Tax haven affiliate

Tax haven affiliate

A wholly owned entity in a low-tax jurisdiction that is used to channel funds to and from a multinational's foreign operations. The tax benefits of tax haven affiliates were largely removed in the US by the Tax Reform Act of 1986.

Tax Haven Affiliate

A wholly owned subsidiary of an American corporation in a foreign tax haven. Prior to the Tax Reform Act of 1986, a corporation could avoid taxes by placing a certain amount of its income in its tax haven affiliate, but this benefit is generally no longer permissible.
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The available evidence suggests that transfer pricing is sensitive to tax rate differences: reported pre-tax profit rates of foreign affiliates are inversely related to local tax rates; [14] royalty payments by foreign affiliates to their American parent companies are positively related to local tax rates; [15] American firms with tax haven affiliates tend to have lower U.S.
International Taxation
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