Income Tax for Domestic Corporations

A foreign business which incorporates in the US and US corporate subsidiaries of foreign businesses are US Persons for US tax purposes subject to US income tax on a worldwide basis. Corporations generally file a corporate tax return, such as Form 1120 “U.S. Corporation Income Tax Return” with the IRS. In general, the income of a corporation is subject to two levels of tax. First, net income (both ordinary and capital) of a corporation is taxed at the entity level at graduated rates which presently range from 15% to 35%. Second, when distributions of profits to shareholders are made, the shareholders are taxable on the distributions. Generally, the tax rate for individuals on dividends and capital gains is 15%. Withholding may apply to non-US Persons shareholders at 30%, unless a lower treaty rate applies.