Alliance Analysis – Tax Planning | Basic Rules on International Tax Credits

【Answer 1】 | Original content by Compliant Alliance | Practices and forms of tax credit implementation. Since tax credits involve taxation relationships between countries, their implementation generally requires not only explicit stipulations—by each country’s government—in its domestic tax laws regarding the principles, policies, and specific provisions of tax credits, but also negotiations between the source country of income and the resident country to conclude bilateral or multilateral agreements on avoidance of double taxation (international law). During tax assessment, procedures are carried out in accordance with domestic tax law provisions or applicable treaties. The majority of tax credits pertain to enterprise and corporate income tax. Due to differences in corporate affiliations, the forms of tax credit applied to taxes paid abroad by enterprises and companies also differ, commonly categorized as direct credit, indirect credit, and multi-tier credit. For resident enterprises deriving taxable income from outside China, and for non-resident enterprises that have established institutions or places of business within China and derive taxable income outside China that is effectively connected with such institutions or places of business, the income tax already paid overseas may be credited against their current tax liability in China. The credit limit equals the amount of tax payable on such income calculated under the Enterprise Income Tax Law and its implementing regulations. Any excess over the credit limit may be carried forward for offset against future tax liabilities over the next five years, using the balance remaining after applying the annual credit limit against the tax due in each year.

Trina’s U.S. Affiliate Monetizes $160 Million: Unveiling the Policy-Financial Game

【Answer 2】 Follow us on 【EnSight New Energy Vision — Seeing Value】 Recently, U.S.-based T1 Energy announced it had successfully sold, for the first time, production tax credits (PTCs) under Section 45X of the U.S. Inflation Reduction Act (IRA) to an investment-grade buyer—generating $160 million in proceeds. This substantial cash inflow did not originate from component sales, but rather from a sophisticated financial maneuver leveraging U.S. government subsidy policies. $160 Million in “Immediate Cash” The Financial Magic of Tax Credits The transaction employed a tax credit transfer mechanism, with T1 Energy selling each $1 of PTCs at $0.91. Citigroup Global Markets served as financial advisor. Final settlement and adjustment will occur in February 2026, based on T1’s actual component output in December 2025. In simple terms, for a company like T1—currently scaling up production and expanding capacity—the volume of future tax credits is large, yet its current taxable profits are insufficient to fully utilize them. By selling these “future tax-offset rights” upfront to banks or investment funds bearing substantial tax liabilities, T1 secures immediate, sizable liquidity without resorting to traditional debt or equity financing. Meanwhile, buyers acquire a reliable “tax-reduction asset” at a discount. This $160 million transaction monetizes anticipated policy subsidies into immediate cash flow—funds that will directly support operations at T1’s G1 Dallas module factory and construction of its G2 Austin advanced battery facility. Thus, a perfect closed-loop cycle emerges: “policy infusion → cash injection → capacity expansion.” This no longer follows the conventional logic of “manufacture–sell–profit,” but instead evolves into a capital game: “manufacture–generate subsidies–financial monetization–reinvest in manufacturing.” Trina Solar’s “Shell” and “Core” Compliance Intelligence Under FEOC Pressure Although T1 operates as an independent U.S. publicly listed company (NYSE ticker: TE), under the stringent controls imposed by the U.S. “One Big Beautiful Bill Act” (OBBA) on “Foreign Entities of Concern” (FEOCs), T1 serves as Trina Solar’s pivotal platform for achieving “localized manufacturing” in the U.S. market. In December 2024, T1 completed the acquisition of Trina Solar’s U.S. manufacturing assets for $621 million, rebranding the facility as the G1 Dallas Factory. (Read original article: [Capacity] Another 5 GW! U.S. Solar Giant Invests $1.1 Billion in Texas Triangle Region) Through subsequent equity transfers, Trina Solar currently holds approximately 17.4% of T1’s shares—a stake deliberately calibrated below the regulatory thresholds associated with FEOC restrictions. This ensures T1’s eligibility for U.S. federal subsidies while preserving Trina Solar’s channels for technological collaboration and financial returns.

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