We’ve blogged about professional legal and financial translation services in the context of pension plans for foreign nationals. Professional legal translation services are equally important in figuring out the new foreign tax credits. Recently, the US government passed HR 1586, which has important changes regarding US international tax rules, particularly pertaining to Section 956 (the foreign tax credit blending rule).
According to the new rule, in situations where a US shareholder is allowed to claim deemed paid foreign tax credits, then the amount of the deemed paid credit can be limited. In other words, if a lower-tier foreign subsidiary had a high tax pool of earnings and a first-tier foreign subsidiary had a low tax pool of earnings, under the new rule the US parent company is able to claim only the foreign tax credits equal to the amount that would have been allowed if a cash distribution was made from the second-tier to the first-tier subsidiary and, from there, a cash distribution was made from the first-tier to the US parent company.
This could become complex when the subsidiaries are foreign-registered, meaning that taxes (and exemptions, depending on any existing tax treaties) must be filed in the foreign jurisdiction. Whenever a filing occurs in a foreign jurisdiction, a foreign language translation will have to be submitted with the filing of the US documents.