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International Taxation - International Taxation and Foreign Tax Credits - Research Paper Example
Finance & Accounting
Pages 6 (1506 words)
U.S. Foreign Tax System Introduction Globalization has become the norm of U.S. business world. The increasing adaptation of globalization by both large and small companies has changed the traditional ideas of tax reforms that earnings can be taxable if only they are earned within geographical boundaries…
However, in reality the U.S. government ignores this concept of neutrality and imposes taxation on profits earned by U.S. companies in any country outside the border. Thus, U.S. companies who seek to spread businesses overseas are burdened with a combination of tax systems. Such companies are required to pay taxes to the U.S. Government as well as the government of the countries where they are conducting their activities (Henchman, 2011, pp.1-2). This paper contains my proposals as a tax professional to my U.S based client who wants to expand his business into foreign markets. Taxpayer’s organizations My client can establish chain of hotels or restaurants in a foreign country. This will make my client fall under deferral system of U.S. foreign tax. Under this system, subsidiary companies that are situated in other countries can be exempted from U.S. taxation unless such revenue is repatriated to the parent company like in the form of dividends. Also, I will advice my client to launch hotels in countries that are keen on promoting tourism by easy tax credits and ready development loans. For instance in Peru, foreign investors on hotel industry are given tax incentives and tax returns even before the investments are completed or the recommended constructions are completed (Finkelstein, 2012). ...