What are the specific methods for avoiding taxation of international profits?
Avoiding taxation of international profits is possible through a few specific methods. One common method is to register a business in a country that does not have a high income tax rate. This is sometimes referred to as a "tax haven" because the company can avoid paying high taxes in their home country. Additionally, companies may be able to take advantage of tax treaties between countries to avoid paying double taxation. Tax treaties specify that a company must pay taxes to only one country, thus avoiding paying taxes in both the foreign and domestic country. Another popular method is to take advantage of foreign tax credits. This allows companies to take a credit for taxes paid to foreign governments and apply it to their corporate tax liability in their home state. This reduces the amount of taxes that the company needs to pay in their home state. Lastly, creating a subsidiary in a foreign country is a viable option that allows companies to pay taxes at the corporate level in the foreign country in lieu of paying taxes on income in their home country. This allows companies to lower their overall tax burden. Overall, these are some of the most common methods that companies can use to minimize taxation of international profits. While they may help to reduce the taxes paid by businesses, it is important to keep in mind that international taxes are very complex and it is essential to have a working knowledge of local and international tax laws.
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