Taxation of Foreign Branches Under Current Tax Law: Qualified Business Units, Foreign Tax Credits, Anti-Hybrid Rules

Recording of a 90-minute premium CLE/CPE video webinar with Q&A

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Conducted on Wednesday, August 17, 2022

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Course Materials

This CLE/CPE webinar will provide tax counsel and advisers with an in-depth analysis of the tax treatment of foreign branches of U.S.-based companies under current tax law. The panel will discuss what constitutes a foreign branch, reporting obligations, foreign tax credits, recent 267A anti-hybrid regulations, and other critical considerations for tax professionals.

Description

U.S. companies conducting business in another country through a branch or foreign entity face complex tax issues and reporting requirements. Tax counsel and advisers must understand the U.S. tax treatment of foreign branch income, the applicability of Section 267A anti-hybrid regulations, obtaining the foreign tax credit, and other tax issues.

A foreign branch is a trade or business operated in a foreign country that maintains its books and records. Although Section 989 defines a foreign branch as a qualified business unit, whether or not it is a trade or business is a facts-and-circumstances determination.

In addition, foreign branch income rules make the existence of a foreign branch far more significant than it had been before the 2017 tax reform. Some U.S. companies may consider transferring the assets of their foreign branch to a controlled foreign corporation and electing not to be treated as a disregarded entity. However, this will result in any gain realized to be subject to full U.S. taxation, with any branch losses being subject to recapture rules.

Generally, taxpayers report income or loss from a foreign branch on a U.S. consolidated income tax return. Reporting branch income provides additional complexities. Advisers must analyze allocation and reallocation rules for foreign branch income to calculate the allowable foreign tax credit. Foreign branch income is ineligible for the Section 250 FDII deduction, which allows a 13.25 percent reduction of the 21 percent corporate tax rate.

Listen as our panel of foreign tax experts explains the tax considerations of operating a foreign branch, including planning strategies to lower the overall tax burden of multinational trade or businesses.

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Outline

  1. U.S. tax treatment of foreign branches
  2. Reporting requirements and ensuring compliance
  3. Comparison with foreign subsidiaries
  4. 267A anti-hybrid rules
  5. Foreign tax credits
  6. Best practices and planning strategies

Benefits

The panel will review these and other critical issues:

  • What constitutes a foreign branch?
  • What are the applicable rules and available planning?
  • Who is required to file Form 8858 and Schedule M?
  • What is a branch mismatch payment under Section 267A?
  • What are the differences between a foreign subsidiary and a foreign branch?
  • How to obtain the foreign tax credit

Faculty

Dill, Brian
Brian D. Dill, JD, LLM

Principal, Tax Services
Cherry Bekaert

Mr. Dill is Partner in charge of international tax. With over 20 years of experience he has extensive experience in...  |  Read More

Warner, David
David J. Warner

Tax Attorney & Shareholder
Holtz, Slavett & Drabkin

Mr. Warner is a Tax Attorney and the Managing Attorney of the Orange County Office of Holtz, Slavett &...  |  Read More

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Strafford will process CLE credit for one person on each recording. CPE credit is not available on recordings. All formats include course handouts.

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