New section 7874 regulations significantly narrow ability to claim substantial business activities in a foreign country

June 2012

Overview

The IRS and Treasury have raised the bar for US multinationals that seek to change their parent company's country of incorporation. New final, temporary and proposed regulations under section 7874 require such companies to have 25 percent of their employees, property, and income in that foreign country. Otherwise the new parent company may be treated as a domestic corporation for US tax purposes.

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Bernard Moens
US Inbound International Tax Services Leader
Tel: +1 (202) 414 4302
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