While the tax code for businesses operating within the United States is complex, the tax code as it applies to multinational firms is even more so. Tax planning for an international company must necessarily take into account a variety of factors including foreign tax rates, tax treaties, profit repatriation, the foreign tax credit limitation and cross-crediting, among other things. Since these factors are interrelated and sometimes conflicting, compiling an effective tax strategy for a multinational company can be a very difficult task.
The specifics of international taxation:
- The foreign income of United States multinational firms it taxed at the same corporate tax rate as the income of domestic firms which is currently a maximum of 35%.
- The tax on foreign income of United States firms is generally deferred until the earnings are repatriated.
- The current tax code allows multinational companies to avoid the tax on repatriated income if is invested in certain domestic assets such as bonds and bank deposits.
- Multinational firms are allowed to claim a tax credit for income taxes paid to foreign governments up to their United States tax liability on that income.
- The tax code allows multinational firms to use excess tax credits from income earned in high-tax countries to offset the tax on income earned in low tax countries, a process called cross-crediting.
- The tax on income earned by United States firms in certain foreign counties is sometimes affected by tax treaties with those countries.
The professionals at BusinessTaxPreparation.com keep abreast of the intricate tax laws of differing international jurisdictions and use that knowledge to help their clients understand how foreign tax laws can affect their proposed business transactions. Our licensed professionals have had extensive experience with tax planning and preparation for companies that operate on foreign soil and use that expertise to ensure that their clients avoid the common pitfalls of operating in international tax jurisdictions.