Timing of tax reform
On 22 December 2017, the Tax Cuts and Jobs Act 2017 was enacted by President Trump. This marks the first major legislative victory of President Trump and the Republican Party since he took office earlier this year. The Act is generally effective from 1 January 2018 for many provisions for many companies.
The changes
The Tax Cuts and Jobs Act of 2017 lowers business and individual tax rates and adds a number of provisions with an intent to modernise US international tax rules. Key provisions include:
- A reduction in federal corporate tax rate to 21%
- A partial limitation on the deductibility of interest expense
- Transition to a territorial tax system with 100% exemption of foreign dividends
- Mandatory deemed repatriation of untaxed foreign earnings
- An additional tax levied on 'base erosion' payments between related parties
- Rules around an additional inclusion of and tax on global intangible low-taxed income (GILTI)
Considerations for Irish business
- The proposed changes need to be carefully monitored by Irish FDI and domestic companies
- Corporate tax rate reduction may not directly have significant impact on Irish business but should be considered in totality with all provisions
- With many changes to the US international tax regime and the manner in which non-US income will be taxed, we expect certain companies may consider certain restructuring, changes in financing arrangements, and/or changes to the existing supply chain.
