Direct Taxes
Classic System
Two Methods
Territorial approach
Worldwide approach
Determination of Expenses
Expenses
Determination of expenses
Tax base
Withholding Tax
Income
Indirect Taxes
Most
Indirect Taxes
Value
Added Tax
Computation of VAT
and Deductions
Tax Treaties
of Subpart F Income
Tax Incentives
Two
major types
U.S.
Tax Incentives
U.S.
Corporate profitability
Differential tax rates
Restrictions on repatriation of profits or dividends
Competitive position of foreign subsidiaries
U.S. Rules
Foreign Subsidiaries
Tax Incentives
Can reduce cash outflow of an investment project
Tax Rates
Tax Treaties
Example Withholding tax between U.S. and U.K. is 15%,
but both countries have 5% withholding agreement with the
Netherlands
An arrangement could be made to send dividends from the
U.K. to Holland, then to the U.S., and the 15% tax would be
partially avoided