Eliminating Double Taxation on Foreign Earnings
As you conduct business around the globe, you may find yourself being taxed by everyone. You have to pay U.S. tax on income earned on global revenue, but a foreign government is taxing you on those same dollars. All of these taxes are impacting cash flow and overall profitability. Isn’t there a way to avoid this double taxation? Perhaps. You may be able to take a credit on the taxes paid to a foreign country or a U.S. possession with the Foreign Tax Credit (FTC). The ability to deduct the taxes as an itemized deduction is another option, although not as beneficial. It’s quite complicated.
As soon as you, personally, or your business has paid a legitimate tax to a foreign country, this credit applies. To fully take advantage of the FTC, you have to plan carefully. The way your business is structured can impact results, so the best time to start planning is before you begin selling internationally. We help businesses with the following issues related to foreign tax credit utilization:
- Foreign Tax Credit (FTC) optimization
- Maximizing foreign source income
- Fair market value and alternative tax book value calculations for interest expense apportionment
- Expense apportionment
- Headquarters expense allocation
- Foreign source income maximization
- Foreign title passage planning
- Overall Foreign Loss (OFL) and Overall Domestic Loss (ODL) studies
- Foreign Earnings and Profits (E&P) and tax pool studies
- FTC planning in flow-through situations
Foreign Tax Credit Experience: Our tax professionals have experience with foreign tax credit utilization and planning including, but not limited to, maximizing foreign source income, analysis of the allocation and apportionment of expense against foreign source income, 863(b) sales and timing of distributions.
Contact us to see how we can help you maximize the use of foreign tax credits to lower global tax expenses.