Cross-border Tax Talks

Currency Exchange: Getting your Dollars worth

Doug McHoney (PwC's International Tax Services Global Leader) welcomes Rebecca Lee (Washington National Tax Services International Tax Partner). Doug and Rebecca discuss the many tax aspects of a strong US dollar, including cream skimming, foreign exchange gains and losses with branches and CFCs, previously taxed earnings, translational versus transactional gain or loss, and more. Can Doug and Rebecca go the entire podcast without mentioning a code section? Tune in to find out!

Timestamps:

• 1:45 - Why is FX so important now, particularly for US multinationals?
• 4:45 - How do we determine the functional currency of an entity for US tax purposes?
• 5:50 - Why is it important to know the functional currencies of branches and CFCs, before we even touch tax consequences of these financial transactions?
• 10:10 - Financial transactions
  • 10:15 - When is gain or loss triggered on debt instruments?
  • 12:30 - What would be the potential consequences if a US-parented Group lent to a UK CFC in US Dollars? What about ‘cream skimming’?
  • 15:20 - What would be the potential consequences if a US-parented Group lends to a UK CFC in pounds?
  • 17:45 - What would be the potential consequences if an upstream loan from a UK CFC is lending to the US-parented company in dollars?
  • 21:50 - Foreign exchange gain or loss on income that has already been subject to tax in the US
  • 28:10 - Foreign exchange gain or loss on branches
  • 33:40 - What would be the potential consequences if a UK branch makes a remittance to a US CFC?
  • 36:40 - Branch loss - ordinary or capital?
  • 36:55 - A CFC that owns a UK branch - how is that treated under subpart F or GILTI rules at the CFC level?
• 39:50 - What are the relevant code sections in subpart J?

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