what is "base erosion" and what provisions has the U.S. enacted to mitigate it?

Expert Solution

Base erosion and profit shifting (BEPS) refers to corporate tax planning strategies used by multinationals to "shift" profits from higher-tax jurisdictions to lower-tax jurisdictions, thus "eroding" the "tax-base" of the higher-tax jurisdictions.

The Organisation for Economic Co-operation and Development (OECD) define BEPS strategies as also "exploiting gaps and mismatches in tax rules.

US proposed regulations

On 13 December 2018, the United States (US) Treasury Department (Treasury) and Internal Revenue Service (IRS) issued proposed regulations under Internal Revenue Code1 Section 59A (Proposed Regulations), providing guidance on the application of the base erosion and anti-abuse tax (BEAT). The Proposed Regulations include provisions addressing:

‌The identification of applicable taxpayers subject to the BEAT under the statutory aggregation rules
Application of the BEAT to partnerships and consolidated groups
‌Treatment of non-cash payments as base erosion payments
Application of various exceptions from base erosion payments in certain circumstances
Accounting for net operating loss (NOL) carryfowards when computing modified taxable income

ekkarill92 answered 2 years ago

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