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By Opalesque: A recent memorandum by global law firm Seward & Kissel analyses Section 899 of the proposed "One Big Beautiful Bill Act," which passed the House by one vote on May 22, 2025, and is now under Senate consideration. The provision represents a significant retaliatory tax measure targeting foreign investment from countries the U.S. views as imposing unfair taxes on American businesses.
Core Mechanism
Section 899 would dramatically increase U.S. tax rates on foreign investors from "discriminatory foreign countries" (DFCs). A country becomes a DFC if it imposes "unfair foreign taxes," including undertaxed profits rules (UTPR), digital services taxes, diverted profits taxes, and other extraterritorial or discriminatory taxes. Notably, many EU countries, Australia, the UK, Canada, France, Italy, and Spain would likely qualify as DFCs due to their existing tax policies.
Affected Investors
The proposal broadly targets "applicable persons," including foreign governments of DFCs, individuals and corporations that are tax residents of DFCs, private foundations in DFCs, and various entities more than 50% owned by such persons. However, it excludes U.S. citizens/residents and foreign corporations with 50%+ U.S. ownership.
Tax Increases
Foreign investors typically face 30% withholding tax on passive U.S. income and regular rates on effectively connected income. Under Section 899, these rates would increase by 5 percentage points annua...................... To view our full article Click here
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