Running head: DEEMED REPATRIATION 1

Deemed Repatriation

Name

Institution
DEEMED REPATRIATION 2

Deemed repatriation

Tax Cuts and Jobs Act of 2017

Under this Act, corporation tax rate is supposed to reduce from 35% which is the current

rate to 21% together with the tax credits which are related to business with any other deductions.

This act is also supposed to shift the U.S current taxation which depends on the taxation system

that is worldwide to taxation system that is territorial (Matthews, 2017). Under the taxation that

is used worldwide, every company that is based in the U.S is required to pay its tax over earnings

that are worldwide regardless where its subsidiaries are located up to the time the earning are

remitted in the U.S. In this way no company can be able to avoid being taxed on oversees profits.

On the territorial tax system, U.S companies are the only ones that would be taxed on their

profits whereas the company’s profits situated in the overseas, taxation will not apply on their

profits until the profits are transferred to government. This situation is the same as the current

repatriation provision as discussed below.

The current Repatriation Provision

The current provision will tax profits which have not been taxed on the U.S based

companies that have overseas subsidiary. As soon as the profits transferred back to the U.S

market, taxation will be applied at lower attractive rates of 8% and 15.8%. This will provide cost

saving to the companies that are based in the U.S because the current rate of corporate tax is

35%. However, the provision is reducing the amount of revenue being earned through taxes as it

encourages people to invest in markets outside the market of the U.S and in this way, they are

taxed at a tax rate that is lower (Harrison, 2007). But this is an initiative by the government of

U.S to bring back to the country over $2.6 trillion in form of un-taxed profits that are not in the
DEEMED REPATRIATION 3

U.S market, but some companies will purposely keep the profits overseas and avail the new

provision in long term.

The method used in calculating the repatriation tax.

The policy of repatriation has adopted an approach called deemed repatriation, in that the

profits which has been kept out of the U.S market will be regarded as already been transferred to

the U.S market and will be taxed at corporation tax which is 35%. The deemed repatriation will

also apply fines of 45% to 50% for deliberately keeping profits outside the U.S (Dubay, 2017).

This will only be applicable under a perspective that is theoretical and on grounds that are

practical there are lower tax rates of 15.55% and 8% that are attractive. The 15.5% rate, will be

charged on investment which has been transferred back and invested in liquid assets such as

stocks. 8% will be charged on the assets which are classified under hard to be sold, for example

real-estate properties, plants or equipment. Therefore, the tax will be calculated on the basis of

liquid and hard assets.

Repatriation beneficiary

The beneficiaries of the deemed repatriation will enable the companies that are based in

the U.S, because they will not be required to pay the corporation tax of 35% on retained earnings

that are untaxed invested abroad and will pay only 15.5% under the investments of liquid assets

and 8% on assets that are hard to be sold in the in the country. The rates of tax are under the tax

rate that is corporation which will produce tax savings of 27% to 19.2%. On the other side,

corporations based in the U.S, the government will get large benefits through the repatriation

provision as there is around $2.6 trillion in overseas and not taxed according to Congress Joint

Committee on Taxation.
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References

Inc., A. (n.d.). Investor Relations - Financial Information. Retrieved February 14, 2018, from

http://investor.apple.com/financials.cfm

Dubay, C. S. (2017). Changes to Repatriation Policy Best Left to Tax Reform. Heritage

Foundation Issue Brief, (4347).

Harrison, E. K. (2007). Estate Planning under the Bush Tax Cuts. National Tax

Journal, 60(3), 371-384. doi:10.17310/ntj.2007.3.02

Matthews, D. (2017, December 19). The tax bill is a giant permission slip for shipping

profits overseas. Retrieved February 14, 2018, from

https://www.vox.com/2017/12/19/16791936/repatriation-holiday-republican-tax-

billexplained 2018].