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Interesting point about taxes. Can anyone confirm if this is how it works? What prevents Microsoft Europe from buying an entity in the United States and holding

by ansy 15y ago

Interesting point about taxes. Can anyone confirm if this is how it works? What prevents Microsoft Europe from buying an entity in the United States and holding the new company in Europe? It's not like other European entities need to pay tax penalties on top of the purchase price when buying assets abroad, right?

fauigerzigerk 15y ago
Good question. Presumably, a corporation cannot pick and choose to act as a single entity in one regard and as multiple independent companies in another. But I'm not sure either how it really works. Would be interesting to hear from an accountant or tax lawyer. [Edit] There's an article in the WSJ by John Chambers of Cisco and Safra Catz of Oracle on the issue: http://online.wsj.com/article/SB10001424052748704469004575533880328930598.html http://online.wsj.com/article/SB1000142405274870446900457553...
- ansy 15y ago
  Humorous how the article recommends the US can take the suggested 5% repatriating tax revenue and use it to give a tax break. So the net repatriating tax revenue to the US government would be 0%? Ah, WSJ. On the other hand dropping the tax would encourage even more overseas shenanigans, which I guess is burning Microsoft (and presumably Oracle and Cisco) for not thinking ahead, forcing them to pass on valuable domestic investments and overpay for less valuable overseas investments.
rprasad 15y ago
The WSJ article gives a basic, but slanted description of how it works. Briefly: income earned by overseas subsidiaries is not taxable to the American corporate parent until those overseas earnings are sent back to America via a dividend. Here, rather than pay a 35% rate on their overseas profits, Microsoft chose to use it to acquire another company, essentially delaying taxation on that income until much later into the future, if ever. Edit: There is no advantage to the reverse (MSEuro buying a US company), since the US-earned income is taxed in the US at the US corporate rates, which are much higher than the European corporate rates. The money would be taxed at a lower rate when repatriated to the Euro owner, but you would have ended up paying the higher tax rate first.

by ansy 15y ago

fauigerzigerk 15y ago

Good question. Presumably, a corporation cannot pick and choose to act as a single entity in one regard and as multiple independent companies in another. But I'm not sure either how it really works. Would be interesting to hear from an accountant or tax lawyer. [Edit] There's an article in the WSJ by John Chambers of Cisco and Safra Catz of Oracle on the issue: http://online.wsj.com/article/SB10001424052748704469004575533880328930598.html http://online.wsj.com/article/SB1000142405274870446900457553...

ansy 15y ago
Humorous how the article recommends the US can take the suggested 5% repatriating tax revenue and use it to give a tax break. So the net repatriating tax revenue to the US government would be 0%? Ah, WSJ. On the other hand dropping the tax would encourage even more overseas shenanigans, which I guess is burning Microsoft (and presumably Oracle and Cisco) for not thinking ahead, forcing them to pass on valuable domestic investments and overpay for less valuable overseas investments.

rprasad 15y ago

The WSJ article gives a basic, but slanted description of how it works. Briefly: income earned by overseas subsidiaries is not taxable to the American corporate parent until those overseas earnings are sent back to America via a dividend. Here, rather than pay a 35% rate on their overseas profits, Microsoft chose to use it to acquire another company, essentially delaying taxation on that income until much later into the future, if ever. Edit: There is no advantage to the reverse (MSEuro buying a US company), since the US-earned income is taxed in the US at the US corporate rates, which are much higher than the European corporate rates. The money would be taxed at a lower rate when repatriated to the Euro owner, but you would have ended up paying the higher tax rate first.