DISTINCTION BETWEEN

INBOUND AND
OUTBOUND
TRANSACTIONS
CROSS BORDER OR INTERNATIONAL
TRANSACTIONS

 An International Transaction or Cross Border Transaction can be

defined as a transaction in an international trade between two
or more entities beyond the territorial limits of a country or a
transaction in a domestic trade in which at least one of the
party is located outside the country of the transaction.
 Cross-border taxation can be subdivided into various categories
based on the type of transaction being analyzed.  At the
highest level, the categories include “inbound” and
“outbound.”  These categories are useful because significantly
different U.S. tax rules can apply to the different types of
transactions.
INBOUND TRANSACTIONS

 When viewed from the United States, “inbound” refers to non-U.S. persons
(“persons” meaning both individuals as well as entities) with U.S. income
and/or U.S. activities.  A typical inbound circumstance exists where a foreign
corporation has income and/or activities in the U.S. 
 For instance, Toyota is a Japanese headquartered company.  However, Toyota
sells its products in the United States.  Thus, Toyota is selling “into” the
U.S., and Toyota would generally be considered in the inbound category.
 In order for a transaction to be considered inbound, however, it is not
necessary for product to be imported into the U.S.  Continuing the example
above, Toyota may decide it is better to manufacture product in the U.S. 
Consequently, Toyota may form a U.S. subsidiary and have the subsidiary
manufacture and sell the product in the U.S.  In this circumstance, there has
been no product imported into the U.S.  However, it is still an inbound
transaction because the parent company is from outside the United States
and its subsidiary has activities in the United States.
OUTBOUND TRANSACTIONS

 “Outbound” refers to U.S. persons with NON-U.S. income or

NON-U.S. activities.  A typical outbound circumstance exists
where a U.S. headquartered corporation has income or
activities in other countries.  For instance, Wal-Mart is an
American publicly traded company.  However, Wal-Mart
purchases many of its products from suppliers located outside
the United States.  Further, Wal-Mart sells many of its products
outside the United States (either through foreign subsidiaries
or otherwise).  Thus, Wal-Mart is a U.S. headquartered
company with activities “outside” the U.S., and Wal-Mart would
generally be considered in the outbound category.
 Typical cross-border tax issues related to outbound
transactions can include: foreign withholding taxes, transfer
pricing, foreign tax credits and foreign tax credit limitations,
subpart F income, Code § 956 inclusions (a.k.a. investments in
U.S. property), income tax treaties, etc.