The Treasury Department relaxed some tax rules on U.S.-based multinational corporations, issuing final regulations that give relief to companies operating in high-tax foreign countries, The Wall Street Journal reported. The final rules gave companies some but not all of what they wanted and will reduce the U.S. tax burden on companies operating in places such as Germany and Japan. The change may encourage them to invest more in such high-tax places, according to an analysis by the Treasury Department and Internal Revenue Service. Companies can now seek retroactive benefits, going back to periods before the proposed regulations came out in June 2019. They also have somewhat looser rules about how their foreign subsidiaries are defined. The rules implement the Global Intangible Low-Taxed Income (GILTI) system that Congress created in the 2017 tax law. That requires U.S. companies to pay additional U.S. taxes if their foreign rates are below certain thresholds. It was designed to prevent companies from concentrating profits in low-tax jurisdictions. Lawmakers and companies say they thought the GILTI tax wouldn’t apply if companies paid rates above 13.125%. But there were technicalities in how the new U.S. system interacted with longstanding U.S. tax rules.
