Just like everything else in life, outsourcing has a tax effect. Well-informed service providers and customers take into account tax benefits and detriments of outsourcing in structuring the transaction, pricing the services and negotiating the terms of a service agreement. Because the tax costs of an outsourcing transaction can be significant, they must be addressed early on in the transaction. Competent tax advice (both U.S. and foreign) should be sought to help both parties to navigate the tax minefield safely.
This article appeared in its entirety in the September 2005 edition of Managing Offshore.