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Strategies & Market Trends : John Pitera's Market Laboratory
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To: John Pitera who wrote (5764)3/1/2002 3:38:53 PM
From: Logain Ablar  Read Replies (2) of 33421
 
John:

Well maybe I mis stated. As an example.

A US company is subject to tax on its world wide income. All its US based companies / subsidiaries are subject to US taxes (i.e. file a us corporate tax return). Technically its foreign companies, to the extent its foreign subsidiares are paying / incurring a foreign tax less than the 35% rate, are subject to the difference @ the holding company level (the tax is @ 35% but there is a foreign tax credit to avoid double taxation). I say technically since good planning helps avoid this (my statement is too simple for this complex area of the code).

However the one area a holding company can't avoid paying a tax is when a dividend from the foreign sub finally moves up the chain (it may not have to move to the holding company since there are tiering rules). At some point if the cash isn't being poured into the business it is moved up the chain or if the cash is invested in financial type assets (to try and avoid a US tax) its income is "deemed" a dividned and taxed anyway (subpart F rules).

To say there are many technical aspects and ways to plan and avoid this would be an understatement and I haven't worked with foreign sales corporations since 89 and controlled foreign corporations since 91 time frames.

Its just there is such misinformation being written from people who should know better. Of course if one tried to be technical they would lose the audience anyway.

Since the area encompanes Foreign Sales Corporations, Foreign Tax Credit, Transfer Pricing, Foreign Taxes, Subpart F income with numerous regulations and court cases I can state I know just enough to get myself in trouble.
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