Int'l Taxation

Territorial - no tax is generally due on income earned outside of the country in which the parent is located

Worldwide - all income is subject to taxation by the country in which the parent is located

# US taxes worldwide income of citizens and permanent residents

# US taxes worldwide income of domestic corporations

# US taxes the US source income of nonresident aliens

# US taxes the US source income of foreign corporations

Withholding

In addition to taxes imposed on earnings, transfers (interest payments, dividends, royalties, etc.) between a corporation and its foreign shareholders (individuals or corporations) are generally subject to withholding taxes.

The general withholding rate imposed by the U.S. is 30% of the payment amount. This rate can be reduced by tax treaties between the various jurisdictions

Some definitions

A domestic corporation is one incorporated in one of the 50 US states

A foreign corporation is one that is not a domestic corporation

U.S. Framework

1. Worldwide taxation

2. Elimination of double taxation Deferral

3. “Arm's-Length” related party transactions

4. Business purpose

1. Worldwide Taxation

 The U.S. taxes the worldwide income of U.S. corporations (also U.S. individuals, partnerships, estates or trusts) irrespective of where it is earned

 The U.S. corporation is also generally taxed by the other countries where