US Tax Reform – Effects on Inbound Foreign Investment

With the passage of the Tax Cuts and Jobs Act (the Act) into law, it is appropriate to now attempt to evaluate the effects of the reform on the tax planning for inbound foreign direct investment. This summary focuses on the U.S. tax changes reflected in the Act to be considered by a foreign-owned U.S. enterprise that intends to conduct business activities in the United States. The summary assumes that the foreign owner is a company treated for U.S. tax purposes as a corporation and that it is entitled to the benefi ts of any U.S. income tax treaty existing between the U.S. and the foreign jurisdiction. The first part of the summary details the tax changes contained in the Act bearing upon the choice of entity, its capitalization and the repatriation of its profi ts to its foreign owner. The second part details the changes in the Act relating to the taxation of the operation of the U.S. enterprise.

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