI to accelerate the work while preserving accuracy, auditability and accountability.

2. Research and Advisory: Routine Answers Become Easier to Produce

AI can rapidly summarize legislation, compare guidance, organize research and help professionals explore technical questions.

This changes the economics of routine advisory work. Tasks that once required hours of manual research may be completed much faster, placing pressure on firms that primarily charge for the time spent assembling information.

But faster research does not eliminate the need for expertise.

The real value of an experienced adviser lies in identifying which rules apply, recognizing exceptions, evaluating uncertainty, understanding commercial context and communicating a defensible conclusion to the client.

Complex cross-border tax matters, treaty interpretation, restructuring decisions and formal professional opinions may still require substantial human analysis and accountability.

What comes next: Firms will need to demonstrate value through interpretation, implementation, risk management and the quality of their conclusions—not simply the volume of research produced.

3. Back-Office Assembly: The Traditional Junior Workload Changes

Document extraction, data classification, reconciliation, workpaper preparation and routine compliance workflows are increasingly suitable for automation.

These tasks have historically provided much of the foundational work assigned to junior accountants and tax professionals. If AI reduces the amount of routine production required, firms may need fewer hours of traditional entry-level work—or may redesign those roles around different responsibilities.

The challenge is that routine work also serves an educational purpose. It teaches new professionals how records fit together, where errors occur and what a reliable answer looks like.

The Institute of Chartered Accountants in England and Wales (ICAEW) has highlighted concerns that junior professionals could miss essential foundational experience as automation expands. https://www.icaew.com/insights/viewpoints-on-the-news/2026/jun-2026/ai-are-junior-accountants-worried-about-roles

What comes next: Firms will need to redesign early-career development around supervised practical work, technical fundamentals, simulations, review exercises and opportunities to challenge AI-generated outputs.

Automation may remove repetitive tasks, but it should not remove the learning pathway.

4. Client Intake: AI Becomes Part of the Service Experience

AI agents can help professional services firms respond to enquiries, qualify prospective clients, collect preliminary information, organize onboarding and deliver relevant educational content outside normal business hours.

For tax firms, this could make it easier to identify a prospect’s jurisdictional connections, understand the broad nature of a problem and route the enquiry to the appropriate specialist.

However, initial screening is not the same as providing a professional opinion. Sensitive information must be handled appropriately, and complex or high-risk matters require suitable human oversight.

What comes next: Firms may increasingly use AI to improve the client journey from first enquiry to engagement, while reserving professional judgment, sensitive decisions and formal advice for appropriately qualified people.

5. The Broken Apprenticeship Model: Where Will Future Partners Learn?

This is the profession’s most important long-term challenge.

Traditionally, junior professionals learned by performing research, preparing returns, reconciling accounts, drafting workpapers and observing how senior colleagues reviewed their work. Through repetition and feedback, they developed the judgment required to handle increasingly complex cases.

If AI performs much of that foundational work, firms must answer a difficult question:

How will tomorrow’s senior advisers develop expertise if they no longer perform enough of the underlying work to understand it deeply?

Removing repetitive tasks may improve efficiency, but eliminating the learning opportunities attached to those tasks could weaken the future talent pipeline.

A more sustainable model would include:

• Structured technical training: Ensure juniors understand accounting principles, tax legislation and the fundamentals behind automated outputs.
• Supervised case simulations: Give trainees realistic scenarios involving incomplete records, conflicting evidence and unusual tax questions.
• AI review exercises: Teach professionals to identify hallucinations, missing assumptions, calculation errors and unsupported legal conclusions.
• Progressive responsibility: Move trainees from basic analysis to complex cases through deliberate supervision and feedback.
• Clear accountability: Ensure that professional responsibility remains with appropriately qualified people rather than being obscured by automated workflows.

The goal should not be to preserve every historical task. It should be to preserve the learning and judgment that those tasks helped develop.

The HTJ.Tax Strategic Playbook

For tax and accounting firms preparing for this transition, five priorities stand out.

1. Map the workflow. Identify which activities are repetitive, which require technical interpretation and which demand professional judgment.
2. Automate with controls. Establish verification procedures, source checks, documentation standards and clear escalation routes.
3. Redesign junior roles. Replace lost learning opportunities with structured practical training, simulations and supervised client work.
4. Rethink pricing. Consider how to price outcomes, specialist expertise and ongoing risk management rather than relying exclusively on hours spent.
5. Protect client trust. Maintain confidentiality, appropriate human review and clear accountability for professional advice.

Strategic Takeaway

Professional services firms are unlikely to disappear simply because AI can perform more of their work. Their operating models, staffing structures and sources of value are likely to evolve.

Firms that depend heavily on billing for routine administrative effort may face increasing competitive pressure. Firms that combine automation with specialist execution, strategic judgment, effective client service and professional accountability may be better positioned to adapt.

But technology alone will not determine the outcome.

HTJ.Tax perspective: The real challenge is not simply replacing people with AI. It is rebuilding the model through which professionals acquire expertise, exercise judgment and earn client trust. The firms that address both productivity and professional development will be better equipped to navigate the next phase of the industry.

This article discusses broader industry trends. The causes and consequences of individual firms’ workforce decisions vary, and AI should not be assumed to be the sole driver of job reductions.

The Hidden Risks of U.S. Structures for Non-Americans

A US company, bank account or payment channel can offer legitimate commercial advantages to international entrepreneurs. But non-US individuals should not assume that using a US structure is simply an administrative decision without potential legal consequences.

At HTJ.Tax, we believe international structures must be assessed not only for their tax efficiency, but also for the transactions they facilitate, the jurisdictions they connect and the laws that may apply to the activities conducted through them.

Two decades of US enforcement history—and a more recent case involving Guyanese gold exports—illustrate why the details matter.

1. The Mohamed Case: When Foreign Tax Allegations Meet a US Nexus

In October 2025, a federal grand jury in Miami indicted Guyanese businessmen Nazar Mohamed and Azruddin Mohamed over an alleged scheme involving the evasion of approximately US$50 million in Guyanese taxes and royalties connected to gold exports.

According to the US Department of Justice, the allegations concern gold exports through Miami, transactions involving buyers in Miami and Dubai, and the alleged reuse of official export seals to conceal shipments for which taxes and royalties had not been paid. The indictment also alleges related money-laundering activity.

The case raises an important jurisdictional question: When can conduct involving alleged violations of foreign tax laws also give rise to US criminal charges?

The alleged US connection is not merely that the individuals were involved in international business. Prosecutors allege conduct involving US transactions and routes that supported charges under US federal criminal statutes, including wire-fraud and money-laundering provisions.

These remain allegations, and an indictment is not proof of guilt. The defendants are presumed innocent unless and until proven guilty in court.

2. The Legal Precedent: Pasquantino v. United States

In Pasquantino v. United States (2005), the US Supreme Court upheld wire-fraud convictions arising from a scheme to smuggle liquor from the United States into Canada while evading Canadian excise taxes.

The defendants had used interstate telephone communications to facilitate the scheme. The Court concluded that a fraudulent scheme to deprive a foreign government of tax revenue could fall within the federal wire-fraud statute.

The decision is significant because the prosecution was not simply an action to collect Canada's tax debt in a US court. It concerned alleged fraudulent conduct that used US communications and violated US criminal law.

The case does not establish that every foreign tax dispute falls within US criminal jurisdiction. Rather, it demonstrates that alleged fraud involving foreign tax revenue may trigger US enforcement where the statutory requirements and relevant jurisdictional connections are satisfied.

3. The Broader Lesson: The FIFA Investigations

The US FIFA investigations provide another illustration of how international commercial conduct can come within the reach of US criminal enforcement.

