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The Strategic Use of Short‐Term Loans to Access Offshore Cash
Author(s) -
Schultz Thomas D.,
Tang Roger Y. W.
Publication year - 2015
Publication title -
journal of corporate accounting and finance
Language(s) - English
Resource type - Journals
eISSN - 1097-0053
pISSN - 1044-8136
DOI - 10.1002/jcaf.22095
Subject(s) - treasury , business , subsidiary , cash , finance , multinational corporation , cash management , flexibility (engineering) , position (finance) , debt , market liquidity , financial system , economics , management , archaeology , history
In times of uncertainty, maintaining a strong cash position generally enhances a corporation's financial flexibility; however, holding significant cash balances offshore to avoid tax consequences associated with repatriations can make the amounts unavailable for use in the United States. A viable, tax‐effective strategy for U.S. multinational corporations seeking to access offshore cash is to structure short‐term, intercompany loans from their subsidiaries operating as foreign controlled corporations. By coordinating the treasury and tax functions in this area, corporations can successfully address the applicable IRS rules while providing liquidity to support domestic operations. © 2015 Wiley Periodicals, Inc.