Balancing Profit Control and Trade Harmony Amid Global Tensions
Key Takeaways
Global tax enforcement is tightening, increasing scrutiny on U.S. businesses with international operations.
Combatting corporate profit shifting is a central focus for governments amid economic and political tensions.
International tax policy remains crucial for businesses based in the DMV region, especially those with cross-border transactions, intellectual property, or foreign subsidiaries.
Business owners should review structures to ensure compliance and reduce audit risk, even if their operations are wholly domestic.
Proactive tax planning can preserve profitability and foster long-term international relationships, despite ongoing global challenges.
Global Tensions, Local Impacts: Profit Shifting and What It Means for Your Business in the DMV
The international business environment is more unpredictable than ever. Political friction, trade disputes, and competing economic strategies affect everything from tariffs to tax policies. But one issue remains consistently in focus—combatting corporate profit shifting.
While international relations may be frayed, cooperation on tax matters is gaining ground. Nations are under pressure to protect their tax bases, and that means more oversight of multinational businesses, tighter enforcement, and changes that affect tax planning strategies for businesses based in the U.S.—especially those headquartered in the DMV (District of Columbia, Maryland, Virginia) region.
Even if your company isn't doing billions in global revenue, tightening rules on profit shifting and global tax enforcement can still affect your operations. Let's look at what's changing and what you need to watch for.
What Is Profit Shifting—and Why Is It Under the Microscope?
Profit shifting occurs when a business moves income from a jurisdiction with high taxes (like the U.S.) to a location with lower tax rates (such as the Cayman Islands or Ireland), often through intellectual property licensing, transfer pricing schemes, or intercompany loans.
To be clear, not all tax planning is abusive. But governments worldwide are losing billions due to aggressive profit-shifting strategies. In response, efforts to create fair and transparent global tax systems are gaining momentum—even between countries that disagree on many other fronts.
Organizations like the OECD (Organization for Economic Co-operation and Development) are promoting initiatives such as the BEPS (Base Erosion and Profit Shifting) project and Global Minimum Tax (also called Pillar Two) to level the playing field. And the U.S. government is joining those conversations, despite headwinds in Congress.
For business owners in the DMV area, especially those with overseas ties or ambitions, this global tax shift carries real implications.
Why It Matters for DMV Businesses and High-Net-Worth Individuals
The Washington D.C. metro area is home to a concentration of entrepreneurs, professional service firms, and internationally positioned companies. Government contractors, tech startups with global teams, consultants, and family offices based in the DMV often have financial structures exposed to international tax trends.
Here's how tightening tax cooperation—in spite of broader geopolitical friction—could impact your planning:
1. Increased Scrutiny on Structures and Transfers
If your business uses cross-border entities, intellectual property strategies, or transfer pricing mechanics, you're likely to face more scrutiny in the coming years. IRS enforcement budgets are increasing, and audits will focus on transactions between related entities in different jurisdictions.
Example: A Virginia-based software startup licenses its code to a newly formed subsidiary in Ireland. Even if legal, such arrangements will require airtight documentation and strategic review to survive scrutiny.
Recommendation: Business owners should conduct internal audits or seek professional reviews of cross-border agreements, royalty arrangements, and cost-sharing formulas. The sooner these are addressed, the better your risk posture will be.
2. Heightened Transparency Expectations
Even for simpler organizations, the global push for tax transparency is reaching local businesses. Requirements such as beneficial ownership disclosures, financial reporting under FATCA or CRS, or country-by-country reporting for large companies will continue to expand.
Example: A D.C.-based consulting business with international clients may find itself needing to report foreign income or disclose beneficial ownership interests, even if the owners reside entirely in the U.S.
Recommendation: Keep meticulous records and stay current on what disclosure rules apply to your entity type. Errors or omissions, even if unintentional, can create real legal exposure.
3. Subtle Impact on Domestic Tax Planning
Even if your operations never touch another country, your overall tax position may still be affected. Why? Because states and the federal tax system increasingly conform to international developments.