In 2015, US prosecutors announced charges involving international football officials and sports-marketing executives in alleged bribery, wire-fraud and money-laundering schemes. Prosecutors highlighted alleged meetings in the United States, the use of US banking and wire-transfer facilities, and commercial activities connected to the US market.

Some defendants later pleaded guilty, and some cases proceeded to trial. The outcomes varied by defendant and charge.

The broader lesson is that an international transaction does not necessarily remain outside US jurisdiction simply because the participants, underlying commercial rights or alleged misconduct are primarily foreign.

US connections may be relevant where conduct involves US communications, financial institutions, transactions, entities or other facts that satisfy the requirements of the particular criminal statute.

4. What This Means for Non-US Entrepreneurs

The Mohamed, Pasquantino and FIFA matters involve different facts and legal issues. They should not be treated as identical precedents or as proof that establishing a US company creates automatic criminal exposure.

However, they illustrate why international structures should be evaluated in the context of the activities conducted through them.

Before establishing or using a US entity, non-US entrepreneurs should consider:

• Commercial purpose: Does the US entity serve a genuine business purpose, and are its activities consistent with that purpose?
• Transaction flows: Where do payments originate, where do they pass, and where are they received?
• Underlying obligations: Do the transactions involve tax, customs, sanctions, anti-bribery or other legal requirements in relevant jurisdictions?
• US connections: Could communications, banking arrangements, counterparties or conduct in the United States create relevant legal exposure?
• Governance and records: Are contracts, payment records, ownership information and business activities accurately documented?

These are risk-assessment questions, not a checklist that determines jurisdiction on its own. The legal analysis depends on the facts, the applicable statute and the nature of the alleged conduct.

Strategic Takeaway

A US company is not inherently risky, and non-Americans can legitimately use US entities for international business. But incorporation does not insulate an individual or business from laws that may apply to its transactions and conduct.

The key distinction is between using a US structure for legitimate commercial activity and using US-linked transactions in conduct that may violate applicable law.

HTJ.Tax perspective: Do not choose an international structure based on tax rates or incorporation costs alone. Understand the legal consequences of the activities conducted through it, the jurisdictions involved and the obligations that remain applicable to the people behind the structure.

Sources

• US Department of Justice, Mohamed case: November 28, 2025 announcement.
• US Supreme Court, Pasquantino v. United States, 544 U.S. 349 (2005).
• US Department of Justice, 2015 FIFA-related indictments and enforcement announcement.

This overview is for general informational purposes and is not a determination of liability or jurisdiction in any individual case.

The Shift from Physical Nexus to Payment Gateway Extraction

For decades, international tax treaties generally protected business profits from source-country taxation unless the foreign enterprise had a Permanent Establishment (PE) in that country, subject to the specific treaty provisions.

That traditional framework is under pressure as governments seek greater taxing rights over cross-border services, including services delivered remotely without a substantial physical presence in the customer’s country.

The United Nations Model Tax Convention provides important context. Article 12A addresses fees for technical services, Article 12B covers automated digital services, and the newer Article 12AA expands the discussion around source-country taxation of certain cross-border services.

However, these provisions are not interchangeable, and their inclusion in a model convention does not automatically make them applicable to every cross-border payment. The outcome depends on the relevant domestic law, applicable tax treaty and any provisions actually adopted between the jurisdictions.

Three Key Risks1. Margin Erosion: Tax on Revenue, Not Profit

Gross-basis withholding taxes can have a disproportionate impact on service providers because the tax is calculated on the payment rather than the provider’s net profit.

Consider a consultancy that invoices €100,000 and earns an 18% profit margin.

• Invoice revenue: €100,000
• Profit before withholding: €18,000
• Illustrative withholding at 15%: €15,000
• Remaining profit before other tax adjustments: €3,000

In this simplified example, withholding absorbs approximately 83.3% of the consultancy’s original profit.

The effect can be particularly severe for SaaS providers, software agencies, technical consultants and other service businesses operating on thin margins.

The actual economic cost will depend on whether the withholding is recoverable, creditable, deductible or refundable, and whether the contract shifts the cost to the customer.

HTJ.Tax insight: Cross-border pricing should be modelled against potential gross withholding exposure before a contract is signed—not after the first payment is received.

2. US Foreign Tax Credit Risks

Foreign withholding does not automatically qualify for a US Foreign Tax Credit.

Under Internal Revenue Code Sections 901 and 903, a foreign tax must satisfy the applicable creditability requirements. These include whether the tax is imposed on the taxpayer, represents the taxpayer’s legal and actual liability, and qualifies as an income tax or a tax imposed in lieu of an income tax.

A gross-basis tax is not automatically disqualified. Certain gross-income withholding taxes may qualify under the relevant rules, while others may fail the requirements.

The analysis can depend on the character and source of the income, the foreign tax’s design, the taxpayer’s circumstances and the applicable US regulations.

Where a foreign tax is not creditable—or relief is limited—the provider may face a higher combined tax burden.

HTJ.Tax insight: US taxpayers should assess foreign tax credit treatment before accepting a withholding obligation as an unavoidable cost. Treaty relief, reduced withholding rates, refund procedures and creditability should all be reviewed.

3. Contractual Friction and Gross-Up Clauses

Cross-border contracts often determine who ultimately bears the cost of withholding tax.

A gross-up clause may require the customer to increase the payment so that the provider receives an agreed net amount after withholding. However, the effectiveness of such a clause depends on its wording, the applicable law and the commercial relationship.

Potential challenges include:

• Customers resisting additional costs or requesting lower prices.
• Local law restricting contractual arrangements or requiring withholding regardless of the agreed terms.
• Exchange controls or administrative procedures delaying payment and tax documentation.
• Disputes over whether the customer must provide withholding certificates or assist with refund claims.

A contract cannot, by itself, override a statutory withholding obligation. Nor does a gross-up clause necessarily guarantee that the provider will recover every tax cost.

HTJ.Tax insight: Contracts should clearly address withholding responsibilities, gross-up obligations, documentation, cooperation with refund claims and the consequences of changes in applicable tax law.

The HTJ.Tax Advisory Protocol1. Strengthen Cross-Border Contracts

Review payment and tax clauses before entering new markets or signing material service agreements.

Define responsibility for withholding taxes, specify whether payments are gross or net of withholding, establish any gross-up mechanism and require the provision of official tax deduction certificates where applicable.

2. Review Treaty Protection and Available Relief

Identify the domestic withholding rules and the relevant tax treaty before assuming that a payment is exempt or subject to a reduced rate.

Assess whether the income falls within business profits, technical service fees, automated digital services, royalties or another category under the applicable legal framework.

Confirm any relevant treaty entitlement, beneficial ownership, procedural requirements and anti-abuse conditions. Commercial substance and accurate documentation can be important, but neither guarantees treaty relief in every case.

3. Model the Exposure Before Pricing

Build withholding scenarios into pricing and margin forecasts for cross-border contracts.

For each material market, evaluate:

• Potential withholding rates and the payment categories covered.
• Whether treaty relief or domestic exemptions may apply.
• The expected impact on net receipts and operating margins.
• Possible foreign tax credit, deduction or refund treatment.
• The contractual allocation of tax costs between provider and customer.

Where uncertainty remains, model alternative outcomes rather than assuming the most favourable tax treatment.

4. Monitor Legal Developments

Distinguish existing domestic withholding rules and treaty provisions from proposed or newly negotiated international measures.

