TAxation of Domestic Corporations
Domestic corporations are taxed on their worldwide income at graduated corporate tax rates that range from 15 percent to 35 percent. If a domestic corporation earns income that is taxed in a foreign jurisdiction, that income is included in the corporation’s U.S. taxable income and a foreign tax credit is allowed for taxes paid to the foreign jurisdiction. The result is that the income is taxed at the higher of the U.S. rate or the foreign rate.
Shareholders of a domestic corporation are also subject to income tax on dividends paid out of the earnings and profits of the corporation. The tax rates on dividends range from 0 percent to 23.8 percent for U.S. shareholders. Foreign shareholders of a domestic corporation are subject to a 30 percent withholding rate which may be reduced if the recipient is a resident of a country with which the United States has an income tax treaty in force.
Shareholders of a domestic corporation are also subject to income tax on dividends paid out of the earnings and profits of the corporation. The tax rates on dividends range from 0 percent to 23.8 percent for U.S. shareholders. Foreign shareholders of a domestic corporation are subject to a 30 percent withholding rate which may be reduced if the recipient is a resident of a country with which the United States has an income tax treaty in force.