A measure in President Donald Trump’s tax and spending bill that’s meant to penalize foreign investors may also raise interest costs for some US borrowers.
The so-called Section 899 provision takes aim at nations such as Canada, the UK and France that have digital services taxes or other corporate tax rules the US deems unfair. Investors and companies from those countries may see gradually higher tax rates on income they earn from US assets — which some analysts have called a “revenge tax.”
But Section 899 would affect loan interest payments in a way that would hurt some US companies, according to legal experts. Many lending agreements require borrowers to cover such tax hikes if they’re enacted after the deal is signed.
These requirements are known as withholding tax gross-up obligations. Borrowers remit the withholding tax to the US government, but they must “gross up” their payment to ensure the lender still receives the full amount of interest owed.
Trials & Tribulations of King Donald
This revolution will be televised.