The UN Model Tax Convention is a reference for treaty negotiations; its provisions do not automatically amend existing bilateral treaties. Businesses should monitor whether relevant provisions are adopted into an applicable treaty or enacted through domestic legislation.

Strategic Takeaway

The growing focus on source-country taxation of cross-border services can change the economics of international business—even where a provider has no traditional physical presence in the customer’s country.

For businesses with narrow margins, the difference between taxation of gross revenue and taxation of net profits can be substantial. Contract terms, treaty eligibility, foreign tax credit treatment and pricing strategy therefore need to be considered together.

HTJ.Tax perspective: Cross-border service pricing must account for where payments may be taxed, whether relief is available and who ultimately bears the cost. Proactive tax modelling and carefully drafted contracts can help businesses identify exposure before it erodes profitability.

Further Reading

• United Nations, Model Tax Convention and international tax publications.
• Internal Revenue Service, Foreign taxes that qualify for the Foreign Tax Credit.
• Internal Revenue Service, Publication 514: Foreign Tax Credit for Individuals.

This overview is for general informational purposes. The treatment of cross-border service payments depends on the applicable domestic law, treaty provisions, transaction classification and taxpayer-specific circumstances.

Synchronizing Corporate Structure with Personal Residency

For years, digital entrepreneurs, remote founders and cross-border consultants have operated international companies while moving between countries, sometimes without establishing a clearly documented personal tax residency position.

At HTJ.Tax, we see why this approach can create significant uncertainty. An offshore company does not automatically separate its owner from the tax rules of the country where they live, work or manage the business.

Where personal residency and corporate arrangements are not properly assessed, both the individual and the company may face tax audits, competing claims of tax residence, reporting issues and unexpected liabilities.

The objective is not simply to choose a favourable jurisdiction. It is to ensure that personal tax residency, corporate management and operational reality are aligned with the applicable legal framework.

1. The Enforcement Landscape: CRS, FATCA and CARFInternational Information Exchange

Tax transparency frameworks have expanded the ability of authorities to obtain and exchange information across borders.

• Common Reporting Standard (CRS): Provides for the automatic exchange of specified financial account information between participating jurisdictions, subject to applicable rules.
• Foreign Account Tax Compliance Act (FATCA): Establishes US-focused reporting and withholding requirements relating to certain foreign financial accounts and entities.
• Crypto-Asset Reporting Framework (CARF): Establishes a framework for the automatic exchange of specified tax-relevant information concerning certain crypto-asset transactions. Implementation and exchange arrangements depend on participating jurisdictions and their applicable rules.

These frameworks do not automatically determine whether a person owes tax. Instead, they can give tax authorities information to compare against tax returns, residency claims and ownership records.

Reporting Discrepancies

Inconsistencies between bank records, corporate documentation, beneficial ownership information and tax filings can prompt further questions.

For example, an individual may declare tax residence in one country while financial institutions hold self-certification information identifying another. Such a discrepancy does not necessarily establish non-compliance, but it may require explanation and supporting evidence.

HTJ.Tax insight: Tax records should tell a consistent, factually accurate story. Where circumstances change, relevant declarations and filings should be reviewed and updated as required.

Unclear Personal Tax Residency

Moving frequently between countries or claiming non-residency does not automatically eliminate tax liability.

Each jurisdiction applies its own domestic residence tests. Relevant factors may include days of presence, habitual home, personal and economic connections, and other statutory criteria. Tax treaties may help resolve dual-residence cases, but the outcome depends on the specific treaty and circumstances.

Citizenship can also be relevant in certain systems, notably the United States, which generally taxes US citizens on worldwide income regardless of where they reside, subject to applicable exclusions, credits and other rules.

The key question is not simply where someone spends their time, but how the relevant tax laws classify their circumstances.

2. Corporate Risks: Effective Management and CFC RulesPlace of Effective Management and Corporate Residence

An offshore company may face corporate tax exposure in a country where its owner or senior executives make key business decisions.

Depending on local law and the applicable tax treaty, authorities may examine where strategic decisions are made, where senior management operates and how the company is actually controlled.

The place-of-effective-management test is not identical in every jurisdiction, and some countries use different or additional corporate-residence tests. Managing a company from abroad does not automatically make it tax-resident there, but it can create material risk that needs to be assessed.

Potential consequences may include:

• Corporate tax residence disputes.
• Foreign registration and tax filing obligations.
• Questions about profit attribution and transfer pricing.
• Additional payroll or other local compliance requirements.

Controlled Foreign Corporation (CFC) Rules

CFC regimes can, in certain circumstances, attribute income earned by a foreign company to its controlling shareholders before that income is distributed.

The rules vary considerably by country and depend on matters such as ownership, control, income classification, exemptions and applicable thresholds.

For US taxpayers, relevant provisions include Subpart F and Global Intangible Low-Taxed Income (GILTI), now subject to the US international tax rules as amended over time. These provisions can result in current US tax on certain income of controlled foreign corporations, subject to the applicable requirements and relief mechanisms.

HTJ.Tax insight: An offshore company is not automatically tax-efficient for its owner. The shareholder’s residence, citizenship where relevant, ownership percentage and the nature of the company’s income can materially change the result.

3. The HTJ.Tax Advisory ProtocolStep 1: Establish a Clear Personal Tax Position

Before relocating, incorporating a company or restructuring existing holdings, assess the individual’s tax residence under the relevant domestic rules and any applicable treaty.

Document the factual basis for the position, including travel history, homes, personal and economic connections, and relevant business activities.

Where two jurisdictions may claim residence, obtain advice on the interaction between their rules rather than assuming that leaving one country automatically ends tax residence there.

Step 2: Align Financial, Ownership and Tax Records

Review whether banking information, beneficial ownership filings, corporate records and tax returns accurately reflect the current circumstances.

Correct outdated information where required and maintain supporting documentation for material changes in residence, ownership or business operations.

Step 3: Document Where the Company Is Managed

Maintain reliable evidence of how the company actually operates, including:

• Board decisions and governance records.
• Delegations of authority and management responsibilities.
• Locations from which key strategic decisions are made.
• Contracts, business functions and operational arrangements.

Documentation should reflect real practices, not simply create the appearance that management occurs in a particular jurisdiction.

Step 4: Assess Shareholder-Level Tax Exposure

Review whether CFC rules, anti-deferral provisions, withholding taxes or other shareholder-level rules may apply.

Consider the combined position of the individual and the company, including how income is classified, when it may be taxed and whether foreign tax relief is available.

Step 5: Reassess When Circumstances Change

A new country of residence, a major business expansion, a change in ownership or a shift in management location can alter the tax analysis.

Review the structure periodically and before significant transactions or relocations rather than relying indefinitely on advice based on an earlier set of facts.

Strategic Takeaway

International mobility does not eliminate tax obligations, and incorporating offshore does not automatically separate personal tax exposure from corporate tax risk.

A robust international structure requires a defensible personal residency position, accurate reporting, appropriate governance and a clear understanding of how the company is managed and taxed.

HTJ.Tax perspective: Personal residency and corporate structure should be planned together. The strongest approach is not built on assumptions about non-residency or offshore incorporation, but on documented facts, jurisdiction-specific advice and compliance with the rules that actually apply.

This overview is for general informational purposes. Tax residence, corporate residence, information exchange and CFC rules vary by jurisdiction and should be assessed in light of the individual facts and applicable law.

The Death of the Letterbox Entity: Why Substance Matters

For years, internationally mobile founders, digital service providers and private wealth clients have used low-tax jurisdictions, nominee directors and registered-office services to structure their cross-border affairs.

But incorporation alone does not guarantee tax advantages.

