Base Erosion and Anti-Abuse Tax: Proposed Regulations Do Not Concede Much
View Debevoise Update
Key takeaways:
- The Treasury and the IRS have issued Proposed Regulations on the base erosion and anti-abuse tax (BEAT) introduced in last year’s tax reform.
- The regulations generally apply the rules in an inflexible manner that can result in a broad application of BEAT to many transactions, thereby increasing the tax liability of US taxpayers.
- The regulations do not provide a netting rule to reduce BEAT that is payable when a US corporation and a foreign related party make crossing payments to each other which are net settled.
- Groups that make payments to foreign affiliates will need to evaluate their gross receipts, deductions and intercompany transactions to determine whether the BEAT applies to them.