Our lawyers travel abroad for matters and nobody counts the days — is that a risk?
It is, because the day count is the evidence and the firm does not hold it. Almost every question that follows — whether a lawyer became taxable in the country worked in, whether the firm acquired a presence there, whether relief for a short visit is available — turns on where people were and for how long. A revenue authority can establish that from immigration and client records. A firm that cannot produce its own version is left arguing against the authority's. The record need not be elaborate: dates, country, matter and who travelled, captured as the travel is booked rather than reconstructed from expense claims two years later.
Does seconding a lawyer to a foreign office create a taxable presence?
It can. Legal work is performed where the lawyer is sitting, so a lawyer placed in another country for a sustained period is the firm carrying on its business there rather than visiting. Whether that becomes a taxable presence depends on duration, continuity and what the lawyer actually does — advising the firm's clients on the firm's matters is the firm's business; attending a course is not. A secondment also raises a separate employment question, because the host country may tax the remuneration from the first day, particularly where the host office bears the cost. The two questions have different tests and both should be answered before the lawyer moves.
Do I have to report a client trust account I sign on abroad?
Signing authority is usually enough to bring an account within a personal reporting obligation, even where none of the money is yours and you hold no beneficial interest in any of it. That is the point commonly missed on client and trust accounts: several countries frame their reporting rules around authority over an account rather than ownership of its contents. The consequence is that the duty falls on the individual who signs, not on the firm, and any penalty attaches to that person. Partners and finance staff holding authority over accounts held in another country should each be asked the question directly, because nothing in the firm's own filings will surface it.
Where is legal work taxed when the lawyer flies in to do it?
In principle in the country where the lawyer does the work. That is the starting rule, and treaty relief is the exception to it. Relief for a short visit typically depends on the length of the stay, on the remuneration not being borne by an entity in that country, and on the firm having no presence there; fail any one of those and the country can tax the portion of the lawyer's income earned on its territory. The firm then has a second question of its own, because sustained visits on the same matter can amount to a presence for the firm even where each individual lawyer still qualifies for relief. Days are counted for both tests, on different bases.
Our income allocation does not match where the work was done — does that matter?
Yes, and it matters most when a foreign authority looks at it. Where partnership income keeps its source, the country in which work was performed can claim a share, and the figure it expects to see is the one supported by the firm's own records of who did the work and where. An allocation driven by seniority, by originations or by historical shares is a perfectly defensible way to divide profit between partners, but it is not by itself evidence of where the income arose. Firms that keep the two things separate — a commercial allocation, and a documented sourcing of the income behind it — have far less difficulty when a return is questioned.
Does opening a foreign office change how our partners are taxed?
It changes what has to be filed and often who files it. An office is the clearest form of taxable presence, so the firm will have a filing in that country, a payroll for anyone employed there, and a basis on which profit is attributed to the office. Where the partnership is transparent, partners may themselves acquire filing obligations in that country in respect of the income arising there, whether or not they have ever worked in it. Their home countries then tax the same income and give credit for what was paid. The attribution method agreed when the office opens is the thing every one of those filings depends on.
Do US citizens abroad have to report foreign bank accounts?
Yes, and under two separate regimes with different thresholds and different filing homes — one report to FinCEN covering foreign financial accounts, and one to the IRS with the return covering a broader class of foreign assets. Both are keyed to balances rather than income, so an account earning nothing can still require reporting, and each carries penalties of its own. See filing both.
What is a totalization agreement and how do I use one?
A social security agreement that stops you contributing to two systems for the same work, and lets periods in both count towards benefit eligibility in either. Which system you stay in depends on the agreement's rules for your situation — a seconded employee usually remains in the home system for a set period, a locally hired one usually joins the host system. You evidence it with a certificate of coverage obtained before or shortly after the assignment starts. See certificates of coverage.