At HTJ.Tax, we emphasize that entities lacking genuine commercial purpose, effective governance or activities consistent with their stated role may face increased scrutiny from tax authorities. Depending on the applicable law and treaty, these weaknesses can undermine treaty benefits, create corporate residence disputes or trigger additional reporting and tax obligations.

The issue is not whether a company operates in a low-tax jurisdiction. It is whether its legal structure, decision-making and actual activities stand up to scrutiny.

The Regulatory Pressure1. OECD Anti-Treaty-Abuse Rules

The OECD’s Base Erosion and Profit Shifting (BEPS) project introduced measures intended to prevent the inappropriate use of tax treaties.

BEPS Action 6 and the Multilateral Instrument (MLI) have helped implement anti-treaty-abuse provisions, including the Principal Purpose Test (PPT) where applicable.

Under the PPT, a treaty benefit may be denied if, having regard to all relevant facts and circumstances, it is reasonable to conclude that obtaining that benefit was one of the principal purposes of an arrangement or transaction, unless granting the benefit would be consistent with the object and purpose of the relevant treaty provisions.

This is not a universal rule that automatically disqualifies every low-tax or holding company. The outcome depends on the treaty, the provisions in force and the facts of the arrangement.

Why it matters: A structure that exists primarily to obtain treaty advantages, without a convincing commercial or legal rationale, may be more vulnerable to challenge.

2. International Information Exchange

Cross-border information exchange has increased the ability of tax authorities to obtain and compare information about financial accounts, entities and individuals.

The Common Reporting Standard (CRS), beneficial ownership requirements and other information-sharing mechanisms can help authorities identify discrepancies between reported ownership, account information and tax declarations.

These systems do not automatically make a structure unlawful. However, they make it increasingly important that ownership, control, residency and income reporting are accurate and consistent.

Why it matters: Confidentiality should never be confused with an absence of reporting obligations.

3. CRS, FATCA and Data Matching

CRS and the US Foreign Account Tax Compliance Act (FATCA) are distinct reporting frameworks with different scopes and requirements.

Depending on the relevant rules and reporting relationships, financial institutions may report information that helps tax authorities assess whether an individual or entity has correctly disclosed its tax residence, account ownership or relevant income.

A mismatch does not automatically establish tax avoidance or wrongdoing, but it can prompt questions and requests for supporting documentation.

Why it matters: Information supplied to banks, tax authorities and corporate registries should be reviewed for consistency, with appropriate corrections made where necessary.

The HTJ.Tax Substance Standard

A resilient international structure should reflect the business or investment activity it is designed to support. The appropriate level of substance depends on the entity’s function, the jurisdiction’s laws and the tax benefits being claimed.

1. Effective Management and Governance

Directors should understand their responsibilities and exercise genuine decision-making authority appropriate to their roles.

Supporting evidence may include:

• Meaningful board discussions and properly recorded decisions.
• Clear delegation of authority and oversight responsibilities.
• Governance records consistent with how decisions are actually made.
• Appropriate supervision of service providers and business activities.

Appointing a nominee director or holding formal board meetings is not, by itself, proof of effective management.

2. A Defensible Commercial Rationale

The reasons for selecting a jurisdiction should be documented and consistent with the entity’s actual purpose.

Relevant considerations may include access to customers or markets, investment strategy, financing arrangements, regulatory requirements, regional operations and legitimate risk management.

Tax efficiency can be a valid consideration, but the structure should also be assessed against applicable anti-abuse rules and the substance of the underlying arrangement.

3. Operational Substance Proportionate to the Business

The entity’s resources and activities should make sense in light of the functions it performs.

Depending on the business, relevant factors may include:

• Personnel and decision-making capabilities.
• Premises or facilities where appropriate.
• Banking arrangements and operating expenditure.
• Contracts, assets and commercial relationships.
• Evidence that the entity performs the functions attributed to it.

Not every company needs a large local office or extensive staff. A holding company, investment vehicle and operating business may have very different legitimate substance requirements.

The objective is not to create an artificial appearance of activity. It is to ensure that the structure accurately reflects the functions it performs and meets the requirements that apply to it.

4. Consistent Residency and Ownership Reporting

Personal tax residence, corporate tax residence, beneficial ownership and treaty entitlement are related but distinct questions.

Review whether filings, bank records, corporate documents and tax returns consistently reflect the relevant facts. Where personal and corporate arrangements span multiple jurisdictions, assess the interaction between domestic rules and applicable treaties.

A registered office does not, by itself, establish corporate tax residence or guarantee treaty entitlement.

The HTJ.Tax Practical Checklist

Before establishing or restructuring an international entity, consider the following:

1. Define the purpose: Document the commercial, operational or investment rationale for the structure.
2. Map decision-making: Identify who actually makes key decisions, where they are made and how authority is exercised.
3. Test treaty access: Review the relevant treaty, applicable PPT or other limitation-on-benefits provisions, and any additional entitlement requirements.
4. Review reporting: Reconcile beneficial ownership, financial account and tax-residency information.
5. Match substance to function: Ensure that governance, personnel, expenditure and operational arrangements are appropriate to the entity’s real activities.
6. Reassess when circumstances change: Relocation, new business activities, changes in ownership or shifts in management can affect the analysis.

Strategic Takeaway

The era of relying on a registered address and formal incorporation alone to support an international tax strategy is increasingly difficult to sustain.

A company does not necessarily need a large physical presence to be legitimate, and a low-tax jurisdiction is not inherently problematic. What matters is whether the entity’s purpose, governance, activities and reporting withstand the relevant legal tests.

HTJ.Tax perspective: Sustainable international tax planning begins with the reality of the business—not just the paperwork. Structures should be commercially coherent, properly governed, accurately reported and assessed against the specific domestic laws and treaty provisions that apply.

This overview is for general informational purposes. Treaty entitlement and substance requirements vary by jurisdiction and arrangement.

Accidental Permanent Establishment: The Hidden Risks of Remote Work

For distributed technology companies, consultancies and internationally mobile executives, cross-border mobility is not just a personal tax issue. It can also expose an operating company to foreign corporate income tax, payroll withholding obligations and transfer-pricing scrutiny.

At HTJ.Tax, we recognize that a founder’s or employee’s decision to work abroad can have consequences beyond individual tax residency. A home office, temporary rental or foreign client location may raise questions about whether a company has established a Permanent Establishment (PE) or created dependent-agent exposure in another jurisdiction.

The outcome depends on the facts, local law and the applicable tax treaty. Remote work does not automatically create a PE, but failing to assess the risks before an international move can leave a business facing unexpected compliance costs.

Three Operational Risks1. Home-Office Permanent Establishment

When an employee or founder regularly works from a home office abroad, tax authorities may examine whether that location qualifies as a fixed place of business of the enterprise.

Relevant considerations can include the duration and regularity of the arrangement, the nature of the work performed, the company’s commercial reasons for the arrangement and whether the premises are effectively available to the business.

The fact that an employee chooses to work abroad does not, by itself, settle the question. The analysis depends on the applicable treaty and the specific circumstances.

Business risk: A company may need to register, file corporate tax returns or attribute profits to a foreign PE if the relevant legal conditions are met.

2. Dependent-Agent Permanent Establishment

An employee or representative working abroad may create additional exposure if their activities satisfy the applicable treaty’s dependent-agent PE provisions.

Risk factors can include negotiating important commercial terms, habitually concluding contracts or playing the principal role leading to contracts that are routinely concluded without material modification by the enterprise.

The precise test varies by treaty. Contract-signing authority is not the only factor that may matter, and simply prohibiting an employee from signing contracts may not eliminate the risk if their actual activities fall within the applicable rules.

