The Minneapolis-based medical instruments firm is considering starting an assembly operation in Bratislava (Slovakia) and is hesitating between establishing it as a branch or a subsidiary. The proposed venture will be assembling medical instruments for distribution in Eastern Europe and is expected to incur losses in its first few years of operation, although it should be slightly cash-flow positive in years 4 and 5. Slovakia taxes both resident firms and branches of foreign firms at the same rate of 28 percent and levies a withholding tax of 10 percent on dividend remittances.

The United States has a federal tax rate of 34 percent on worldwide income when earnings are repatriated but gives credit for taxes paid to foreign governments.

Does it matter to St. Jude Medicals how it chooses to operate in Slovakia?