Wed, May 13, 2020

Stefanie Perrella, Zachary Held and Elizabeth Patrun Published in Treasury and Risk: Managing the BEAT

Managing Director Stefanie Perrella and Directors Zachary Held and Elizabeth Patrun in Duff & Phelps Transfer Pricing practice recently published an article for Treasury & Risk titled, “Managing the BEAT: What Role Can Treasury Play?

On December 2, 2019, the IRS and the U.S. Department of the Treasury issued final regulations implementing the base erosion and anti-abuse tax (BEAT).

The BEAT was enacted by the Tax Cuts and Jobs Act (TCJA) to limit intercompany funds flowing out of the U.S. For companies that meet certain criteria, the BEAT acts as an alternative minimum tax, with the potential for the additional tax payable to be significant. As such, the BEAT continues to be an area of focus for multinationals with U.S. operations, particularly large multinationals with material U.S.-outbound intercompany flows.

Effective management of BEAT exposures is highly specific to the facts and circumstances of each multinational and requires those impacted to perform critical reviews of operations and supporting structures that result in material funds flows. Many intercompany flows that touch the corporate treasury group appear relevant; these could include interest on loans, lease-financing payments, guarantee fees and service payments to non-U.S. treasury centers.

Therefore, treasury professionals must coordinate with their colleagues in tax and other areas of the company to manage the impact of intercompany financial flows on any new, and potentially substantial, tax liabilities under the BEAT provision.

This article explores how corporate treasury teams can evaluate the pricing and structure of intercompany funds flows to help manage potential tax liabilities.

Treasury & Risk subscribers can read the full article here.

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