Business risk: The company may face foreign corporate tax exposure, additional reporting obligations and questions about the profits attributable to its local activities.

3. Founder-Led Businesses and Effective Management

Founder-led businesses can face more complex questions when key strategic, commercial or operational decisions are made from another country.

Depending on local law and the applicable treaty, authorities may examine whether the company has a PE, whether its place of effective management affects corporate residence, or whether other local registration, payroll or reporting obligations arise.

These are separate legal tests and should not be treated as interchangeable. A founder’s physical presence abroad does not automatically change the company’s tax residence or establish a PE.

Business risk: A move intended to improve the founder’s personal tax position could create corporate tax exposure or additional compliance obligations for the operating business.

The HTJ.Tax Risk-Management Strategy1. Formalize Cross-Border Remote-Work Policies

Establish a documented approval process before employees or founders begin working from another country.

Policies should address:

• Permitted countries and expected duration of work.
• Whether the company requires or provides access to local premises.
• The employee’s commercial responsibilities and decision-making authority.
• Restrictions or approval requirements for negotiations and contract execution.
• Procedures for escalating arrangements that may create tax exposure.

A written policy is useful, but actual working practices must be consistent with it.

2. Control Contracting and Commercial Activities

Review who negotiates, approves and concludes contracts in each jurisdiction.

Establish clear procedures for contract approvals and record where significant commercial decisions are made. Assess the substance of an individual’s activities rather than relying solely on formal job titles or contractual restrictions.

3. Monitor Presence and Business Functions

Track international travel, working locations, days of presence and the functions performed by employees and founders.

Do not rely exclusively on a single day-count threshold. PE exposure can arise under tests that focus on the nature, regularity and duration of business activities, while payroll, immigration and individual tax residence rules may use different criteria.

4. Review Corporate and Individual Tax Exposure Together

Before approving a relocation or long-term remote-work arrangement, assess both the individual’s tax position and the company’s potential obligations.

The review may need to cover:

• Corporate income tax and PE registration.
• Payroll withholding and employer social security obligations.
• Corporate residence and management location.
• Transfer pricing and the attribution of profits to local activities.
• Local employment, immigration and business-registration requirements.

Not every issue will arise in every case, but considering them together helps prevent personal tax planning from creating overlooked business risks.

Strategic Takeaway

International mobility can create corporate tax consequences even when the original decision concerns only an employee or founder.

For businesses operating across borders, the objective is not to prohibit remote work. It is to understand the relevant legal tests, document the commercial arrangement and assess exposure before the work begins.

HTJ.Tax perspective: Personal tax planning and corporate tax risk must be assessed together. A structured cross-border remote-work policy, supported by monitoring and jurisdiction-specific advice, can help companies manage PE exposure before it becomes an expensive compliance problem.

This overview is for general informational purposes. The outcome in any particular case depends on domestic law, the applicable tax treaty and the facts of the working arrangement.

Mobile Wealth Under Pressure: The New International Tax Landscape

International tax cooperation is increasingly extending beyond multinational corporations to high-net-worth individuals (HNWIs), offshore assets and cross-border private wealth.

The United Nations Framework Convention on International Tax Cooperation represents a significant step toward a more inclusive international tax system. Its negotiating agenda includes the taxation of HNWIs, reflecting growing interest in how countries can cooperate to address tax avoidance and evasion involving mobile wealth.

However, the distinction between policy direction and enforceable law remains essential. The Convention is being negotiated, and proposals discussed through this process do not automatically create new tax liabilities for individuals.

1. The Policy Shift: From Corporate Taxation to Private Wealth

International tax debates have traditionally focused heavily on multinational enterprises, profit allocation and the taxation of cross-border business activities. The UN process places additional emphasis on the taxation of HNWIs and the challenges created by international mobility.

Potential areas of cooperation include:

• Tax transparency: Improving the exchange of information relevant to identifying income, assets and ownership.
• Beneficial ownership: Strengthening the ability of tax authorities to identify the individuals who ultimately own, control or benefit from legal structures.
• Cross-border tax compliance: Addressing arrangements that exploit differences between national tax systems.
• Residency-related planning: Examining the tax implications of changes in residence or citizenship where these affect tax obligations.

These areas are part of an evolving policy discussion. The specific obligations that may ultimately apply will depend on the final international instruments and their implementation by participating jurisdictions.

2. Emerging Risks for Mobile WealthA. Greater Transparency and Reporting

International information exchange and beneficial ownership requirements can make it more difficult to rely on complex structures without adequate documentation.

Trusts, private foundations, holding companies and other wealth vehicles may attract closer scrutiny where ownership, control, source of funds or tax treatment is unclear.

Practical implication: Individuals should ensure that ownership records, tax filings, trust documentation and disclosures are accurate and consistent across relevant jurisdictions. A structure’s legal validity does not, by itself, establish that its tax treatment is correct.

B. Exit Taxes and Changes in Tax Residence

Some jurisdictions already impose exit taxes on certain unrealized capital gains when an individual ceases to be tax-resident. Other countries may consider changes to their rules as international tax cooperation develops.

An exit tax can create a liability before an asset is sold, potentially leaving the taxpayer with a tax bill but limited cash available to pay it.

Exposure depends on the jurisdiction’s legislation, the assets involved, the applicable valuation rules and any available deferral or relief provisions.

Practical implication: A planned relocation should be reviewed before the move, particularly where the individual owns a business, substantial shareholdings, investment portfolios or other assets with significant unrealized gains.

C. Conflicting Residence Claims and Double Taxation

Two jurisdictions may consider the same individual tax-resident under their respective domestic rules. Tax treaties may provide residence tie-breaker rules, but the outcome depends on the treaty and the individual’s circumstances.

Potential complications include:

• Different interpretations of personal and economic connections.
• Disagreement over the source or character of income and capital gains.
• Different rules for taxing trusts, distributions and investment income.
• Limited access to relief where domestic law and treaty procedures do not fully resolve the conflict.

Practical implication: Residency planning must consider the complete factual picture, not simply the number of days spent in each country.

3. The HTJ.Tax Advisory PlaybookStep 1: Establish a Defensible Tax Residency Position

Review the relevant domestic residence tests and any applicable treaty provisions. Consider days of presence, habitual home, family and personal ties, economic interests, business activities and other legally relevant factors.

Maintain contemporaneous evidence supporting the position taken. No single factor should be assumed to determine residence in every jurisdiction.

Step 2: Review Wealth-Holding Structures

Assess whether trusts, foundations, companies and other arrangements have a clear legal and commercial purpose and are administered consistently with their governing documents.

Review beneficial ownership records, reporting obligations, governance arrangements and the tax consequences for founders, settlors, trustees, beneficiaries and shareholders as relevant.

Step 3: Plan Major Liquidity Events Early

Before a business sale, restructuring, substantial distribution or international relocation, evaluate the potential tax consequences.

This may include exit taxes, capital gains tax, withholding taxes, valuation requirements, payment deadlines and the availability of treaty relief or tax deferrals.

Step 4: Coordinate Advice Across Jurisdictions

Where wealth spans multiple countries, separate advice from individual local advisers may not be enough. The analysis should consider how each jurisdiction treats the same person, asset, structure or transaction.

Identify potential mismatches early and establish a coordinated compliance and documentation process.

Step 5: Monitor Legislative Developments

Distinguish between:

• Existing law: Rules already enacted and applicable to the taxpayer.
• Adopted international instruments: Agreements whose legal effect depends on their terms, entry into force and relevant implementation requirements.
• Negotiating proposals: Possible future commitments that may change before adoption.

