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| *Ostroff, Fair and Company>>>Other Taxes |
Could a company like Coca-Cola decide to move to the Philippines and stop paying USA taxes? |
Could a company like Coca-Cola decide to move to the Philippines and stop paying USA taxes? Not anymore! It used to be just that they could pay the tax and get out as Lewis Y suggests, but in 2004, Congress passed Section 7874 of the Internal Revenue Code, which prevents just the idea you suggest. Section 7874 says that if you are a US company and you "invert" to become a foreign company and you have at least 80% of the same shareholders you had before the inversion, you will still be treated as a US corporation for all purposes of the Internal Revenue Code unless you have 鈥渟ubstantial business activities鈥?in the country you moved to. (There are other, milder, penalties if you have at least 60% but fewer than 80% of the same shareholders you had before.) Thus, moving to true tax havens is not really possible anymore . . . though a company may be able to move to a more favorable jurisdiction if they have operations, assets, and sales in that country. Interestingly, there will be an article on this topic in next week's Tax Notes International, and there was an article in the July issue of the Journal of International Taxation. Yes companies do it all the time yup I think the Philippines are a United States territory so that wouldn't work They'd have to move every last facility they own in the United States to the Philippines and change their corporate charter from a US company to a Philippine company in order to avoid US income taxes. However, they'd still be hit with some US import fees, I would imagine. Nope yes .. many companies do that sort of thing .... there is actually a tiny little rich country in Europe called Lichtenstein that is famous for having many many huge companies that are headquartered there for tax reasons. Most only really have post office boxes there so they can be "official". |
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