Is Obama not violating some double taxation relief here by saying that US companies will pay tax on the profits earned overseas even if they don't bring them to America? http://www.bbc.com/news/business-31085912 According to my understanding, these companies strode a repository of NET profits which should mean that they should have been taxed in their respective countries. Or is that the structure of the taxation in US will tax only if the overseas tax rate is lower?
Profits are taxed in the home country only. But if the overseas subsidiary pays a dividend to the US parent (eg Apple Irish subsidiary which holds $160bn in cash!!) then this would be treated as "income" in the US parent's accounts. As income falls above the tax line, it would increase profits before tax and hence tax. The double tax treaty kicks in at this stage to reduce the US tax on this portion of the US company's profits to the additional tax above that which has already been paid in Ireland. But it would still be a huge amount of tax as Ireland has a 10% corporation tax rate. What is being proposed I suspect, is not a breach of double tax laws, but a rule that forces companies to bring the cash back after a certain period or something. They will probably still get double tax relief when they do though.