Planning should respond to current obligations while allowing for credible future developments, rather than treating every proposal as an immediate legal requirement.

Strategic Takeaway

Cross-border wealth planning increasingly requires defensible tax residency positions, transparent ownership records, careful liquidity planning and coordinated advice across jurisdictions.

For HNWIs, the objective is not simply to select a favourable jurisdiction. It is to understand how multiple legal systems interact, comply with applicable reporting rules and anticipate tax consequences before a relocation or major transaction occurs.

HTJ.Tax perspective: Robust international wealth planning combines legal substance, accurate disclosure and forward-looking tax analysis. Emerging UN initiatives deserve close attention, but proposed measures must remain clearly distinguished from enacted law and existing treaty obligations.

Further Reading

• United Nations, Terms of Reference for a UN Framework Convention on International Tax Cooperation.
• United Nations, Fifth Session of the Intergovernmental Negotiating Committee, August 2026.
• OECD, Taxing Capital Gains, including an overview of exit taxation approaches across jurisdictions.

UN Protocol 1 & the Future of Remote ServicesWhat Cross-Border Businesses Need to Know

The traditional assumption that a country generally needs a physical permanent establishment (PE) before taxing a foreign business's profits is facing increasing pressure.

The United Nations is examining how international tax rules should address cross-border services in an increasingly digitalised economy. Its work on Protocol 1 under the proposed UN Framework Convention on International Tax Cooperation could influence how source countries tax certain payments to non-resident service providers.

For SaaS companies, consulting firms, software agencies and remote-first businesses, the central question is whether the countries where their customers are located may gain additional taxing rights even when the service provider has no conventional physical presence there.

The potential impact extends beyond tax rates. It could affect profit margins, contract negotiations, pricing strategies and the availability of foreign tax credits.

1. Gross Withholding and Profit Margins

One of the principal concerns is taxation based on gross service fees rather than net business profits.

Gross-basis withholding is calculated on the payment itself, without necessarily deducting the service provider's operating expenses. For a business with substantial payroll, software, subcontracting or infrastructure costs, this can create a disproportionate tax burden.

Consider a consultancy that invoices €100,000 for international services and earns €15,000 in profit.

If a hypothetical 10% gross withholding tax applied, the tax withheld would be €10,000 — approximately two-thirds of the consultancy's profit before considering any relief or other tax consequences.

This illustrates why the tax base matters as much as the headline rate.

The UN's Protocol 1 negotiations address the taxation of income from cross-border services. Their final outcome will determine the scope of any new obligations. The existing UN Model Tax Convention provisions on fees for technical services (Article 12AA) and automated digital services (Article 12B) provide relevant context, but they should not be treated as though every provision has automatically become part of Protocol 1.

2. US Foreign Tax Credit Risks

For US taxpayers, foreign withholding taxes create a separate question: can the tax be credited against US tax?

Under Internal Revenue Code Sections 901 and 903, certain foreign income taxes and qualifying taxes imposed in lieu of income taxes may be creditable. But the fact that a foreign tax has been withheld does not automatically make it eligible for a US foreign tax credit.

The analysis depends on the character of the foreign levy, the applicable US creditability rules, the taxpayer's circumstances and any relevant treaty provisions.

A gross-basis withholding tax may create double-taxation exposure if it does not qualify for a credit, if the credit is limited, or if the foreign tax exceeds the amount that can be credited against the corresponding US tax liability.

For this reason, US businesses should assess foreign withholding exposure before entering into contracts or expanding into new markets.

The IRS guidance on qualifying foreign taxes explains the principal requirements.

3. Contractual and Pricing Pressures

Cross-border withholding can also affect commercial negotiations.

A contract may specify that the customer must deduct any withholding tax required by local law. Alternatively, a gross-up clause may require the customer to increase the payment so that the supplier receives the agreed net amount.

Neither approach eliminates the underlying tax. Instead, the contract determines who bears its economic cost.

For example, if a customer is required to withhold tax from a €100,000 invoice, the supplier may receive less than the agreed amount unless the contract provides for a gross-up.

However, customers may resist gross-up clauses, particularly when domestic competitors do not face equivalent withholding obligations.

International service providers could consequently face three commercial pressures:

• Lower net revenue;
• Higher prices for foreign customers;
• Reduced competitiveness against local suppliers.

The appropriate contractual response depends on the governing law, applicable tax rules, bargaining position and commercial relationship.

4. What Businesses Should Review Now

The UN negotiations are not a reason to assume that new withholding obligations already apply to every remote service. Businesses should first identify their current exposure and then monitor developments that could change it.

Audit cross-border payments

Identify service fees, consulting payments, management charges, technical-service fees and digital-service revenue that may be subject to withholding under existing domestic law or treaties.

Review contracts

Check withholding clauses, gross-up obligations, tax indemnities, withholding certificates, refund cooperation and the allocation of responsibility for tax compliance.

Assess structures commercially

Consider whether local entities, regional hubs or other operating arrangements make commercial sense. Any restructuring should reflect genuine business needs and applicable substance, governance and reporting requirements.

Document service delivery

Maintain reliable records showing where services are performed, where personnel work, which entities enter into contracts, where management decisions occur and how revenue is earned.

These records can be important when determining source, PE exposure, withholding obligations and entitlement to treaty relief.

Review foreign tax credit exposure

US taxpayers should evaluate creditability and potential limitations before assuming that taxes withheld overseas will be recoverable through the US tax system.

5. What to Watch in the UN Negotiations

Businesses and advisers should distinguish three separate stages:

Proposals under negotiation: These indicate possible future policy directions but do not, by themselves, create new tax liabilities.

Adopted international instruments: Their legal effect depends on the instrument's terms, entry into force and any applicable ratification or acceptance requirements.

Domestic implementation and treaty interaction: The rules that actually apply to a transaction depend on the relevant domestic law, existing treaty obligations and the legal effect of any new instrument.

The UN's Protocol 1 negotiations have specifically considered the taxation of income derived from cross-border services in a digitalised and globalised economy. The final provisions, their implementation and their interaction with existing tax treaties will determine the practical consequences for businesses.

Key Takeaway

The future of remote-service taxation may involve a greater role for source-country taxing rights, including potential withholding taxes on payments to foreign service providers.

For businesses operating internationally, the risks include reduced margins, contractual disputes, additional compliance costs and double taxation where foreign tax credits or treaty relief are unavailable or insufficient.

But the appropriate response is not to treat every proposal as an existing obligation.

The HTJ.Tax Client Playbook

1. Identify exposure: Map cross-border payments and existing withholding obligations.
2. Protect contractual positions: Review gross-up clauses, tax allocation and documentation requirements.
3. Assess tax relief: Check treaty eligibility, refund mechanisms and foreign tax credit treatment.
4. Document operations: Maintain evidence of where services are delivered and where business activities take place.
5. Monitor legal developments: Track the final Protocol 1 text, adoption, implementation and interaction with existing treaties.

The strategic lesson is to prepare for potential change without confusing a negotiated proposal with binding law. Cross-border businesses that understand their payment flows, contractual allocation of tax costs and available relief mechanisms will be better positioned to respond as international service-tax rules evolve.

OECD vs. UN: Who Shapes the Future of Global Tax?The OECD–UN Divide: Strategic Risks for Cross-Border Businesses

International taxation is entering a period of significant change. For internationally mobile entrepreneurs, digital service providers and cross-border businesses, the debate is no longer only about where profits are taxed. It is also about which countries should have taxing rights, how cross-border services should be treated, and what happens when different jurisdictions impose competing tax claims.

Two major institutions are shaping this debate: the Organisation for Economic Co-operation and Development (OECD) and the United Nations (UN).

Their approaches reflect different priorities in international tax governance. For businesses operating across borders, the resulting divergence could create legal uncertainty, additional compliance costs and greater exposure to double taxation.

1. The Fundamental Divide: Residence vs. SourceThe OECD approach

The OECD has traditionally played a central role in coordinating international corporate taxation through:

• Permanent establishment (PE) rules;
• Transfer pricing and the arm’s-length principle;
• Measures addressing base erosion and profit shifting (BEPS);
• Treaty-based dispute resolution;
• The Two-Pillar Framework addressing the tax challenges of digitalisation.

These mechanisms seek to coordinate taxing rights, reduce profit shifting and provide a degree of consistency across national tax systems.

However, the OECD framework has continued to evolve, including through proposals that seek to allocate some taxing rights to market jurisdictions.

The UN approach

The UN places greater emphasis on inclusive international tax governance and the interests of source countries, particularly developing economies.

UN General Assembly Resolution 78/230 initiated negotiations towards a UN Framework Convention on International Tax Cooperation. The process includes work on the taxation of income from cross-border services and the prevention and resolution of international tax disputes.

The negotiations could influence how countries allocate taxing rights over services supplied across borders, including in increasingly digitalised business environments.

As of August 2026, the UN negotiations had progressed to detailed draft texts, with final texts targeted for submission to the General Assembly in 2027. These remain negotiated instruments rather than automatically applicable tax rules. United Nations: Framework Convention negotiations

2. Why Cross-Border Services Are a Key Battleground

Consider a software-as-a-service (SaaS) business incorporated in one country, with developers working remotely and customers spread across several markets.

Under traditional treaty principles, the source country's ability to tax business profits may depend on whether the business has a permanent establishment there. However, withholding taxes and specific treaty provisions can operate differently.

The UN's work on cross-border services raises the possibility of changes to how source countries tax certain payments to non-resident service providers.

For businesses, the central questions include:

• Can a country tax payments to a foreign service provider without requiring a conventional physical presence?
• Could withholding tax apply to gross service fees rather than net profits?
• How would the new rules interact with existing tax treaties?
• What relief would be available if two countries tax the same income?

These are policy and implementation questions, not a statement that all cross-border services are already subject to new UN withholding taxes.

3. Operational Risk: US Foreign Tax Credits

For US taxpayers with international income, the interaction between foreign withholding taxes and the US foreign tax credit system is particularly important.

Under Internal Revenue Code Sections 901 and 903, qualifying foreign income taxes — and certain taxes imposed in lieu of income taxes — may be creditable against US tax, subject to applicable requirements.

However, not every foreign tax qualifies for a US foreign tax credit.

The analysis generally considers whether the tax is imposed on the taxpayer, represents their legal and actual foreign tax liability, and satisfies the applicable requirements for a creditable income tax or tax imposed in lieu of an income tax.

A gross-basis withholding tax can therefore create a potential double-taxation problem. Its creditability depends on the nature and design of the levy, the applicable US rules and the circumstances of the taxpayer.

For example, a US business might pay tax on its net profits at home while a foreign jurisdiction withholds tax from the full amount of a service invoice. If the foreign levy does not qualify for a US foreign tax credit, or the available credit is limited, some of that foreign tax may become an additional cost.

Businesses should not assume that every amount withheld overseas will automatically be creditable in the United States. IRS: Foreign taxes that qualify for the foreign tax credit

4. Dispute Resolution: When Tax Authorities Disagree

Another challenge arises when jurisdictions disagree about the allocation of taxing rights.

One country may consider income taxable because the business has a local taxable presence. Another may treat the same income as attributable to a different jurisdiction.

Disagreements can concern:

• The existence of a permanent establishment;
• The source and character of income;
• Transfer pricing adjustments;
• Withholding tax obligations;
• Eligibility for treaty relief;
• The availability and calculation of foreign tax credits.

Existing tax treaties may provide mutual agreement procedures (MAP) through which competent authorities seek to resolve disputes.

However, the availability of binding arbitration and other dispute-resolution mechanisms varies by treaty and instrument.

The UN negotiations include a dedicated workstream on preventing and resolving international tax disputes. Their eventual effect will depend on the agreed text, adoption, implementation and interaction with existing treaties.

For cross-border businesses, the practical priority is to understand the dispute-resolution mechanisms that apply to each relevant jurisdiction today.

5. Why Middle-Market Businesses May Be Particularly Exposed

Large multinational groups often have specialist tax teams and the resources to manage complex international compliance.

Smaller and middle-market businesses may have fewer resources, even when they operate across multiple jurisdictions.

This is particularly relevant for:

Distributed SaaS businesses: Revenue, employees, intellectual property and customers may be spread across different countries.

International consultancies: Service fees may be subject to different source-country withholding rules and documentation requirements.

Remote-first companies: Employees and founders working from different jurisdictions can create questions around personal residence, payroll and corporate taxable presence.

International family offices: Multiple entities, investments and cross-border payments can increase the complexity of reporting and tax coordination.

The risk is not limited to the amount of tax payable. It also includes the cost of professional advice, registrations, filings, documentation and resolving disputes.

6. Strategic Priorities for International Tax Advisers

Businesses should prepare for possible changes without treating proposals as though they are already binding law.

Review service agreements

Examine withholding-tax clauses, tax gross-up provisions, responsibility for local taxes and the allocation of VAT or GST obligations.

Map cross-border payments

Identify where customers are located, where services are performed, which entity invoices the customer and whether withholding obligations may arise.

Assess foreign tax credit eligibility

For US taxpayers, determine whether foreign taxes meet the applicable creditability requirements. Consider whether treaty relief, a reduced withholding rate, a refund claim or another mechanism may be available.

Review corporate presence and tax residence

Assess where key management decisions are made, where employees work, and whether business activities could create tax obligations in additional jurisdictions.

Monitor international developments

Distinguish between proposals under negotiation, adopted international instruments, enacted domestic legislation and rules already in force.

The objective is to prepare for credible risks without restructuring a business solely in anticipation of provisions that may change.

Key Takeaway

The OECD–UN divide reflects a broader debate about the future of international taxation.

The OECD has developed extensive frameworks for coordinating corporate taxation, addressing profit shifting and resolving cross-border disputes. The UN is negotiating a broader international framework that places greater emphasis on inclusive participation, source-country taxing rights and international cooperation.

For internationally mobile entrepreneurs, the potential risks include:

• Greater exposure to source-country withholding taxes;
• Foreign taxes that may not qualify for full US foreign tax credit relief;
• Overlapping taxing rights and double taxation;
• Additional compliance costs;
• Uncertainty over how future dispute-resolution mechanisms will operate.

But these risks must be assessed against the rules that actually apply to each transaction and taxpayer.

In practice

Cross-border businesses should begin by reviewing their existing contracts, payment flows, withholding exposure, tax residence, corporate presence and foreign tax credit eligibility.

They should then monitor the OECD and UN initiatives that could materially affect their operations.

The strategic lesson is not to assume that international tax rules will remain fully harmonised — or to assume that proposed changes are already law.

Sound international tax planning means understanding the rules in force today, identifying where future divergence could matter, and maintaining the flexibility to respond as the international framework evolves.

The OECD–UN Tax Divide: What Global Entrepreneurs Need to Know

International taxation is entering a new phase. For founders, digital service providers, internationally mobile entrepreneurs and remote businesses, the debate is no longer only about where profits are taxed. It is increasingly about which countries should have taxing rights, how cross-border services should be taxed, and how disputes between tax authorities should be resolved.

