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 . |
4 |