We are pleased to attach our Newsflash on “The US Tax Cuts & Jobs Law - Certain Key Aspects” for your reference and perusal. The US economy is the largest economy in the world and India’s largest trade partner. A large number of Indian companies have US operations either subsidiaries, joint ventures or branches and several groups have family members and executives working in the US for whom the reforms would have direct significant impact.

The proposed tax reforms if enacted are set to transform the US tax regime in terms of corporate tax rates, abolition of Alternate Minimum Tax (AMT), taxation of foreign profits and dividends and other reforms. It must be pointed out that still there is a significant uncertainty in the final law which may be approved and currently there are 2 versions of the proposed law viz. version as per House Bill and version as per Senate Bill as would be evident from the Table below:

ASPECTS

DESCRIPTION

HOUSE BILL

(11/16/17)

SENATE BILL

(12/1/17)*

Corporate rate reduction

Reduction in Corporate tax rate from 35% to  20%

      ✓

✓

Pass through rate reduction

Lower rates applicable to income earned through partnerships, s-corporations, etc .

      ✓

✓

Full Capex expensing

Immediate 100% expensing of qualified capital expenditures

✓

✓

Modification of NOL deduction

NOLs can only offset 90% of income, and NOL carrybacks are generally repealed

✓

✓

Limit on interest deductibility

Limits interest deductibility for businesses, subject to certain exceptions

✓

✓

Territorial taxation regime

Shift to a ‘territorial’ system, wherein foreign dividends to the extent received in US shall be exempt from tax. (Referred to as 100-percent dividends received deduction (DRD) tax system)

✓

✓

Repatriation toll tax on existing overseas profit

One time taxation on repatriation of Existing foreign Overseas Profits 

✓

✓

Repeal of corporate AMT

Repeals corporate AMT

✓

×

Excise Tax On Certain Payments

Additional Tax on Outbound Payments to Related Parties abroad

✓

✓

 

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