8/18/2023 0 Comments Gross receipts testThe "base erosion percentage" is the taxpayer's aggregate base- erosion tax benefit divided by all allowable deductions. A "base erosion tax benefit" is generally any allowable deduction with respect to a base-erosion payment, excluding amounts subject to withholding on fixed or determinable annual or periodical income under Sec. Base-erosion payments also include amounts paid or accrued to a surrogate foreign corporation and members of the expanded affiliated group of the surrogate foreign corporation, as defined in the anti-inversion rule of Sec. 267(b) or 707(b)(1), or any person related under Sec. "Related parties" are broadly defined to include any 25% owner of the taxpayer by vote or value, related persons under Sec. A "base erosion payment" is any amount paid or accrued to a foreign related party for which a deduction is allowable, including amounts subject to depreciation or amortization, as well as certain reinsurance payments. A corporation that passes the $500 million average- gross- receipts threshold for the most recent three tax years will still not be subject to the BEAT as long as its "base erosion percentage," a proportion of those payments compared with total deductions, is less than 3%.ฤก. The apparent purpose of the BEAT is to identify and impose a special tax on entities that make payments to affiliates for intangibles and most services that substantially reduce U.S. Therefore, while two or more U.S.- resident corporations sharing a common foreign parent must aggregate all gross receipts, the gross receipts of the foreign parent often will not count in the aggregated gross receipts total. 59A(e) includes only the gross receipts of a foreign group member to the extent they are effectively connected with the conduct of a trade or business in the United States. Not all gross receipts of the foreign parent or other foreign group members are included in the $500 million gross- receipts test. For example, to determine whether they are subject to the BEAT, two U.S.- resident corporations under common foreign ownership of 50% or more must aggregate their gross receipts, even if they do not file a consolidated return. As a result, foreign- parented groups of U.S.- resident corporations, the foreign parent itself, and other foreign persons within the group may have to aggregate gross receipts in the three- year- average- gross- receipts determination. 1563 under which foreign corporations are not considered part of the controlled group. 59A(e)(3) also removes an exception to the controlled group rules of Sec. 1563(a), controlled groups may include parent- subsidiary chains, sibling corporations with a common parent, or any combination of the two. The essence of these cross- references is that any chain of corporations affiliated by 50% or more ownership, by vote or value, will be treated as a single taxpayer for purposes of determining the $500 million BEAT threshold. (a) to identify entities whose gross receipts must be aggregated for purposes of the gross- receipts test. Two factors complicate the three- year- average- gross- receipts test: (1) The gross receipts of certain taxpayer groups must be aggregated and treated as gross receipts of one taxpayer, and (2) not all gross receipts of foreign entities count toward the $500 million BEAT trigger. The latter two conditions, however, require greater analysis. The first criterion exempts certain passthrough entities and is relatively easy to apply. 59A must be at least 3% (2% for certain banks and securities dealers). The taxpayer's "base erosion percentage" determined under Sec.The taxpayer must have average annual gross receipts of at least $500 million over the three-year period ending with the preceding tax year and.The taxpayer must be a corporation that is not a regulated investment company, a real estate investment trust, or an S corporation.To be subject to the BEAT in any tax year, corporate taxpayers must meet a three- part test: This discussion explores the threshold issue of which corporate taxpayers need to consider potential BEAT liability. 482 and making substantial payments to non- U.S. However, not all corporations governed by Sec. 482, the BEAT adds fresh complexity to the calculation of transfer- pricing tax and accounting results. Because these payments are also governed by the arm's- length principle of Sec. 115- 97, imposes a base- erosion and anti- avoidance tax (BEAT) on certain corporations making payments to related foreign persons. 59A, enacted by the law known as the Tax Cuts and Jobs Act, P.L.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |