In some circumstances, a U.S.-based multinational parent provider with operations in quite a few foreign nations may perhaps obtain it advantageous to personal its many foreign investments by means of a third-country holding provider. The critical attributes of this structure are that the U.S. parent straight owns the shares of a holding provider setup in one particular foreign jurisdiction, plus the holding provider, in turn, owns the shares of one particular or extra operating subsidiaries setup in other foreign jurisdictions. The tax-related positive aspects of this holding provider organizational form could involve:
1. Securing valuable withholding tax rates on dividends, interest, royalties, and related payments
2. Deferring U.S. tax on foreign earnings till they may be repatriated for the U.S. parent provider (namely by reinvesting such earnings overseas)
3. Deferring U.S. tax on gains from the sale with the shares with the foreign operating subsidiaries
Realizing these positive aspects depends in substantial element on right organizing beneath complicated U.S. tax guidelines (which include the Subpart F and foreign tax credit guidelines) and avoiding antitreaty shopping guidelines identified in lots of tax treaties.
