The One Big Beautiful Bill Act (OBBBA) aims to extend and alter many provisions from the 2017 Tax Cuts and Jobs Act (TCJA), including several international tax provisions. On May 22, 2025, the U.S. House of Representatives passed the OBBBA. This significant tax bill is now under consideration by the U.S. Senate.

Several international tax provisions were proposed in the bill that could impact multinational businesses and individuals.

 

PROPOSED CHANGES TO EXISTING INTERNATIONAL TAX RULES

The tax bill proposes changes to some TCJA rules, including the following: 

Global Intangible Low-Tax Income (GILTI)

  • The current GILTI effective tax rate is set at 10.5% and was scheduled to increase to 13.125% for tax years beginning after Dec. 31, 2025. The new bill proposes to permanently set the GILTI tax rate at 10.668%

Foreign-Derived Intangible Income (FDII)

  • The current preferential tax rate for FDII is 13.125% and was scheduled to rise to 16.406% after Dec. 31, 2025. The OBBBA suggests a new permanent effective rate of 13.335% for FDII

Base-Erosion and Anti-Abuse Tax (BEAT)

  • BEAT is designed to prevent U.S. tax base erosion by multinational corporations. Under the TCJA, the current BEAT rate of 10% was set to increase to 12.5% for tax years starting after Dec. 31, 2025. The OBBBA proposes a permanent rate of 10.1%
  • In a favorable change for taxpayers, the bill would also repeal a scheduled provision that included certain tax credits in the BEAT calculation

Maintaining the BEAT rates at current levels would be a welcome relief to multinational businesses subject to the additional tax on its outbound payments.

 

PROPOSED NEW TAX PROVISIONS

The OBBBA also introduces several new tax rules, including:

Section 899: Remedies Against Unfair Foreign Taxes

  • A new Section 899 is proposed in the legislation to give the U.S. a tool to retaliate against foreign tax measures that the U.S. Treasury considers "unfair" or "discriminatory" towards U.S. corporations or citizens. This provision is projected to raise approximately $116 billion over 10 years

Unfair Foreign Taxes

While the definition of “Unfair Foreign Taxes” is broad, it includes (but is not limited to):

  • Undertaxed Profits Rules (UTPR), a component of the OECD/G20 Pillar Two framework
  • Digital Services Taxes (DSTs)
  • Diverted Profits Taxes (DPTs)
  • Extraterritorial taxes that assert jurisdiction over income or activities outside a country's borders
  • Taxes imposed on a base other than net income that do not allow for cost recovery or that primarily apply to nonresidents
  • Any other tax the Treasury Secretary designates as disproportionately targeting U.S. persons

How the Tax Works

  • The proposal would levy an additional tax on “Applicable Persons” from countries deemed discriminatory under Section 899
  • The tax would increase by 5% each year the country is considered discriminatory, capped at 20% above the applicable U.S. statutory tax rate. This means that, for income subject to the statutory 30% withholding or branch profits tax, the 20% Section 899 surcharge could result in a rate up to 50%
  • Additionally, the tax rate for effectively connected income would cap at 41% (21% plus 20% Section 899 surcharge) for corporations and 57% (37% plus 20% Section 899 surcharge) for individuals

Impacted Taxpayers

  • This increased tax would apply to U.S. source income (both passive and effectively connected with a U.S. business), the Branch Profits Tax and FIRPTA tax on the sale of U.S. real property interests, among others
  • Affected Persons ("Applicable Persons") include foreign governments, individuals (excluding U.S. citizens/residents), and various foreign corporations and trusts resident in or owned by persons from the discriminatory country
  • Section 899 also proposes significant modifications to BEAT, increasing its rate to 12.5% and potentially greatly expanding the number of taxpayers subject to BEAT

The proposed rules under Section 899, if enacted, would negatively impact many non-U.S. individuals and foreign owned businesses by increasing tax cost on profits from their investments in the U.S. Some adjustments to these rules can be expected as the Senate deliberates its version of the OBBBA.

Excise Tax on Remittances

  • The tax bill also proposes a new 3.5% excise tax on remittances sent from foreign persons to U.S. recipients
  • A remittance transfer for this purpose is defined by cross reference to the Electronic Funds Transfer Act and, therefore, would apply to banks, money transmitters and others who make electronic transfers. A remittance transfer occurs when a “Remittance Transfer Provider” transfers funds from a consumer (defined as a natural person) to a designated recipient. A designated recipient is any person located in a foreign country, which may be an entity as well as an individual. The tax includes an exception for a Remittance Transfer Provider who has an agreement with the U.S. Treasury, and the sender is a verified U.S. citizen or US national. The proposal also mandates new information reporting for money transfer service providers

 

LOOKING AHEAD

Based on current discussions in the Senate, some modifications to the rules in the House version of the OBBBA can be expected. In addition, the Senate appears to be discussing further changes that are not included in the House version of the bill. As the bill progresses through the Senate, the GHJ International Tax Team will continue to monitor changes and provide updates on significant developments. Please contact us to discuss how these proposed changes could affect your business.

Additional insight on the tax reform proposal for corporations can be found here.