Is There a List of Countries Banned From Doing Business With United States Companies?
The US government maintains a list of countries and entities that are subject to economic sanctions. These sanctions can include restrictions on doing business with US companies. One of the most well-known lists is prepared by the Office of Foreign Assets Control (OFAC), from the US Department of Treasury. This list includes countries such as Iran, North Korea, Syria, and Cuba, among others.
In addition to the OFAC list, there are other lists maintained by different government agencies that include countries and individuals that are subject to sanctions or are prohibited from doing business with US companies. Some examples include: (1) the Bureau of Industry and Security (BIS), which maintains a list of denied parties, for individuals and entities that are prohibited from receiving exports from the US; (2) the US Department of State maintains a list of state sponsors of terrorism, which currently includes Iran, North Korea, Syria, and Sudan; (3) the Department of Commerce; (4) and the US Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) maintains a list of “Specially Designated Nationals” (SDN) which include individuals and entities that are subject to financial sanctions.
What Happens if You Do Business With Prohibited Countries and / or Persons in the United States?
Conducting business with countries or individuals that are subject to sanctions or are on a prohibited list can result in serious legal and financial consequences for US companies. If a US company is found to be in violation of sanctions or export control regulations, it can face fines and penalties from the relevant government agencies. These fines can be substantial, and in some cases, can reach into the millions of dollars. For example, a California company, using a broker, chartered a boat to carry products from Chile to Japan. Unbeknownst to the company, the owner of the chartered boat had ties to the Cuban government. Given that the United States has put several sanctions against Cuba, the company was fined $50,000.00 by the U.S. government for violating said sanctions. Another company in Milwaukee made six shipments of TV sets to a company in Panama; after it was discovered that the Panamanian company had ties to the Cuban government, the Milwaukee company was fined $300,000 for violating the Trading with the Enemy Act.
Additionally, a company found to be in violation of sanctions may also face reputational damage and could be barred from doing business with the US government or other countries in the future. In some cases, individuals involved with the company may also face criminal charges. Criminal charges can include imprisonment from 10 to 30 years, alongside fines ranging from $50,000 to $10 million.
Can You Get Taxed for Profits Made From Business Done With Foreign Companies?
A foreign corporation’s trade or business with a U.S. business can be subject to tax in the United States. This applies not only to U.S. businesses doing business with a foreign person or entity, but also with foreign entities or persons doing business with U.S. businesses. The Internal Revenue Service (IRS) requires you to file taxes under both of the previous scenarios by filing IRS Form 1120-F.
Normally, if you are a foreign company filing these taxes, before you can even conduct business in the U.S., you might be required to apply for an Employer Identification Number (EIN) for use on tax related documents by filing a Form SS-4 with the IRS; this is the only way of acquiring a tax identification number.
However, some countries have tax treaties with the United States, such as, for example, France. When a foreign corporation is entitled to the benefits or the tax treaty between the United States and the country of which the foreign corporation is a tax resident, the way in which U.S. domestic tax laws apply may change. For example, where a foreign corporation is subject to income tax in the United States under the provisions of the Internal Revenue Code (IRC), the terms of the applicable tax treaty may allocate the right to tax the activities that the IRC seeks to tax to another taxing jurisdiction.