Example: Maryland conforms in part to federal tax law changes. If global standards affect federal deductions or income recognition, your state tax returns may change too.
Recommendation: Businesses should work with tax professionals to model not only current-year returns, but multi-year projections based on possible law changes. Staying agile is a competitive advantage.
Which Businesses and Entities Are Most Exposed?
You might be wondering: "Does all this apply to my business?" If your company touches global markets, owns IP, or has family investments overseas, the answer is likely yes.
Here's a short list of common DMV-based entities affected:
LLCs and S-Corps with foreign partners, clients, or suppliers
Foreign-owned LLCs operating in the U.S.
Startups holding intellectual property overseas
Government contractors relying on intercompany cost-sharing
Estates or trusts with offshore assets
Professional service firms with foreign income
Each situation carries its own risks—and opportunities. While enforcement is increasing, so is the chance to structure your business smartly before problems arise.
Estate and Tax Planning Considerations
High-net-worth individuals and families in Maryland, Virginia, and Washington, D.C., also need to be aware of how international tax enforcement might affect trusts, wealth transfers, and legacy planning.
You may not consider your estate "global" in nature. But even one foreign bank account or real estate investment can trigger a maze of compliance issues—from FBAR reporting to FATCA rules.
In our practice at Thienel Law, we often see families surprised by foreign reporting requirements after a loved one passes, or when migrating trusts internationally. These issues can lead to significant penalties if not anticipated.
If your estate plan involves:
Offshore accounts
Foreign real estate
Non-U.S. beneficiaries
International trusts
Cross-border business ties
—then it's crucial to evaluate the plan under the lens of increasing global tax transparency.
Strategic Planning in a Shifting Environment
Given the current landscape, doing nothing is not a strategy. Proactive planning stands out as the best way to protect your business and wealth from avoidable consequences.
Here are a few strategic areas we help clients prioritize:
Review Corporate Structures
Even long-standing entities may be using outdated strategies. A periodic review with a trusted business attorney can uncover risks and open up better alternatives for achieving your goals.
For example, if your business has grown substantially or added foreign investors, an LLC might no longer be the most tax-efficient entity type.
Update Operating Agreements and Ownership Records
Audit risk increases sharply when documentation is incomplete or outdated. International tax enforcement relies heavily on document review—so make sure your internal records tell a consistent, defensible story.
Do your operating or shareholder agreements address transfer pricing, IP ownership, or intercompany service fees? If not, now is the time to revisit them.
Improve Communication Between Your Legal and Tax Advisors
Too often, attorneys and CPAs work in silos. When it comes to cross-border tax planning or resolving corporate reporting issues, that disconnect can cost more than you think.
At Thienel Law, our approach is collaborative—we partner with your financial team directly or help you build one if needed. That way, your strategy is intersectional and coordinated across jurisdictions.
Educate Internal Teams
Legal and tax changes aren't just for the legal team to worry about. Your accounting staff, CFO, or project managers should be looped into developments that affect billing, transfer pricing, third-party vendors, or contract terms. Early awareness promotes compliance and avoids last-minute fire drills.
A Balanced Approach: Strengthen Your Compliance and Your Competitive Edge
One of the most important insights we can share with clients is this: Keeping up with international tax enforcement isn't just for compliance's sake. It's also a way to strengthen your position in the market.
Countries may compete on trade and policy, but they agree more than ever that corporate transparency and fair taxation protect economic stability. That shared commitment gives businesses willing to act early a chance to lead—whether by building more resilient structures, accessing new markets, or avoiding the reputational costs of enforcement action.
Business owners who stay flexible, informed, and well-advised can balance risk management with strategic growth. That's what long-term success looks like in today's global tax environment.
Schedule a Consultation with Thienel Law
If you're unsure how these global tax enforcement trends apply to your business or personal situation, we're here to help. At Thienel Law, we assist clients throughout Maryland, Virginia, and Washington, D.C. with proactive legal strategies in business law, tax planning, and estate matters.
Schedule a consultation with Steve Thienel to get clear, tailored advice that protects your interests and supports your goals—no matter how complex the regulations become.