Victor Jaramillo Talks to Law360 on Latin American and Foreign Tax Credits

The U.S. tax overhaul’s limit on foreign tax credits can make it a challenge to bring home overseas earnings, including those from countries in Latin America, a region that specialists say will get a close look at an upcoming American Bar Association meeting.

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Foreign tax credits apply to this income at an 80 percent rate. According to Victor Jaramillo, who is of counsel at Caplin & Drysdale Chtd. in Washington, D.C., the tax law’s restriction on foreign tax credits increases the cost of local taxes, and that [in] turn affects earnings brought back into the U.S.

“You’re always worried about your effective tax rate and what you’re going to pay in the U.S.,” he said, noting that after regulations are issued, “you’ll see a lot more creative transactions trying to figure out if you can place things in different baskets that don’t have a credit limitation.”

Jaramillo is one of the panelists at an ABA tax section meeting, scheduled for June 13-15 in Miami, that will confront repatriation challenges under the new tax law, especially in Latin American countries.

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Now that the offshore earnings are being taxed, “you might as well bring it back,” Jaramillo said.

He said that specialists on the panel — which include practitioners from several Latin American countries — will discuss how dividends, royalties and related party payments are taxed in their jurisdictions, including how any double-tax treaties would factor in.

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Excerpt taken from the article “ABA Meeting To Tackle Latin America's Repatriation Hurdles” by Natalie Olivo for Law360.