Introduction

Injecting a conduit offshore corporate entity in a transnational corporate structure can implement cost savings. One useful purpose is characterized as an offshore corporate entity that provides services within the organizational structure.

As stated in a previous segment, (Foreign Corporations and Subpart F Income – Part II on TaxConnections, 17/September 2013 – Corporate – International – Tax Blogosphere) the essence of this type of corporate planning is to combine the concept of ownership structure that subjects a foreign corporation to controlled status and activities of the corporate entity. The two concepts are intertwined in the implementation of Subpart F Income tax consequences.

If a foreign corporate entity has Subpart F Income because it has Foreign Base Company Income, but it is not deemed a controlled foreign corporation by virtue of ownership, it is not subject to Subpart F Income treatment. Those are two distinct planning features.

Conversely if the aspect of controlled ownership or the characterization of corporate activity of Subpart F Income treatment is averted by virtue of it not being deemed Foreign Base Company Income, it achieves the same planning result. The elimination of either enables the corporate taxpayer to remove itself from the application of Subpart F Income treatment. The gist of this Read More