What are inversions, and how will TCJA affect them? Q.What are inversions, and how will TCJA affect them? A.An inversion is a transaction in which a US-based multinational company merges with a smaller foreign company and then establishes its residence in the foreign company’s country. As a foreign resident, the company can sometimes significantly reduce its taxes without changing the location of any real business activities. Read more about What are inversions, and how will TCJA affect them?
How does the current system of international taxation work? Q.How does the current system of international taxation work? A.All countries tax income earned by multinational corporations within their borders. The United States also imposes a minimum tax on the income US-based multinationals earn in low-tax foreign countries, with a credit for 80 percent of foreign income taxes they’ve paid. Most other countries exempt most foreign-source income of their multinationals. Read more about How does the current system of international taxation work?
What are the consequences of the new US international tax system? Q.What are the consequences of the new US international tax system? A.Despite enactment of the 2017 Tax Cuts and Jobs Act, which reduced incentives, current rules still encourage US multinational firms to earn and report profits in low-tax foreign countries, enable both US- and foreign-based firms to shift profits earned in the United States to other countries, and encourage companies to incorporate in foreign jurisdictions. Read more about What are the consequences of the new US international tax system?
