The US Treasury Department and Internal Revenue Service have announced further measures (temporary regulations TD 9761) to deter corporate tax inversions, which involve companies moving their tax residence overseas to avoid US taxes without making significant changes in their business operations. The proposed changes will disregard foreign stock attributable to recent inversions or US acquisitions, making it harder to avoid the inversion thresholds for subsequent US acquisitions. They will also reduce the scope for ‘earnings stripping’ through transactions that generate large interest deductions on corporate debt.
Press reports suggest that the temporary regulations have led US companies to rethink plans to redomicile. Pfizer Inc. has since scrapped its planned merger with Ireland-based Allergan plc which, valued at $160bn, would have been the biggest example of an inversion.
House Ways and Means Committee chair Kevin Brady said that Congress will ‘conduct thorough oversight of the new measures ‘to protect workers and job-creators from regulations that will make it even harder for America to compete’.
At the same time, announcing publication of an updated ‘framework for business tax reform’, which revises the 2012 version, the US Treasury Secretary, Jacob J. Lew, observed that ‘ultimately, the best way to address inversions is to reform our business tax system’. See www.1.usa.gov/1N6i55H.
The US Treasury Department and Internal Revenue Service have announced further measures (temporary regulations TD 9761) to deter corporate tax inversions, which involve companies moving their tax residence overseas to avoid US taxes without making significant changes in their business operations. The proposed changes will disregard foreign stock attributable to recent inversions or US acquisitions, making it harder to avoid the inversion thresholds for subsequent US acquisitions. They will also reduce the scope for ‘earnings stripping’ through transactions that generate large interest deductions on corporate debt.
Press reports suggest that the temporary regulations have led US companies to rethink plans to redomicile. Pfizer Inc. has since scrapped its planned merger with Ireland-based Allergan plc which, valued at $160bn, would have been the biggest example of an inversion.
House Ways and Means Committee chair Kevin Brady said that Congress will ‘conduct thorough oversight of the new measures ‘to protect workers and job-creators from regulations that will make it even harder for America to compete’.
At the same time, announcing publication of an updated ‘framework for business tax reform’, which revises the 2012 version, the US Treasury Secretary, Jacob J. Lew, observed that ‘ultimately, the best way to address inversions is to reform our business tax system’. See www.1.usa.gov/1N6i55H.
