![]() The Senate Proposal also provides for a 100% deduction of the foreign-source portion of a dividend received by a corporate U.S. The limitation of foreign tax credit relating to foreign-source dividends would be effective for deductions with respect to tax years ending after December 31, 2017. The 100% deduction would be effective for distributions made after December 31, 2017. income tax liability by the amount of any foreign income tax paid on that foreign-source portion of that dividend. income tax on the foreign-source portion of the dividend from the foreign corporation, that U.S. shareholder would not be entitled to claim any foreign tax credit for any foreign income tax paid in connection with the foreign-source portion of a dividend received by the “specified 10% owned foreign corporation.” See id., §4001(d). §904 with the basic effect that the corporate U.S. The House Proposal would also amend the foreign tax credit limitation under I.R.C. shareholder has owned stock of the foreign corporation for at least 180 days and (ii) that foreign corporation has retained its status as a “specified 10% owned foreign corporation” throughout that period. The deduction of the foreign-source portion of the dividend is not allowed unless (i) the corporate U.S. shareholder,” but that term does not include a foreign corporation that is a “passive foreign investment company” (a “ PFIC”) and not a “controlled foreign corporation” (a “ CFC”). A “specified 10% owned foreign corporation” is basically any foreign corporation owned by a corporate “U.S. shareholder” (i.e., it must own at least 10% of the voting stock) of the distributing foreign corporation. To be eligible for the 100% deduction, the shareholder receiving the dividend must be a domestic corporation that is a “U.S. corporate shareholder from a “specified 10% owned foreign corporation.” See House Proposal, §4001(a). The House Proposal would provide a 100% deduction for the foreign-source portion of a dividend received by a U.S. income tax on that foreign corporation’s income until the year in which that income is distributed to that shareholder. shareholder of a foreign corporation can generally benefit from deferral of U.S. tax on their worldwide income as that income is earned. 100% Deduction for Foreign-Source Dividends. ![]() Instead, this article is intended to provide a high level overview of the pending proposals so that readers will be alerted and can look further into the proposals potentially impacting them. In addition, this article does not discuss every nuance or detail relating to the pending proposals discussed herein. Rather, this article summarizes five categories of international tax reforms under the pending proposals that would be broadly applicable and thus are important to monitor as the legislative process advances. ![]() international tax laws that would result under the pending House and Senate proposals. ![]() This article does not attempt to summarize every change to the U.S. income tax laws affecting international transactions, but there are subtle differences that will need to be resolved as the legislative process moves forward to achieve passage of final legislation. The Senate and House proposals are generally consistent regarding the nature of the changes that would be made to the U.S. 1, the “Tax Cuts and Jobs Act” (the “ House Proposal”) while the Senate Finance Committee passed on that same date its own proposal (the “ Senate Proposal”). House of Representatives passed on November 16, 2017, H.R. income taxation of international business activities and investments. Congress is considering two different legislative proposals that would cause significant changes to the U.S. ![]() Unless otherwise indicated, attorneys at Eversheds Sutherland (US) LLP are not certified by the Texas Board of Legal Specialization.As of the date of this article, the U.S. The responsibility for the provision of services to the client is defined in the terms of engagement between the instructed firm and the client.ĪTTORNEY ADVERTISING - Prior results do not guarantee a similar outcome. The use of the name Eversheds Sutherland, is for description purposes only and does not imply that the member firms or their controlled, managed or affiliated entities are in a partnership or are part of a global LLP. Eversheds Sutherland Entities are constituted and regulated in accordance with relevant local regulatory and legal requirements and operate in accordance with their locally registered names. Eversheds Sutherland is the name and brand under which the members of Eversheds Sutherland Limited (Eversheds Sutherland (International) LLP and Eversheds Sutherland (US) LLP) and their respective controlled, managed, affiliated and member firms (each an "Eversheds Sutherland Entity" and together the "Eversheds Sutherland Entities") provide legal or other services to clients around the world. ![]()
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