Second, is the incentive to reincorporate in the U.S.How would this allow the foreign owners to circumvent the income tax. If they wanted to realize any profit from this new U.S. corporation, it would be taxed the same as if they had not reincorporated in the US. The only way around this is for them to move (not their corporation, but pack up their family and move) to the US. I doubt too many people would find that appealing.
"The only way around this is for them to move (not their corporation, but pack up their family and move) to the US. I doubt too many people would find that appealing."
Are you aware of how many people move here every year - both legally and illegally? Apparently some people find relocating to the USA very appealing.
They will pack up and move. I did it......
Section 936 of the Internal Revenue Code made it VERY attractive to do business (Manufacture) in Puerto Rico. We moved, lived there for three years. Took our 3 and 5 year olds, moved from family, friends, all that was familiar. Not easy, but it's done everyday. Capital flows, over time, to where it is treated best. That is an undeniable fact. It will take time, but it will happen.
Because of the incentives of section 936, manufacturing plants sprung up like ant hills on the Island of Puerto Rico. Most of our pharmaceuticals are manufactured there. The old timers told me (through interpreters) that the island changed virtually overnight.
And it continues to happen under our noses.......we're losing the capital investment battle:
http://www.ciol.com/content/search/showarticle.asp?arid=68731&way=search