What’s in President Trump’s “One Big Beautiful Bill”?

Section 899 – Retaliatory tax on “unfair foreign taxes”

One of the most striking changes is the increase in U.S. federal income tax on U.S.-sourced income received by foreign companies or individuals from so-called “discriminatory foreign countries.” These are countries that, according to the U.S., impose “unfair taxes” on American companies.

The definition of “unfair taxes” is broad and includes, among others, the Digital Services Tax (DST), the Diverted Profits Tax (DPT), and – crucially for Belgian and other non-U.S. groups – the Under-Taxed Profits Rule (UTPR) under the OECD’s Pillar 2 initiative.

Income subject to these measures includes:

• Dividends from the U.S.

• Interest payments from the U.S.

• Royalties from the U.S.

• Profit transfers from U.S. subsidiaries

The applicable withholding tax rates will increase gradually: starting with an additional 5% in the first year and reaching up to 20% on relevant income. For example, income normally taxed at 30% could rise to 50% over four years. These increases apply on top of the generally reduced rates under double tax treaties.

Importantly, these withholding taxes may fall outside the treaty exemptions. In some cases, Belgian taxpayers may partially mitigate the impact through a foreign tax credit mechanism (under conditions, and capped at 15%).

Who is affected?

The measure applies to a wide range of foreign (read: Belgian) stakeholders, including:

• Non-U.S. groups with U.S. subsidiaries

• Foreign individuals holding shares in U.S. companies

• Foreign financing structures with U.S. interests

• Foreign governments and sovereign wealth funds (as the new rules may limit their tax exemptions)

Exception: foreign entities that are majority-owned by U.S. residents fall outside the scope.

Other measures

Expansion of the Base Erosion and Anti-Abuse Tax (BEAT)

The law also introduces a strengthened BEAT regime, known as the Super BEAT. It specifically applies to multinationals from countries subject to Section 899.

The proposed BEAT rate increases from 12.5% to as high as 14%, which could in some cases result in effective tax rates exceeding 100% for U.S. subsidiaries of non-U.S. companies. Even Belgian SMEs with U.S. operations could be caught under the Super BEAT, leading to higher tax burdens and significantly more administrative requirements.

Lower rates for Global Intangible Low-Taxed Income (GILTI) and Foreign-Derived Intangible Income (FDII)

The OBBB provides for a permanent reduction of the GILTI and FDII tax rates. It also reintroduces the 100% bonus depreciation for certain assets and allows – under conditions – accelerated depreciation of R&D expenses in the U.S. This creates clear benefits for Belgian companies with R&D activities or investments in U.S. assets.

Limitations on interest deduction

The rules on interest deductibility are also changing. A new calculation method disregards depreciation, which in some cases improves interest deductibility. Belgian groups with U.S. activities could therefore see a tax benefit.

Customs and trade measures

Finally, the OBBB abolishes the current $800 exemption for low-value commercial shipments. This measure continues earlier U.S. protectionist policies against among others China and Hong Kong. For Belgian exporters, it translates into higher customs duties and additional administrative obligations.

Questions about the OBBB and its impact on your company?

Our international tax experts are closely monitoring developments, particularly around the interpretation and application of Section 899 and its interaction with double tax treaties. Contact your account manager or complete the contact form below.