Tax inversion is a corporate strategy in which a company acquires or merges with a foreign entity, often based in a country with a lower tax rate, and then shifts its domicile abroad to reduce its tax burden. This enables the company to benefit from lower tax rates, which helps to increase profits and reduce taxes paid to the home country's tax authorities.

Solved

A Tax Inversion Is

Question 95

Multiple Choice

A tax inversion is

A) a country that has a low corporate income tax rate and low withholding tax rates on passive income.
B) a maneuver in which a firm (usually U.S.) acquires or merges with a foreign rival incorporated in a low-tax country,then shifts its domicile abroad to reap tax benefits.
C) any country with a higher tax rate than available domestically.
D) none of the options

Correct Answer: