As part of yesterday’s historic passing of the Tax Cuts and Jobs Act (the Act), the U.S. international tax world has been redefined. The Act contains significant international tax provisions that will drastically change the way U.S. multinationals are taxed and conduct business abroad as well as change how foreign multinationals will conduct business in the U.S. Qualifying U.S. corporations will soon benefit from a 100 percent dividends received deduction (DRD) with respect to dividends paid from certain foreign subsidiaries (i.e., the participation exemption system). Consequently, the foreign earnings of foreign subsidiaries owned by such U.S. corporations will generally not be subject to U.S. federal income tax at the corporate shareholder level assuming it’s an actual dividend distribution, not a deemed inclusion.
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