Multinational tax competition has been driving down corporate income tax rates while anti-base erosion measures are steadily increasing. The G20/OECD BEPS initiative continues to gain momentum following the implementation of the Country-by-Country Reporting in 2016. As part of the TCJA, the U.S. has enacted IRC Section 59A, the Base Erosion Anti-Avoidance Tax (“BEAT”) on base erosion payments of domestic corporations with gross receipts of at least $500 million.
The tax is equal to 10% (5% for 2018 tax years) of the taxpayers’ modified taxable income (“MTI”). MTI is determined by making specific adjustments to the taxpayers taxable income, especially otherwise deductible payments to related foreign persons.