January 21, 2021

Volume XI, Number 21

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Base Erosion Minimum Tax May Mean Change for Foreign Affiliates of US Multinationals

On November 16, 2017, we participated in a panel discussion at Tax Executives Institute’s (TEI’s) Chicago International Tax Forum regarding base erosion measures under the (then proposed) House and Senate tax reform bills. The House proposed a new 20 percent excise tax on most related-party payments (other than interest) that are deductible or includible in cost of goods sold or depreciable/amortizable basis. The Senate proposed a base erosion minimum tax on certain outbound base erosion payments paid by a corporation to foreign related parties. The conference committee has since submitted a conference report to accompany the Tax Cuts and Jobs Act that adopts the Senate’s proposed base erosion measure, with some changes. The base erosion minimum tax is equal to the excess of 10 percent of the modified taxable income of the corporation over an amount equal to the taxpayer’s regular tax liability reduced by certain Chapter 1 credits. The base erosion minimum tax could impact any multinational group in which foreign affiliates provide services, intellectual property, depreciable or amortizable property and other deductible items to related US corporations. It remains to be seen how the base erosion minimum tax will affect businesses in practice, and how countries with which the United States has a tax treaty will respond .

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© 2020 McDermott Will & EmeryNational Law Review, Volume VII, Number 356
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About this Author

Britt Haxton, Tax Attorney, McDermott Will law Firm Washington DC
Associate

Britt Haxton is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Washington, D.C., office.  She focuses her practice on U.S. and international tax matters for U.S. and non-U.S. multinationals.  Britt regularly advises clients on tax-free and taxable acquisitions, dispositions, restructurings and liquidations.  In addition, she has experience in providing advice on medical device excise taxes. 

202 756 8267
Barry Quirke, McDermott Law Firm, Chicago, Tax Law Attorney
Partner

Barry J. Quirke focuses his practice on international corporate tax matters, including planning for corporate acquisitions, dispositions, reorganizations, spin-offs, joint ventures, intercompany transactions and cross-border financings. He works extensively with multinational corporations on post-acquisition integration strategies.

Barry previously served as the chief tax officer of a NYSE-traded mobile industrial equipment manufacturer with operations in more than 160 countries. He has developed and implemented global effective tax rate...

312-984-7752
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