Corporate Inversions: Will the Repo Act Keep Corporations from Moving to Bermuda?

28 Pages Posted: 15 Feb 2010

Date Written: June 1, 2003

Abstract

In the wake of September 11, 2001, several influential lawmakers have questioned a tax reduction practice known as a "corporate inversion," calling the companies who undertake such an inversion "unpatriotic. In addition, the foreign corporation also remains subject to U.S. tax on its U.S.-sourced income after undertaking the inversion. An inverted U.S. corporation can undertake several arrangements that allow it to make certain deductible payments to the foreign parent corporation, which results in a shift of income from the taxable U.S. subsidiary corporation to the non-taxable foreign parent corporation. The draft REPO Act would attempt to achieve this goal by treating the foreign parent corporation in a pure inversion as a domestic U.S. corporation for U.S. tax purposes. A corporate inversion consists of a U.S. corporation forming another corporation in an offshore tax haven and then transforming the U.S.-based corporation into a subsidiary of the offshore parent corporation. As a result, a foreign parent corporation that has its main office in the foreign parent jurisdiction, but a subsidiary in another foreign jurisdiction, will not be taxed by the foreign parent jurisdiction on its foreign subsidiary's income. ...

Suggested Citation

Cantley, Beckett Gordon, Corporate Inversions: Will the Repo Act Keep Corporations from Moving to Bermuda? (June 1, 2003). Houston Business and Tax Law Journal, Vol. 3, No. 1, 2003. Available at SSRN: https://ssrn.com/abstract=1552962

Beckett Gordon Cantley (Contact Author)

Northeastern University ( email )

4471 Dean Martin Dr. #3708
Las Vegas, NV 89103
United States
702-881-4849 (Phone)

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