Double taxation

Incorporating has its drawbacks, too.

Double taxation

Many Tennessee businesses have an interest in flow through entities subject to Tennessee taxation. The flow through income is reported by both the parent and the income producing entity. To avoid the income being taxed twice, the state allows the holding entity to exclude the flow through income or loss from its excise return.

Income subject to self-employment tax is also excluded from the excise return, because Tennessee does not have an individual income tax. General partnerships not seeking LLC protection and single member LLCs with corporate owners are not required to file separate Tennessee tax returns.

The Tennessee Franchise and Excise tax has two levels: When calculating Franchise Tax, if the holding entity owns an interest in several other entities, its equity can potentially be taxed more than once. This potential negative tax effect can be avoided for an affiliated group by making a joint election to compute net worth on a consolidated basis.

However, each affiliated group member that is subject to the Tennessee Franchise and Excise tax is still required to file its own separate return. The only difference is that each member will calculate its franchise tax based upon its percentage owned of the consolidated net worth of all members in the group.

That is assuming the assets of each group member are lower than their share of the consolidated net worth. The negative net worth of the first member will reduce the positive net worth of the second member. The combination will result in a lower overall tax liability for the consolidated group.

Additionally, as mentioned above, if the assets of the reporting entity are higher than the apportioned consolidated net worth, the franchise tax is calculated based on the assets instead of consolidated net worth.


This presents another opportunity for savings upon consolidation. If the flow through entity's assets are greater than total net worth, the flow through entity might pay tax on the fixed assets, and the holding entity could pay tax on the investment in the flow through positive equity.

With consolidation, only the fixed assets of the flow through entity are taxed. To compute net worth on a consolidated basis, all members of an affiliated group must file a group consolidated net worth registration form before the due date of the tax return.

After the election is made, each member of the affiliated group needs to compute its net worth on a consolidated basis. First, the group needs to combine all members' balance sheets on the last day of the year to determine net worth, which is the difference between combined assets and liabilities.

Second, each member has to use three factors property, payroll, and sales to compute its apportionment of the group's net worth.

Finally, each member will compute its franchise tax using the calculated appointment multiplied by its percentage of the consolidated net worth. Most taxpayers can benefit from calculating their franchise tax based on a consolidated net worth.

In fact, rarely would it benefit qualifying taxpayers to file on an unconsolidated basis. If you think you might qualify for consolidated treatment in Tennessee, or have any other questions related to Tennessee consolidated net worth filings, please contact your Marcum representative.Avoidance of Double Taxation Agreements (DTAs) A DTA is an agreement concluded between Singapore and another jurisdiction (a treaty partner) which serves to relieve double taxation of income that is earned in one jurisdiction by .

An S corporation is a pass-through tax entity, while a C corporation is a completely separate taxpayer from its owners. A savvy business owner must carefully consider both nontax and tax ramifications when deciding how to structure the business.

It is unwise to select a business structure based. Jan 01,  · taxation convention with thailand general effective date under article 1 january table of articles article personal scope. Concept of Double Taxation Double taxation is a situation that affects mainly multinational corporations when business profits are taxed at both the corporate and personal levels.

The corporation has to pay income tax at the corporate rate before any profits are to be paid to shareholders. Jan 01,  · taxation convention with thailand general effective date under article 1 january table of articles article personal scope.

Double taxation

Double taxation arises when two or more tax jurisdictions overlap, such that the same item of income or profit is subject to tax in each. Hong Kong adopts the territoriality basis of taxation, whereby only income / profit sourced in Hong Kong is subject to tax and that derived from a source outside Hong Kong by a local resident is in most cases not taxed in Hong Kong.

Which Form of Business Organization Is Associated With Double Taxation? |