EBF advisor: Roger Kaiser

Publication date: 19 February 2019

Executive summary

As part of the 2017 US Tax Reform, a Base Erosion and Anti-Abuse Tax (BEAT) was introduced in the Internal Revenue Code under Section 59A with the aim to combat eroding of US tax base through related-party payments of interest, royalties and management fees. The Internal Revenue Service (IRS) issued proposed Regulations on BEAT mid-December 2018 with a consultation period of two months. On 19 February 2019, the EBF presented the US Treasury with a comment letter emphasizing the detrimental effects of BEAT for European banks. The EBF points out in particular that the exception for interest paid on intercompany funding held in the U.S., which is a welcomed relief for interest paid on certain total loss-absorbing capacity (TLAC) securities, does not extend to similar securities issued by non-U.S. corporations nor does it capture other regulatory-driven funding. In addition, the BEAT applies to a portion of the interest expense that is attributed by a foreign bank to its U.S. branch in accordance to U.S. tax regulations and treaties.

EBF contact:

Roger Kaiser, Senior Policy Adviser Tax & Crime, r.kaiser@ebf.eu, +32 2 508 37 11