Taxation of Foreign Income

Worldwide Taxation with limited deferral

Participation Exemption System of Taxation of Foreign Income

N / A

Taxation of Foreign Dividends

Dividends subject to corporate tax with FTC

100 % Dividend Received Deduction ( DRD ) for foreign source dividends received by domestic corporations from specified 10 % owned foreign corporations

100 % Dividend Received Deduction for foreign source dividends received by U . S . corporation only from CFC ( i . e . 50 % U . S owned foreign corporation )

Foreign Tax Credits

FTC or deduction for direct and indirect taxes paid or accrued

No foreign tax credit or deduction allowed for any taxes including withholding taxes paid or accrued w / r / t dividends that qualify for the DRD .

FTC to be calculated on a country-by-country basis ( prevents blending of high and low foreign tax rates ); no carryback of FTC – 10 year carryforward , except for GILTI credits

Transition Tax

Deferred foreign income not subject to current US tax

Tax rates : 15.5 % cash assets / 8 % on remainder ; proportional reduction on Sec 902 credits Election to pay over 8 years

N / A

Interest Expense Limitation

Earnings stripping – denied interest expense to the extent based on debt / equity ratio greater than 1.5 to 1

Business interest expense cannot exceed the sum of the taxpayers business interest income , 30 % of ATI and floor plan financing

Limit interest for certain domestic corporations that are part of an international reporting group . Limitation would be the allowable percentage of 110 % of their net interest expense .

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