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US tax reform: foreign dividend exemption and intangible income

The lower corporate rate, foreign dividend exemption and foreign derived intangible income make the US a more attractive location for foreign investments, but there are potential downsides for global businesses, say Craig Hillier, international tax services leader at EY

On 22 December 2017, US President Donald Trump signed into law the Tax Cuts and Jobs Act of 2017 (TCJA). Its provisions are generally effective 1 January 2018. This law represents an extensive overhaul of the US federal income tax system and includes a reduction of the US corporate income tax rate from 35% to 21%. The law makes sweeping changes to the international provisions, which had not undergone a fundamental change since 1962.

With the corporate rate cut, the US now has a corporate tax rate comparable to that of many European jurisdictions and the UK. The law also provides for immediate 100% expensing of tangible property for a five-year period.

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