TAXATION
TAXATION
Tax planning is crucial for any business, since it can have a profound effect on profitability and cash flow. This is especially true in international business, ^s complex as domestic taxation seems, it is relatively simple compared to
the intricacies of international taxation. The international tax accountant must be familiar not only with the home country's tax policy relating to foreign operations, but also with the laws of each country in which the client operates.
Taxation has a strong impact on the choice of: (1) location in the initial investment decision; (2) legal form of the new enterprise, such as branch or subsidiary; (3) method of finance, such as internal versus external sourcing and debt versus equity; and (4) method of arranging prices between related entities.5 This section of the chapter examines taxation for the firm involved in international operations. Emphasis will be placed on U.S. tax policy because of the nature and extent of U.S. foreign direct investment. As any country finds its firms generating more and more foreign-source income, it must decide on the principles of accounting for that income. Therefore, principles of taxation that U.S.-based MNEs face at home and abroad are, or could be, applicable to firms domiciled in other countries.
Tax planning is crucial for any business, since it can have a profound effect on profitability and cash flow. This is especially true in international business, ^s complex as domestic taxation seems, it is relatively simple compared to
the intricacies of international taxation. The international tax accountant must be familiar not only with the home country's tax policy relating to foreign operations, but also with the laws of each country in which the client operates.
Taxation has a strong impact on the choice of: (1) location in the initial investment decision; (2) legal form of the new enterprise, such as branch or subsidiary; (3) method of finance, such as internal versus external sourcing and debt versus equity; and (4) method of arranging prices between related entities.5 This section of the chapter examines taxation for the firm involved in international operations. Emphasis will be placed on U.S. tax policy because of the nature and extent of U.S. foreign direct investment. As any country finds its firms generating more and more foreign-source income, it must decide on the principles of accounting for that income. Therefore, principles of taxation that U.S.-based MNEs face at home and abroad are, or could be, applicable to firms domiciled in other countries.
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