"Over the last decade, middle-market companies have explored how to choose a location when expanding internationally. "
By Rhonda Miller PBN Staff Writer
Paul Oliveira is a shareholder and director of tax services for Kahn, Liwin, Renza & Co., one of New England’s largest CPA and business consulting firms, with offices in Providence and Newport, as well as Boston and Waltham, Mass. He specializes in corporate tax advisory services and is co-chair of the Private Equity and Venture Capital Services Group. He
is a Certified Public Accountant in Massachusetts and Rhode Island.
Oliveira has expertise in international structuring and operations, joint ventures and acquisitions, global transfer pricing strategies, U.S. export incentives and U.S. foreign tax credits. He works with clients in industries including technology, life sciences, e-commerce and manufacturing and distribution.
Oliveira is a board member of Leadership Rhode Island. He has a bachelor’s degree in business administration and a master’s degree in taxation from Bryant University.
PBN: With the announcement of KLR’s joint advisory services with Dezan Shira for New England, what will be the specific change in services?
OLIVERIA: Our joint services agreement with Dezan Shira expands our ability to deliver timely and relevant advisory services to local-area companies who are either already doing business in China or Hong Kong, or are in the process of investigating entering that market. China can be a complex market to do business in, with multiple regulatory layers. Although we have been delivering global consulting services for some time, we believe it was key for our clients that we enhance our abilities with respect to China. In partnership with Dezan Shira, we can increase our focus on assisting local businesses execute their China strategy, with experienced valuable resources and connections, both here in the U.S. and in China.
Solid global tax planning requires not only an understanding of the local market, but also knowledge of what the implications are from a U.S. perspective. It is a given that the decisions that U.S.-based businesses make regarding their business operations in foreign markets will have an impact on their worldwide tax liability, including here in the U.S. We think what makes our arrangement with Dezan Shira so powerful and unique is that both sides of the equation will be at the table with the client providing, a well-rounded and coordinated set of services.
Jessica Tou, Dezan Shira’s U.S. liaison, will be taking up residence with KLR, working in all of our offices, and assisting with the identification and coordination of services that Dezan Shira will be providing for our clients who are doing business or just entering China. Periodically, various tax partners at Dezan Shira will be traveling to Rhode Island and meeting with clients. From the U.S. side, Neelu Mehrotra, KLR’s director of international tax services, will also be advising our clients on the U.S. tax implications of their strategy.
PBN: What’s the arc of KLR’s Asia business that led to this joint services partnership? Has it been an increase over the past year? Five years? Ten years?
OLIVEIRA: Over the last decade, middle-market companies have explored how to choose a location when expanding internationally. China is a country which ranks top of the list. With almost no currency exposure, China is the front-runner when a company chooses what country they would like to enter when looking into Asian operations. KLR understands the thought process companies need to face when making the investment into a market, and provides theses necessary services locally. Initially, the activity we saw was primarily U.S. companies setting up contract manufacturing operations with local Chinese partners. In recent years, as the Chinese economy shifts from one that is export-based to one that is more consumer-driven, we are seeing U.S. companies increasingly shift their strategies and set up trading companies in China to sell into that market.
PBN: KLR offers a wide range of financial services. Which services are most in demand for your business with companies in Asia?
OLIVEIRA: When companies start having global operations, being able to keep financials in local currency as well as USD becomes very important. Also, understanding foreign payroll, foreign indirect tax remittances and local taxes becomes vital to running the business. That is some of the basic blocking and tackling that needs to be done once operations are established. Even prior to this stage, we will work with companies in choosing the most appropriate legal structure to be used in China and assist them in establishing their transfer pricing policy. KLR and Dezan Shira have also consulted on structuring acquisition transactions, due diligence and forensic audits. From a China perspective, Dezan Shira is a great partner for us because they very much mirror the types of services we have long been delivering to our clients in the U.S.
PBN: What do you see as the near-term and long-term future for joint Asia and U.S. partnerships, since there seems to be a growing interest in bringing some of the outsourced services back to the U.S., and back to Rhode Island, especially related to manufacturing?
OLIVEIRA: In the near-term, understanding the local Asia market as their own middle class grows and cost of labor, coupled with growth projections, will help shape how joint ventures will prevail
The Chinese economy is somewhat in transition from an exporter to becoming more consumer-driven. This will create opportunities for U.S. manufacturers. You couple this with the Obama administration’s stated policy of doubling U.S. exports between 2009 and 2014 and I think this provides a very fertile environment for local-area manufacturers. In the long-term, a division of functions and possible final product manufacturing can occur in the United States, as the market trends and tax incentives in the U.S. grow. I think we’ll see some manufacturing continuing to occur in China, but this will be driven more by wanting to be closer to that market, as opposed to gaining any cost advantages. And although protection of intellectual property remains a concern, my sense is that U.S. companies are getting a bit wiser in that area through some hard lessons learned over the years.
PBN: Do you have advice or suggestions for Rhode Island firms interested in expanding business partnerships in Asia? Is this a risky time to do that, or an opportune time?
OLIVEIRA: Do your homework. The regulatory environment can be complex and made up of different layers, from the national government down to the general manager in the local industrial park that you are establishing operations in. Also, protection of intellectual property remains a concern, so a company looking to expand will need to have a strategy for how to protect their “secret sauce.” The business etiquette will also be different. You need to go in well-armed with information and a strategy to manage risk. That is the gap that KLR and Dezan Shira are attempting to fill with our clients.
Renza & Co,
Leadership Rhode Island,