Base Erosion and Anti-Abuse Tax: Proposed Regulations Do Not Concede Much

17 December 2018
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.