Two major initiatives are shaping this debate: the OECD's Two-Pillar Framework and the United Nations Framework Convention on International Tax Cooperation.

Both seek to address challenges in international taxation, but they reflect different priorities and approaches to allocating taxing rights. The UN framework remains under negotiation, and its proposed provisions should not be confused with binding domestic tax rules. United Nations, August 2026

1. Two Competing Approaches to International Tax GovernanceThe OECD: coordinating the existing international tax system

The OECD's work focuses on international tax coordination, corporate profit allocation, transfer pricing, and mechanisms designed to reduce tax avoidance and resolve cross-border disputes.

Its Two-Pillar Framework addresses two major issues:

• Pillar One: seeks to reallocate certain taxing rights over the profits of the largest and most profitable multinational enterprises toward market jurisdictions.
• Pillar Two: introduces a global minimum-tax framework for large multinational groups, generally those with consolidated annual revenues of at least €750 million.

The OECD framework builds on existing international tax arrangements while attempting to adapt them to increasingly digital and globally integrated business models. OECD: International Tax

The UN: a broader, more inclusive framework

The UN Framework Convention on International Tax Cooperation emerged from UN General Assembly Resolution 78/230.

Its objective is to develop a more inclusive international tax framework, with greater participation by countries that believe existing arrangements do not adequately reflect their interests.

The negotiations include proposed instruments addressing:

• International tax cooperation and governance;
• Taxation of cross-border services;
• Prevention and resolution of international tax disputes.

In August 2026, UN member states negotiated draft texts covering these workstreams. The process is ongoing, with the aim of delivering final texts to the General Assembly by 2027. These drafts are proposals under negotiation, not automatically applicable tax rules. United Nations: Framework Convention

2. Why Cross-Border Services Are a Major Flashpoint

For internationally mobile entrepreneurs, the most immediate concern may be the taxation of cross-border services.

Consider a consulting business based in Portugal that provides digital services to customers in another country. The business has no office, employees or other physical establishment in the customer's jurisdiction.

Under traditional treaty principles, the source country's ability to tax the business profits may depend on whether the business has a permanent establishment there, although withholding taxes and special treaty provisions can apply differently.

The UN negotiations consider approaches that could expand source-country taxing rights over certain cross-border services, including circumstances where the provider has no physical presence in the market country.

This is a significant policy debate.

The International Chamber of Commerce has warned that broad gross-basis withholding taxes on service fees could increase administrative complexity, create double-taxation risks and disproportionately affect businesses operating on narrow margins. ICC: Cross-Border Services

The outcome will depend on the final negotiated provisions, their adoption, domestic implementation and their interaction with existing tax treaties.

3. The Main Risks for International EntrepreneursWithholding taxes

A source country may seek to withhold tax from payments made to a foreign service provider.

Where tax is calculated on gross fees rather than net profits, a business with substantial operating expenses could face a tax cost disproportionate to its actual profit.

For example, a business invoicing €100,000 but earning only €15,000 in profit could experience a significant reduction in its margin if a gross-basis withholding tax applied and no effective relief were available.

This is a potential exposure, not a universal rule under the proposed UN framework.

Double taxation

Two countries may assert taxing rights over the same income.

Relief may be available through domestic foreign-tax-credit provisions, tax treaties or mutual agreement procedures, but relief is not always automatic or complete.

Differences in definitions, timing and the characterisation of income can make the problem more complicated.

Greater compliance costs

International businesses may need to review:

• Customer locations and payment flows;
• Service classifications and applicable withholding rates;
• Tax treaty eligibility;
• VAT and GST obligations;
• Local registration and filing requirements;
• Documentation supporting foreign-tax credits.

For smaller businesses, the cost of identifying and managing these obligations can be significant even when the underlying tax liability is modest.

4. What About Mobile Wealth and Beneficial Ownership?

The international tax debate extends beyond corporate profits.

Governments are increasingly interested in transparency, beneficial ownership, cross-border financial information and the effectiveness of international tax cooperation.

These developments may affect internationally mobile founders and high-net-worth individuals, particularly where they use companies, trusts or other arrangements across multiple jurisdictions.

However, it is important to distinguish between transparency initiatives and substantive tax rules.

An information-exchange agreement does not automatically create a tax liability. Nor does a proposal for greater cooperation automatically impose new reporting obligations on every internationally mobile individual.

The relevant questions remain:

• Where is the individual tax resident?
• What income or gains arise?
• Which jurisdiction has taxing rights?
• What reporting requirements apply?
• Are foreign-tax credits or treaty relief available?

5. The Dispute-Resolution Problem

A further challenge is what happens when two tax authorities disagree.

A business may face competing claims over the source of income, the existence of a taxable presence, the applicable withholding rate or the availability of treaty relief.

The UN negotiations include a dedicated workstream on preventing and resolving tax disputes.

For businesses, the objective should be clear: international tax rules must provide not only taxing rights but also workable mechanisms to prevent and resolve double taxation.

The ICC has called for stronger dispute-prevention measures, clearer rules and more effective mutual agreement procedures. ICC: Tax Dispute Resolution

Until the relevant instruments are finalised and implemented, businesses should assess their exposure under the law currently applicable to each transaction.

6. What Businesses Should Do Now

The appropriate response is not to restructure every international business in anticipation of proposals that may change during negotiations.

Instead, businesses should strengthen their existing cross-border tax analysis.

Review contracts. Clarify who bears withholding taxes, whether gross-up clauses apply, and how VAT or GST obligations are allocated.

Map payment flows. Identify where customers are located, where services are performed or used, and whether local withholding rules may apply.

Review tax residency and corporate presence. Ensure personal residence, company management, employees and commercial operations are analysed consistently.

Maintain commercial substance. Ensure entities and arrangements reflect genuine business activity, appropriate governance and accurate records.

Review treaty relief. Check whether a relevant treaty applies, whether the income qualifies for protection, and what documentation is required.

Monitor developments. Distinguish draft proposals from adopted instruments, enacted domestic legislation and rules that are already effective.

7. What the ICC Is Advocating

Business advocacy has focused on making international tax rules predictable and commercially workable.

Key priorities include:

• Clear and consistent definitions of cross-border services;
• Reasonable thresholds for establishing a taxable presence;
• Withholding rules that reflect the economics of service businesses;
• Effective mechanisms to relieve double taxation;
• Alignment between new instruments and existing tax treaties;
• Practical dispute-prevention and resolution procedures.

These concerns are particularly relevant to small and medium-sized businesses, digital service providers and startups that may not have the resources of large multinational groups.

The challenge is to balance countries' legitimate revenue interests with a system that allows cross-border trade and investment to operate predictably.

Key Takeaway

The OECD–UN tax divide reflects a broader debate about how international taxation should evolve.

The OECD has developed an extensive framework for coordinating corporate taxation and addressing profit shifting. The UN is negotiating a broader framework that places greater emphasis on inclusive participation, source-country taxing rights and international dispute resolution.

For internationally mobile entrepreneurs, the practical concern is not that every proposal will automatically become law.

It is that different taxing rights, withholding rules and dispute mechanisms could create additional obligations if proposals are adopted and implemented without sufficient coordination.

In practice

Start with the rules that apply today. Review residence, corporate presence, customer locations, payment flows, treaty eligibility and withholding obligations.

Then monitor the proposed changes that could affect those facts.

International tax planning should be proactive, but it must remain grounded in the distinction between a policy proposal, an adopted international instrument and a binding domestic obligation.

The goal is not to predict every possible tax change. It is to build a business that can respond to change without losing tax certainty, commercial flexibility or compliance discipline.