Jerry Keen, the CFO of Boots Unlimited, a Texas corporation, has come to you regarding a potential restructuring of business operations. Boots has long manufactured its western boots in plants in...

"Exploring the Tax Implications of a Manufacturing Subsidiary in Ireland: A Case Study of Boots Unlimited"
Student Name
22nd Dec 2022
The issue of foreign base company income (FBCI) is one of concern for Jerry Keen, CFO of Boots Unlimited, a Texas corporation. With plans to set up a manufacturing subsidiary in Ireland, it is important to understand the implications of such a move and if the Irish subsidiary's revenue will be regarded as FBCI. This research paper aims to explore the concept of FBCI, how it is imposed, and how Boots Unlimited might plan to work around any possible tax implications.
The venture to Ireland would have a significant pricing advantage given the difference between the 34% and 10% tax rates. In Ireland, lower taxes equate to lower costs, which leads to lower product prices that will help Ireland compete. The branch rule applies to the income a CFC receives from the sale of goods it manufactures, which is exempt from the description of foreign base business sales income (FBCSI) under subpart F.
The following conditions must be completed in order for acquired property to be considered manufactured under current regulations: the property has undergone a substantial transformation, such as the conversion of steel rods into screws; the manufacturing are significant in scope and are ordinarily regarded as manufacturing, such as the assembly of automobiles; or the conversion costs are at least 20% of the costs of the...