International Tax Research and Planning

International Tax Research and Planning Student: Professor: Course title: Date: International Tax Research and Planning United Stated multinationals generally pay much lower taxes on proceeds obtained from their overseas investments compared to proceeds obtained from their domestic investments. This serves to give companies a strong incentive to move their economic activities and income from the United States into other nations. International tax regimes cover the range between territorial and worldwide or residence. A worldwide tax system often taxes a firm on its global profits, in spite of where that income was generated. Conversely, a territorial tax system would tax only the domestic share of the income of a multinational company (Marr & Highsmith, 2012). Tax deferral and Tax Credits To effectively mitigate the U.S. tax impact from income that the client received from abroad, he has to capitalize on tax deferral and tax credits. At present, the U.S. corporate income tax is a hybrid – having features of both residence/worldwide and territorial tax systems –, since it taxes U.S. based companies on a worldwide basis, whist giving a credit for overseas taxes paid in order to avoid paying taxes twice. Tax deferral: In its direction toward territorial system, foreign profits are not subjected to tax until they are repatriated – sent home (Marr & Highsmith, 2012). In actual fact, U.S. multinationals frequently defer sending home their foreign profits indefinitely with the effect that those proceeds are never subjected to U.S. taxes although companies could get United States tax deduction for expenses incurred in supporting those foreign ventures. The residual tax collected by the United States on income that is repatriated is diminutive. This deferral feature of the tax system, together with other provisions which lower the effective tax rate on overseas investments, usually lets U.S. corpo...