International businesses that operate in, or are planning to expand in to, the United States are likely to have questions about the recent US tax reform legislation.
The alphabet soup of abbreviations can be confusing, but it’s important to understand a few major shifts and key provisions in order to best plan your company’s path forward.
In brief, the Tax Cuts and Jobs Act, or TCJA:
- Decreases the tax rate for U.S. corporations from 35 to 21 percent.Shifts the United States from a worldwide tax system to a hybrid territorial tax system.
- Exempts shareholders owning 10 percent or more from tax on future dividends from foreign subsidiaries, although they must pay a one-time tax on previously unrepatriated earnings.
- Incentivises intellectual property onshoring.
- Discourages related-party payments to shift profits.
In addition, the TCJA institutes a business interest limitation, and — speaking of acronyms — an investor coming into the US will also need to know about BEAT (which stands for base erosion alternative tax); GILTI (global intangible low-taxed income); and FDII (foreign derived intangible income), which can apply to many multinational companies and inbound investors.
US tax legislation can be complex and advice should be taken before making a move into the US. Our partners in our International Alliance have put together more information on US tax reform and what it means to the inbound investor here.
Ready to take a deeper dive into tax reform as a whole? Our partners have also put together a detailed tax reform playbook and web-based app here.
If you are thinking about investing in the US it is critical to seek advice in advance.
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David Robinson
As a Tax Partner, I advise clients on all aspects of UK tax, ranging from business taxes, transactions and private client matters, helping to achieve the objectives and aspirations of businesses and their owners.
View my articlesTags: Business Taxes
