This will in effect be a form of double taxation (Hines & Rice, 1994). A strategy for a US-Based taxpayer to repatriate earnings from the foreign markets and avoid or mitigate the U.S. tax impact on repatriation Lots of profits that most taxpayers in the U.S attribute to mitigate or avoid taxes should be taxed up to about 35% when they are repatriated. In this context, the client can repatriate his earnings from the business abroad and at the same time avoid taxes using the “Cash Hoards” strategy. The fact that U.S has cash hoards indicate that investment is not being hindered by lack of cash. The tax payer can thus bring money back home by shifting income through transfer pricing, a strategy that will allow him to assign costs to subsidiaries in high-tax nations and profits to tax heavens. The technique can work effectively putting in mind an example set by Google, a company that reduced its taxes by about$3.1 billion in the last three years by shifting most of its earnings attributed abroad eventually to Bermuda. ...Show more
Assignment 3: International Taxation and Foreign Tax Credits Name Institution Assignment 3: International Taxation and Foreign Tax Credits Types of organizations that a US-based taxpayer could establish abroad and the various tax impacts that these types of organization may cause An intercontinental tax strategy starts with selecting the type of entity to be considered…
The discussion covers quite a number of topics including credit for foreign income taxes, limitation on credit, maximum allowable foreign tax credit, carry-back and carryover of the foreign tax credit, claiming the tax credit or deduction each year, foreign taxes not eligible for the foreign tax credit, foreign source income, refunds and adjustments and corporate foreign tax credit situation in the US.
23). Since 1940s, the U.S tax code has undergone many modifications to ensure justice to taxpayers as well as to generate revenue for the federal government. Tax credits, along with other instruments such as tax deductions and tax exemptions, was used to protecting various income groups and business enterprises during economic downturn (economic instability).
[Shaxon, N. (2012)] In order to acquaint with the concept of transfer pricing, consider two companies, that is a parent companies and a subsidiary company or two subsidiaries that have the same parent company, actively involved in trading with each other.
Although the market value of US companies have been reduced after economic recession but the investment by the foreign individual as well as institutional investors in US companies have not been reduced much due to the favourable rules, policies and tax implications of the country.
In order to promote this dynamism, it is necessary that the U.S. government collect taxes from income that is earned only within the nation and companies that are earning profit outside the U.S. boundaries should be allowed to follow the tax rules of the countries in which they are doing business.
Tax credits, along with other instruments such as tax deductions and tax exemptions, was used to protecting various income groups and business enterprises during economic downturn (economic instability). Tax credits are neutral and enable the Congress in making certain that
This tax regime not only exists in this foreign country, but such investors and individuals can take advantage of this offshore system to evade paying taxes even in their own countries. Anyone can operate in an offshore jurisdiction.
It does not require these
The main objective of the research and development department is to find out the foreign source of income and estimate accurately the number of multinationals operating in the United States. The other purpose of research and development department of the US is to estimate the accurate limit of the foreign trade credit.
25 pages (6250 words)Research Paper
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