Repatriation is the act of returning an item to its country of allegiance or country of origin. It is also a process of converting or returning a foreign currency into one’s local currency. When an asset or an item is returned to its original owner or its true country of origin, repatriation has occurred. In the broad sense, repatriation refers to when individuals who are foreign nationals are voluntarily or forcefully returned to their place of origin, Refugees, deportees, and aliens of other countries are returned to their country through repatriation. Repatriation often occurs in business deals, international relations or investments.
A Little More on What is Repatriation
Repatriation often occurs in the business world or the exchange market, when an individual converts foreign currency to their own local currency, it is repatriation. In some business settings, repatriation occurs when a business converts its offshore capital to the currency of the country where its business is domicile.
Also, institutional investors who have an investment in foreign countries can convert their investment earnings to their local currencies through repatriation. Repatriated funds are common in business, it is an act of returning earnings or returned generated in a foreign country to local currency.
International travel is another common aspect where repatriation occurs. Tourists or travelers can be returned to their place of origin either voluntarily or forcefully.
Risks Associated with Repatriation
Repatriation is not without any risks, especially when used by large corporations that have business outlets in different locations or countries. The major risk associated with repatriation is foreign exchange risk which results from the volatility or fluctuations in the exchange rate. If a company that made investment gains in the U.S, for instance, wants to convert the earnings to its local currency, Japan, the conversion will be subject for foreign exchange rate which means that the value of the earnings will be slightly different depending on the difference in the exchange rate of the two countries.
Also, businesses located in foreign countries receive their income in the currency of the country in which they operate, such income or earnings are to be sent to the country of the business owner, it will be subject to the foreign exchange rate.
Below are the essential points you should know about repatriation;
- Repatriation refers to a process or converting or returning an asset or item to its place of origin. It broadly refers to an act of returning a person or an item to its place of origin.
- For currency, it entails, converting foreign currency to one’s local currency.
- Repatriation is also the act of retiring foreign nationals and individuals to their original country or place of allegiance.
- Repatriation common occur in the business world, foreign invesmnets, international relations, and international travel.
- Rapratraited funds in the corporate world refer to funds or earnings made offshore that are converted back to the currency where a business is a domicile.
Below are some examples of repatriation;
Apple has a multinational business has many business offices and outlet in different countries. If for instance, the Apple store in France needs to make remittance of their earnings to the Apple store in the U.S, it has to be through repatriation. This is because the Apple store in France has all its earnings in Euro and there is a need to covert the earnings to dollars before they can be sent to the U.S.
There are also tax implications for repatriated funds, such as corporate tax. In 2017, the U.S., the Tax Cuts and Jobs Act reduced the corporate repatriation tax that was formerly charged 35% to 8%. This change had a lot of benefits and enabled corporations to make tax payments to the IRS at once, without splitting the tax payment.