Cisco will not create new jobs in the U.S. unless changes are made to the tax policy on repatriating overseas cash, CEO John Chambers said.

Cisco has about $45 billion in cash on its balance sheet and some of that money will be put to work through capital returns to shareholders and acquisitions, Chambers said on CNBC's "Closing Bell" Wednesday.

More specifically, Chambers said half of the company's cash generated through operations, which was $3.3 billion in the second quarter, will be returned to shareholders.

Cash will also be used for acquisitions to bolster growth. And "wherever we acquire is where our headcount is going to be," Chambers said.

With cash sitting overseas, Chambers said it will likely be adding jobs outside the U.S., unless U.S. tax policy changes to make repatriation easier.

As for Europe, Chambers does see some bright spots. "We are starting to see some early signs of improvement in Europe but southern Europe is going to be a challenge," Chambers said.

—By CNBC's Shannan Siemens. Follow her on Twitter @ShannanSiemens