| Dividend Planning and Repatriation
Each year, U.S. multinational companies prepare dividend plans to repatriate cash to the U.S. from their controlled foreign corporations (CFCs). The plans must be prepared quickly, accurately, and far enough in advance to allow for local board approval cycles. The challenge is the calculations are very complex and many factors need to be considered. Dividend plans need to consider the amount of cash to be repatriated, the timing of the transaction and related transactions, and the appropriate mix of taxable and non-taxable dividends—of high and low foreign taxed dividends—and from the appropriate locations. The end goal is to increase cash flow and to be as tax efficient as possible as measured by the company’s effective tax rate (ETR).
Using the Liquid Engines ITx, tax planners are able to consider and quantify financial aspects and business operation needs at both the U.S. parent level and at multiple CFC levels. Tax professionals can quickly model various scenarios to determine how to efficiently move cash to the U.S. or other preferred location. Additionally, the Dividend Optimizer can be used to
rapidly calculate the tax impact of hundreds—in some cases, thousands—of potential alternatives and presents the best options. With ITx, tax professionals can confidently drive key decisions into the dividend plan to capture optimal value for the company.
- Forecast the taxable income for the U.S. tax consolidated group
- Forecast FTC utilization
- Hedge the costs and exposure of having cash in foreign currency
- Analyze the impact of foreign audit settlements on U.S. tax
- Analyze legislative impact of section 965 on dividend plans
- Calculate both AMT and regular tax for analysis
- Factor in local legal requirements and limitations in relation to distributions to its parent
- Analyze accumulated earnings or loss
- Determine tax rates of the accumulated earnings, and analyze withholding tax rates
- Determine previously taxed income (PTI) and dividends from lower-tier CFCs
In addition, as major tax and business events occur during the year, dividend plans can be monitored and changed quickly, accurately, and efficiently, gaining full insight into how the changes impact income tax treatment.
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