Tag Archives: U.S. corporate tax

Even corporations are renouncing U.S. citizenship

Introduction – International business in the modern world

It’s tough to be a U.S. Corporation and compete with non-U.S. companies

This is the question posed by Robert Wood in his recent post about the rise in U.S. companies wanting to NOT have a U.S. domicile. The attempts on the part of the United States to control and tax the activities of “U.S. persons” is resulting in renunciations of U.S. citizenship. People (of the flesh and blood type) are renouncing. Corporations are merging with “foreign” companies in a way that ensures that they cease to be “U.S. persons” for tax purposes.

As you know, the United States laws subject people and companies to U.S. taxes on income earned anywhere in the world. U.S. citizens abroad live with this reality every day of the week.

In fact, U.S. citizens abroad are required to pay tax on their foreign source income at the point it is received – before it is brought back to the United States.

U.S. corporations have a better deal than U.S. citizens (of the DNA people) type. In the case of corporations:

1. Although they are subject to U.S. taxation on business activities/profits outside the U.S.;

2. They are NOT required to pay the U.S. tax until the profits are brought back to the U.S.

This is why U.S. corporations often do NOT bring their profits back (repatriate profits) to the U.S. They will be hit with a massive tax at the point of reentry. (Obviously not a good thing for America, but …) For example, in the Senator Carl Levin inquisition of Apple, Apple CEO Tim Cook made it clear that Apple had no intention of bringing it’s “offshore profits” back to the U.S.

Of course, these rules apply only to corporations that are “U.S. persons”. If a corporation is NOT a U.S. person then the corporation would pay tax only profits earned in the United States.

Mr. Wood explains the process as follows:

Continue reading