Nimble definition business pro#
Nimble definition business code#

person that owns any share(s) of stock in a foreign corporation classified as a PFIC. 956(b)(1)).Ī foreign corporation generally is a PFIC if 75% or more of its gross income is of certain types of passive income, or 50% or more of its average percentage of assets consists of assets that produce, or are held for the production of, this passive income. 956 income is limited to 'applicable earnings,' which generally includes both current and accumulated earnings (Sec. For example, Subpart F income is limited to current E&P (Sec.

shareholder's deemed dividend inclusion is limited to the foreign corporation's E&P. income inclusion with no corresponding receipt of cash. This deemed dividend income is often referred to as 'phantom income,' as the U.S.

Nimble definition business pro#

shareholder to include in current income its pro rata share of certain types of income (e.g., Subpart F income, Sec. person that owns directly or indirectly (including by attribution) 10% or more of the total combined voting power of all classes of stock entitled to vote in the foreign corporation. shareholder' has a specific meaning under the CFC regime. tax deferral on certain types of foreign earnings in situations perceived as abusive (e.g., 'portable' or 'passive' income).Ī foreign corporation generally is a CFC when more than 50% of its stock (by vote or value) is owned by U.S. These rules include the CFC regime and the PFIC regime. federal income taxation of a foreign corporation's earnings until a dividend is paid to its U.S. tax net for extended periods (or perhaps indefinitely) and be redeployed globally without the burden of U.S. Accordingly, a foreign corporation's earnings from abroad may remain outside of the U.S. The foreign corporation's dividend income is then subject to tax in the hands of its U.S. The general rule is that a foreign corporation's income is not taxed in the United States until the foreign corporation pays a dividend to its U.S. tax accounting standards.Īdditional adjustments may be required to adjust for items such as currency translation, certain exchange gain or losses, blocked deductions, and blocked income. Step 3: Make the further adjustments necessary to conform the U.S. Step 2: Make the accounting adjustments necessary to conform the foreign P&L to U.S. Step 1: Prepare a local country profit-and-loss statement (P&L) for the year from the books of account regularly maintained by the corporation for the purpose of accounting to its shareholders. The annual calculation of a foreign corporation's E&P is generally based on a three-step approach (see Regs. Thus, tax practitioners need to have a strong grasp on basic Subchapter C concepts (e.g., reorganization effects on E&P, tax accounting methods) before layering on the international tax E&P concepts to calculate a foreign corporation's E&P.Ī foreign corporation's current E&P is an annual calculation, with accumulated E&P generally being the sum of prior-year calculations with necessary adjustments (e.g., reduction for dividends). 964, the central themes and calculation mechanisms remain relatively congruent. Although key differences between domestic and foreign corporations arise out of the regulations promulgated under Sec. 964(a) states that foreign corporations' E&P is determined in substantially the same manner as domestic corporations' E&P. 964 and the accompanying regulations dictate the procedures for foreign corporations to calculate E&P. Instead, E&P has taken shape over the years through various case law, administrative guidance, and other authorities.

Nimble definition business code#

At its core, E&P represents the economic earnings and losses of a corporation that may be distributed to shareholders in the form of a dividend.Į&P is not specifically defined in the Code or Treasury regulations. federal income tax purposes (e.g., dividend, return of capital). What Is Foreign E&P?Į&P is a long-standing concept that forms the basis for characterizing corporate distributions to direct shareholders of the distributing corporation for U.S. This item provides a high-level overview of E&P of foreign corporations and several common misconceptions that directly affect a foreign corporation's E&P. 956 income), and passive foreign investment companies, or PFICs (e.g., qualified electing funds, or QEFs). E&P is the foundation for the cross-border income inclusion regimes that apply to controlled foreign corporations, or CFCs (e.g., Subpart F income, Sec.

The importance of E&P in the international tax arena should not be underestimated. Although the term 'earnings and profits' (E&P) is common in the realm of international tax, it is all too often misconceived, misapplied, or even ignored.