International Tax

The Branch-Related Taxes of Section 884 (Portfolio 6480)

  • This Portfolio analyzes the branch-related taxes of §884, i.e., the branch profits tax, the branch level interest withholding tax, and the excess interest tax.

Description

These taxes may be applicable to a foreign corporation engaged in a trade or business in the United States (in addition to the regular corporate income tax, which is imposed on the taxable income of the foreign corporation effectively connected with its U.S. trade or business).

The branch-related taxes of §884 are imposed with respect to three separate tax bases: (1) U.S. trade or business earnings and profits deemed to be repatriated by the foreign corporation (the “dividend equivalent amount”); (2) interest deemed to be paid by the branch; and (3) interest that is deductible by the foreign corporation, but is not deemed to be paid by the branch (“excess interest”). The Bloomberg Tax Portfolio, The Branch-Related Taxes of Section 884, describes in depth the calculation of the branch-related taxes and in addition addresses a number of other issues, including: (1) the effect of corporate reorganizations and other nonrecognition transactions on the branch profits tax; (2) the interplay between the tax on interest deemed paid by the branch and the excess interest tax; (3) the effect of treaty provisions on the branch-related taxes and (4) the impact of the OECD Report on the Attribution of Profits to Permanent Establishments on the branch-related taxes.

Table of Contents

I. Introduction
II. Branch Profits Tax
III. Branch Interest Withholding Tax
IV. Tax on Excess Interest
V. Application of U.S. Tax Treaties
VI. Branch Reporting Requirements

connors_peter_2015
Peter Connors
Partner
Orrick Herrington & Sutcliffe LLP
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