A Potential 20% Tax on Foreign Investors in the US Under Consideration
EU Challenges Trump's "Big Beautiful Bill" Tax Provision in Tariff Negotiations
The ongoing US budget negotiations include a proposal that could lead to a hefty tax hike for foreign investors. The provision, raising concerns within the EU, is being discussed in the ongoing tariff talks according to EU lawmaker Markus Ferber.
The EU is worried about the prospect of being taxed more heavily than other nations in retaliation for certain taxes imposed on US businesses overseas. Indeed, the proposed legislation, already approved by the House of Representatives, has been brought up in the ongoing tariff negotiations with the Trump administration by the European Commission.
Markus Ferber, vice-chair of the European Parliament's tax subcommittee, revealed his concerns to our website, explaining that the bill - dubbed the "One Big Beautiful Bill" by Donald Trump - includes special taxes aimed at jurisdictions that impose taxes on US companies. This includes the EU, which has already implemented the OECD agreement establishing a global minimum tax of 15% on multinationals and digital service taxes.
"It could affect member states that have introduced a digital services tax," Ferber noted, pointing out that countries like Denmark, Portugal, and Poland have already imposed digital services taxes on US tech giants, while others are considering doing so.
The proposed US tax hike would increase US federal income tax rates on foreign entities by five percentage points per year, potentially reaching 20% in addition to existing taxes. This move, understandably, has raised concerns within the EU.
However, it remains uncertain whether the US has agreed to include this provision in the ongoing negotiations. For several weeks, the EU and the US have been locked in a trade dispute, with US imposing 50% tariffs on EU steel and aluminium, 25% on cars, and 10% on all EU imports. In response, the EU has prepared countermeasures targeting around €115 billion worth of US products, measures that are either suspended until July or awaiting approval by EU member states.
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- The US aims to remedy what it considers "unfair foreign taxes" by imposing higher rates on foreign investors. Countries that might be affected include most EU member states, South Korea, Australia, Thailand, and the UK.
- The increased taxes could discourage foreign investment and lead to regulatory challenges, as multinational companies might restructure to avoid the higher rates.
- The ongoing negotiations could have far-reaching implications on global taxation policies, with countries reassessing their stance on perceived unfair tax practices.
- The legislation, which has already passed the House of Representatives, faces challenges in the Senate and requires further negotiation to become law.
The potential 20% tax on foreign investors in the US under consideration could significantly impact the business sector, potentially deterring foreign investments and stirring up political controversy. This financial decision, if implemented, might lead to a ripple effect in global news, prompting countries to reconsider their taxation practices and possibly engaging in discussions about fair taxation in international business.
