December 18 2018

Proposed regulations on base erosion and anti-abuse tax (BEAT)

Source: IBFD Tax Research Platform News

On 13 December 2018, the US Treasury Department and the US Internal Revenue Service (IRS) released proposed regulations (REG-104259-18) on the base erosion and anti-abuse tax (BEAT) under the new section 59A of the US Internal Revenue Code (IRC).

The IRS issued a related News Release (IR-2018-250) dated 13 December 2018.

IRC section 59A, enacted by the Tax Cuts and Jobs Act (TCJA), imposes a tax equal to the base erosion minimum tax amount (BEMTA) for certain taxpayers beginning in tax year 2018. When applicable, this tax is in addition to the taxpayer's regular tax liability.

The new provision primarily affects corporate taxpayers with gross receipts averaging more than USD 500 million over a 3-year period that make deductible payments to foreign related parties.

The proposed regulations provide guidance on the following:

  • which taxpayers are subject to IRC section 59A;
  • the determination of what is a base erosion payment;
  • the method for calculating the BEMTA; and
  • the required BEAT resulting from that calculation.