US tax reform enacted

The US Tax Cuts and Jobs Act was signed by president Trump and became law on 22 December. The Act lowers the corporate income tax rate permanently from 35% to 21%, starting in 2018. Most individual income tax rates within the seven-bracket structure are also reduced, including the top marginal rate from 39.6% to 37%. The majority of the individual income tax changes are temporary, expiring on 31 December 2025. See www.congress.gov/bill/115th-congress/house-bill/1/all-info.

Other corporate tax changes include:

·         20% deduction of qualified business income from certain pass-through businesses until 31 December 2025;

·         net interest expense deductibility limited to 30% of EBITDA for four years, and 30% of earnings before interest and taxes thereafter;

·         deemed repatriation of currently deferred foreign profits, taxed at 15.5% for cash and cash-equivalent profits and 8% for reinvested foreign earnings;

·         move to a territorial system with base erosion rules; and

·         abolition of corporate alternative minimum tax.