US Tries to Prevent Corporations From Abusing Foreign Tax Havens – Treasury
The US Department of the Treasury said that the United States introduced new restrictions to prevent US-based multinationals from restructuring after mergers to establish foreign parent companies in order to avoid paying taxes.
WASHINGTON (Sputnik) — The United States introduced new restrictions to prevent US-based multinationals from restructuring after mergers to establish foreign parent companies in order to avoid paying taxes, the US Department of the Treasury said in a press release.
“Genuine cross-border mergers make the US economy stronger,” the release stated on Thursday. “But these transactions should be driven by genuine business strategies and economic efficiencies, not a desire to shift the tax residence of a parent entity to a low-tax jurisdiction simply to avoid US taxes.”
The new restrictions, the release added, would limit the ability of US companies to combine with foreign entities using a new foreign parent located in a third country.
The regulations will prevent US companies from inflating foreign ownership and also the establishment of parent companies in countries that have little connection to the actual merger transaction, according to the release.
The US Treasury Department, the release further noted, will continue to examine additional ways to reduce the tax benefits and make these types of inverse merger transactions less economically appealing.
