President-elect Donald Trump’s election win moves Apple, Pfizer, Microsoft and other big U.S. corporations much closer than they have been in years to winning a big tax break on approximately $2.6 trillion in foreign profits.
This article explains the mechanics of taxing foreign-source income, the 2004 repatriation holiday, proposals for another holiday, and the prospects of enacting a repatriation holiday under the Republican-controlled government.
U.S. corporations are taxed on a worldwide basis, meaning that they’re generally taxed on income that’s earned within and outside of the U.S. subject to certain exceptions; income earned outside the U.S. isn’t subject to U.S. tax until it’s brought back to the United States — in other words, until it’s repatriated. At that point, it’s included in the corporation’s gross income. To mitigate double taxation, U.S. corporations may elect to either deduct or claim a foreign tax credit for the foreign income taxes that were paid or accrued on the foreign earnings.
Most developed countries, on the other hand, have adopted a territorial tax system. Such countries generally only tax income derived from sources within their borders. (more…)
The IRS said it plans to modify the regs relating to certain triangular reorganizations involving foreign corporations.
Specifically, in Notice 2016-73, the tax agency announced it will alter the rules affecting the treatment of property used to acquire parent stock or securities in triangular reorganizations involving one or more foreign corporations, as well as describe the consequences to persons that receive parent stock or securities in those reorganizations. (more…)
Her Majesty’s Revenue and Customs (HMRC) warned in a tax guidance that overseas online retailers must pay VAT on items sold in the UK.
The tax agency said VAT liability applies to overseas sellers supplying goods already in the UK at the point of sale to consumers through an online marketplace. It also applies to:
- UK VAT representatives for overseas sellers, and
- Online marketplaces allowing sales by overseas sellers.
The 2010 Foreign Account Tax Compliance Act (FATCA) contains a number of provisions that are intended to make it more difficult for U.S. taxpayers to use foreign accounts to shelter income from U.S. tax. These provisions are designed to prevent U.S persons from evading U.S Tax by holding income producing assets through accounts at foreign financial institutions (FFI’s) or through other foreign entities (non-financial foreign entities or “NFFEs”)…
You may be surprised by the answer, especially, if you don’t have an office in the United States. A foreign corporation is obligated to file a US tax return (Form 1120-F) if it is “engaged in a trade or business” in the United States, 1) even if it has no income effectively connected with its US business, 2) has no income from US sources, and/or 3) is exempt under the US tax treaty. Definition of “engaged in trade or business” is mostly driven by…
San Jose, Calif. – January 2, 2013 – Managing Principal Ray Scheaffer of Abbott, Stringham & Lynch (ASL), a Silicon Valley accounting and consulting firm, announced that three high-level CPAs, Luis Ramirez, Julie Malekhedayat, and Kay Filler, formerly with the accounting firm of Perisho Tombor Ramirez Filler & Brown (Perisho), have joined ASL. “Luis, Julie and Kay enhance our ability to serve the Silicon Valley domestic and international business community in the areas of tax and audit, as well as to expand services to individuals in the areas of estate, gift and trust planning. We welcome them as part of an overall plan to position for growth in 2013.” The addition of Ramirez, Malekhedayat and Filler brings the firm’s principal count to 12, supported by over 60 professionals, including staff members formerly with the Perisho firm.