Definition of Corporate inversion:
Corporate inversion is one of the many strategies companies employ to reduce their tax burden. A company can reincorporate abroad by having a foreign company purchase its current operations. The foreign company then owns the assets, the old corporation is dissolved, and the business, while remaining the same in its daily activities, is now domiciled effectively in the new country. Companies may also buy or merge with a foreign business and use that entity as their new headquarters.
A corporate inversion (or tax inversion) is a process by which companies, primarily based in the U.S., relocate operations overseas to reduce their income tax burden. Companies who receive a significant portion of income from foreign sources employ corporate inversion as a strategy since that income is typically taxed both abroad and in the country of incorporation. Companies undertaking this strategy are likely to select a country which has a lower tax rate and less stringent corporate governance requirements than their home country.
Practice used by organizations with a parent company located in the United States to gain tax benefits offered by foreign government. Corporate inversion occurs when the parent company switches registration with a subsidiary located outside of the United States.
How to use Corporate inversion in a sentence?
- The destination company will have a lower tax rate and more favorable regulatory environment than the domestic country, thus lowering the corporation's effective tax rate on a net basis.
- Corporate inversion, also known as tax inversion, involves a domestic company moving its headquarters or operations base overseas.
- While legal, the practice has come under fire as a loophole that artificially lowers corporate taxes and keeps U.S. dollars overseas.
Meaning of Corporate inversion & Corporate inversion Definition