System and method for analyzing distributions for taxation analysis

Abstract

A method and system receives one or more target distribution amounts corresponding to currency totals for one or more foreign entities to distribute to one or more domestic entities in one or more years, the foreign entities being direct or indirect subsidiaries of the one or more domestic entities, then it receives entity data pertaining to tax relevant attributes for the one or more domestic and foreign entities over the one or more years, and receives distribution constraints for each foreign entity, the distribution constraints including a minimum distribution amount and a maximum distribution amount for each entity in each year. The method and system creates one or more distribution scenarios including corresponding tax costs based on the entity data and the distribution constraints and identifies a distribution scenario from the one or more distribution scenarios having the lowest tax and meeting the one or more target distribution amounts.

Description

BRIEF DESCRIPTION OF THE DRAWINGS

The present invention is illustrated by way of example, and not by way of limitation, in the figures of the accompanying drawings in which:

FIG. 1 is a diagram that illustrates an example embodiment of a tax analysis system;

FIG. 2 is a diagram of a hierarchal entity tree illustrating an example embodiment of an entity ownership structure;

FIG. 3 is a block diagram illustrating example modules, according to one embodiment, that may be utilized by one or more tax analysis application(s) associated with a distribution analyzer;

FIG. 4 is a flow chart illustrating at a high level example operations performed by one or more tax analysis application(s) to create a distribution plan;

FIGS. 5-9 are screen shots, according to various embodiments, illustrating a distribution analyzer wizard;

FIG. 10 illustrates an example embodiment of a table of default values associated with distribution analysis-specific data;

FIG. 11 an example screenshot illustrating, according to one embodiment, default values that may be captured and displayed on a user interface;

FIG. 12 illustrates an example embodiment of a screenshot of a set of results returned by a distribution analyzer;

FIG. 13 illustrates an example embodiment of a table generated when “Re-estimate” has been selected; and

FIG. 14 illustrates a diagrammatic representation of a machine in an example form of a computer system within which a set of instructions may be executed to cause the machine to perform any one or more of the methodologies discussed herein.

Claims

1. A method, including: receiving one or more target distribution amounts corresponding to currency totals for one or more foreign entities to distribute to one or more domestic entities in one or more years, the one or more foreign entities being direct or indirect subsidiaries of the one or more domestic entities;receiving entity data pertaining to tax relevant attributes for the one or more domestic and foreign entities over the one or more years;receiving distribution constraints for each foreign entity, the distribution constraints including a minimum distribution amount and a maximum distribution amount for each entity in each year;creating one or more distribution scenarios including corresponding tax costs based on the entity data and the distribution constraints; andidentifying a distribution scenario from the one or more distribution scenarios having the lowest tax and meeting the one or more target distribution amounts.

2. The method of claim 1, including receiving the target amounts, the entity data, and the distribution constraints from a user interface.

3. The method of claim 1, including converting each distribution amount to the currency of the domestic entity.

4. The method of claim 1, including determining the maximum distribution amount is too low when the one or more distribution scenarios include an amount less than the one or more target distribution amounts.

5. The method of claim 1, including determining the maximum distribution amount is equal to or greater than the minimum distribution amount for each entity in each year.

6. The method of claim 1, wherein creating a distribution scenario of the one or more distribution scenarios includes: creating a primary distribution out of an entity in a given year, the amount of the primary distribution in the entity's functional currency being equal to the lesser of the amount available in the entity in the given year and an incremental distribution size;creating induced distributions in the year by moving up the entity ownership structure;determining an additional tax associated with the primary distribution as the sum of one or more of an increase in foreign income tax, a withholding tax from the primary distribution, any induced distributions, and an increase in U.S. (United States) tax; anddetermining a tax rate associated with the primary distribution as a ratio of additional tax from the computing of the additional tax associated with the distribution and the distribution amount from the creating of the primary distribution.

7. The method of claim 1, wherein the determining which of the one or more distribution scenarios has the lowest tax cost includes determining, in each year, the tax cost of an incremental distribution out of each entity that has distributed less than its maximum distribution amount for that year.

