About
Foundational Principles In the Community Diversity, Equity & Inclusion Technical Excellence Alumni TIAG Membership
Careers
Why Cohen & Company Our Culture Total Rewards & Benefits Intern & Entry Level Opportunities Experienced Opportunities
Contact
Akron, OH Baltimore, MD Chicago, IL Cleveland, OH Detroit, MI Milwaukee, WI New York, NY Philadelphia, PA Pittsburgh, PA St. Clair Shores, MI Youngstown, OH
Client Portal
Services Industries Knowledge Center People

About Our Services

We offer tailored solutions — whether private company or owner; public or private fund, adviser or fund service provider; or Fortune 1000 enterprise. Learn how we can help you.

Learn More

Assurance Services

Employee Benefit Plan Audits Internal Controls Investment Company Audits Private Company Audits SOC Readiness & Compliance

Tax Services

Federal Tax Planning & Compliance High Net Worth & Wealth Transfer International Filings & Structuring Investment Company Tax State & Local Tax Tax Credits & Incentives Transaction Tax Planning

Advisory Services

Business Valuations Data & Insights Digital Finance Solutions IT Strategy & Implementation M&A Advisory Outsourced Accounting Solutions Risk Assurance & Advisory Transaction Services Turnaround & Restructuring

Our Industry Expertise

Our industry experience means you can find professionals who speak your language and bring earned insights to the table. Learn how we can help you.

Learn More

Key Industries

Digital Assets Investment Companies Manufacturing Private Companies Private Equity Real Estate & Construction Technology & Life Science
VIEW THE COMPLETE LIST

Knowledge Center

Our team wants to help your team stay up to date. Browse our thought leadership, events and news for insights and a point of view on business-critical topics.

Learn More

Insights

Browse valuable articles and publications our experts have written to help you and your organization answer key questions — and consider new ones.

Read Our Insights

Events

Join us in person and online for events that address timely topics and key business considerations.

Explore Our Events

News

Find out what is happening at Cohen & Company, from industry recognitions and growth updates, to where we are contributing to important media stories.

Read Our News
People
Foundational Principles In the Community Diversity, Equity & Inclusion Technical Excellence Alumni TIAG Membership
Why Cohen & Company Our Culture Total Rewards & Benefits Intern & Entry Level Opportunities Experienced Opportunities
Akron, OH Baltimore, MD Chicago, IL Cleveland, OH Detroit, MI Milwaukee, WI New York, NY Philadelphia, PA Pittsburgh, PA St. Clair Shores, MI Youngstown, OH
Client Portal
Back to Insights

Avoiding Double Tax on Overseas Profits

by Ray Polantz

July 09, 2014 Federal Tax Planning & Compliance, International Filings & Structuring

Doing business internationally is practically a necessity to survive in today’s competitive business environment. Many companies find that setting up a separate legal entity in a foreign jurisdiction is the best way to conduct business there. Operating through a foreign subsidiary, however, presents many challenges, including the potential for double taxation of profits.

Generally, profits earned in foreign subsidiary corporations can be subject to two layers of tax:

  • tax in the foreign jurisdiction; and
  • U.S. tax when profits are repatriated, often in the form of a dividend.

At times this potential double taxation is mitigated by the U.S. tax system’s foreign tax credit regime, which allows a dollar-for-dollar reduction of U.S. tax for foreign income taxes paid, subject to certain limitations. However, not all U.S. owners are eligible to claim foreign tax credits for the income taxes paid by a foreign subsidiary corporation.

Thankfully, there are options for those who plan upfront. Taxpayers may benefit from making a “check-the-box” election that treats the foreign subsidiary as a disregarded entity for U.S. tax purposes. By making this election, taxpayers forfeit U.S. tax deferral on foreign profits. However, the election will make the underlying foreign income taxes eligible to be claimed as a credit, which may allow taxpayers to mitigate double taxation.

If you are considering forming a foreign entity to conduct business overseas, be sure to properly plan upfront to minimize worldwide taxes.

We want to hear from you! We encourage you to share this blog post on social media or contact Ray Polantz at rpolantz@cohencpa.com or a member of your service team for further discussion.

This communication is for information only, and any action should only be taken after a detailed review of the specific situation and appropriate consultation.

About the Authors

Ray Polantz, CPA, MT

Partner, Tax
rpolantz@cohencpa.com
216.774.1148

Sign Up for Our Emails & Events

Receive insights from our specialists in a variety of areas and timely information on upcoming events directly to your inbox as they go live in our online Knowledge Center.

Subscribe Today
Subscribe to our newsletter
About Contact Submit RFP Privacy Policy
LinkedIn Twitter Facebook
© 2023 Cohen & Company