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Foreign Branches, QBUs, and Disregarded Entities: Foreign Tax Credits, Anti-Hybrid Rules, and Planning Strategies

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Thursday, October 17, 2024

Recorded event now available

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This course will explain foreign branches' tax considerations, including what constitutes a foreign branch and its U.S. reporting obligations, calculating foreign branch income and the related foreign tax credit, and the recent 267A anti-hybrid regulations.

Description

A U.S. company can conduct business through a branch in another country or through a foreign entity that is disregarded in the U.S. Generally, a foreign branch is a trade or business operated in a foreign country that maintains its own set of 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.

Income or loss from a foreign branch is reported on a U.S. consolidated income tax return. This can provide substantial benefits to the group when the branch is reporting losses. Dual losses--deducting the same loss in both countries--are prohibited. Reporting income provides additional complexities. Allocation and reallocation rules for foreign branch income must be analyzed to calculate the allowable foreign tax credit. Foreign branch income is subject to a 21 percent tax rate and is ineligible for the Section 250 FDII deductions which yield a 13.125 percent effective 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. Furthermore, Section 267A contains branch payment rules and branch payment mismatch rules that international tax practitioners must understand.

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Outline

  1. Foreign branches: overview
  2. Foreign branch loss recapture under Section 91
  3. Subpart F and GILTI
    1. Section 954(d)(2) branch income rules
    2. GILTI and Subpart F high-tax exceptions
  4. Foreign tax credit
  5. Anti-hybrid rules
  6. Form 8858 reporting
  7. Planning strategies

Benefits

The panel will review these and other critical issues:

  • What constitutes a foreign branch?
  • 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?

Faculty

Chesman, Adam
Adam Chesman
Senior Director, Cross-Border Mergers and Acquisitions Tax Leader
RSM US

Mr. Chesman has broad experience in federal, state, and international taxation, including consulting, compliance, and...  |  Read More

Steren, Carly
Carly Steren, J.D.
International Tax Manager
Armanino

Ms. Steren International Tax Manager at Armanino, LLP

 |  Read More

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