8. The method of claim 7, wherein the determining which of the distribution scenarios has the lowest tax cost includes selecting an incremental distribution with the lowest tax cost until all the one or more target distribution amounts have been achieved or determining it is not possible to get closer to meeting the one or more target distribution amounts.

9. The method of claim 7, including adding a penalty for unused foreign tax credits to the tax cost when selecting which incremental distribution to create.

10. A system, including: an entity data module to receive one or more target distribution amounts corresponding to currency totals for one or more foreign entities to distribute to one or more domestic entities in one or more years, the one or more foreign entities being direct or indirect subsidiaries of the one or more domestic entities; to receive entity data pertaining to tax relevant attributes for the one or more domestic and foreign entities over the one or more years; and to receive distribution constraints for each foreign entity, the distribution constraints including a minimum distribution amount and a maximum distribution amount for each entity in each year; anda distribution analyzer module to create one or more distribution scenarios including corresponding tax costs based on the entity data and the distribution constraints and to identify a distribution scenario from the one or more distribution scenarios having the lowest tax and meeting the one or more target distribution amounts.

11. The system of claim 10, wherein the entity data module is further to receive the target amounts, the entity data, and the distribution constraints from a user interface.

12. The system of claim 10, wherein the distribution analyzer module is further to convert each distribution amount to the currency of the domestic entity.

13. The system of claim 10, wherein the distribution analyzer module is further to determine the maximum distribution amount is too low when the one or more distribution scenarios include an amount less than the one or more target distribution amounts.

14. The system of claim 10, wherein the distribution analyzer module is further to determine the maximum distribution amount is equal to or greater than the minimum distribution amount for each entity in each year.

15. The system of claim 10, wherein the distribution analyzer module to create a distribution scenario of the one or more distribution scenarios includes the distribution analyzer module to: create a primary distribution out of an entity in a given year, the amount of the primary distribution in the entity's functional currency being equal to the lesser of the amount available in the entity in the given year and an incremental distribution size;create induced distributions in the year by moving up the entity ownership structure;determine an additional tax associated with the primary distribution as the sum of one or more of an increase in foreign income tax, a withholding tax from the primary distribution, any induced distributions, and an increase in U.S. (United States) tax; anddetermine a tax rate associated with the primary distribution as a ratio of additional tax from the computing of the additional tax associated with the distribution and the distribution amount from the creating of the primary distribution.

16. The system of claim 10, wherein the distribution analyzer module to determine which of the one or more distribution scenarios has the lowest tax cost includes to determine, in each year, the tax cost of an incremental distribution out of each entity that has distributed less than its maximum distribution amount for that year.

17. The system of claim 16, wherein the distribution analyzer module to determine which of the distribution scenarios has the lowest tax cost includes the distribution analyzer module is further to select an incremental distribution with the lowest tax cost until all the one or more target distribution amounts have been achieved or the distribution analyzer module to determine it is not possible to get closer to meeting the one or more target distribution amounts.

18. The system of claim 16, wherein the distribution analyzer module is further to add a penalty for unused foreign tax credits to the tax cost when the distribution analyzer module to select which incremental distribution to create.

19. The system of claim 10, including a report module to create a report composed of at least the identified distribution scenario from the one or more distribution scenarios having the lowest tax and meeting the one or more target distribution amounts.

20. A machine-readable medium that includes instructions to be executed by a machine, the instructions when executed causing the machine to: receive one or more target distribution amounts corresponding to currency totals for one or more foreign entities to distribute to one or more domestic entities in one or more years, the one or more foreign entities being direct or indirect subsidiaries of the one or more domestic entities;receive entity data pertaining to tax relevant attributes for the one or more domestic and foreign entities over the one or more years;receive distribution constraints for each foreign entity, the distribution constraints including a minimum distribution amount and a maximum distribution amount for each entity in each year; andcreate one or more distribution scenarios including corresponding tax costs based on the entity data and the distribution constraints and to identify a distribution scenario from the one or more distribution scenarios having the lowest tax and meeting the one or more target distribution amounts.