Can tax treaties help companies gain favorable tax rates on income?
Many countries have tax treaties with the U.S., and some will allow companies to pay dividends to the U.S. without withholding taxes, provided that the foreign business is substantially wholly owned by the U.S. parent company. Ordinarily, when you set up a subsidiary in a foreign country, you pay a dividend to the U.S. and withhold tax money so the foreign government can collect income tax. In a tax treaty situation, you may be able to pay a dividend with no withholding from the foreign country. MICHAEL HEIMAN is associate director of SS&G Financial Services, Inc. in Solon. Reach him at MHeiman@SSandG.com or (440) 248-8787.
