As detailed in my last blog posting, “qualified dividend income” is taxed at beneficial lower tax rates and can be received from both domestic (US) corporations and certain “qualified” foreign (non-US) corporations. A “qualified foreign corporation” excludes a so-called “Passive Foreign Investment Company” or, PFIC. Subject to this limitation, the term “qualified foreign corporation” means any foreign corporation that is incorporated in a possession of the United States or that is eligible for the benefits of a comprehensive US income tax treaty which the IRS has determined is satisfactory for qualified dividend purposes. In addition, a foreign corporation will be treated as a “qualified’ with respect to any dividend paid by the corporation on stock which is readily tradable on an established securities market in the United States. The Internal Revenue Code does not exclude a so-called “controlled foreign corporation” Read More

As discussed in Part I, “What Is A Tax Haven“, the OECD originally went after tax havens in a 1998 document titled, Harmful Tax Competition, An Emerging Global Issue. They defined a tax haven as a low or no tax jurisdiction that employs secrecy and does not exchange information with other taxing officials. To counter-act the effect of havens, the OECD proposed a number of options. There are several that stand out.

Recommendation concerning Controlled Foreign Corporations (CFC) or equivalent rules: that countries that do not have such rules consider adopting them and that countries that have such rules ensure that they apply in a fashion consistent with the desirability of curbing harmful tax practices. Read More