Adapt to the significant US tax reform

The changes to the US tax system mean significant changes to corporate, individual and international tax rules. Wondering how the new law will impact you? What are the implications for global companies looking to or already doing business in the US? What measures should be taken to prepare for the new tax law? 

Our subject matter experts from Assurance, Tax and Consulting share their insights, specifically addressing what is unique and relevant to global companies that are doing business in the US. We take a deep dive into relevant matters impacting structuring of existing and new investments in the US, readiness for tax reform, Asian-outbound/US-inbound merger and acquisition, etc. Our team is ready to provide our integrated services to help you adapt to all the changes.

Upcoming webcasts from the tax reform readiness series

Stay ahead of the curve by joining one of these upcoming webcasts

Join our panel of business specialists from across the PwC network, as they dive into the details of tax reform and its multifaceted impact on your business from financial reporting to workforce strategies and tax function preparedness.

View details on upcoming webcasts and register

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Global insights

Blogs

Join the conversation with PwC leaders from all over the world. Get the latest commentary, opinions and news on tax reform.

Podcasts

Listen to our podcast series on tax reform. Our specialists give you a succinct overview of today's most relevant tax reform topics. 

 

Our services

Financials and funds review and planning

Key points of tax reform

  • The federal income tax rate is reduced from 35% to 21%. Companies need to consider the potential tax effect of the timing of income and cost recognition and changes to deferred tax assets and liabilities as a result of tax reform and the impact on the Companies’ financial statements.
  • New tax law requires US companies to pay a one-time repatriation toll charge tax on foreign earnings of controlled foreign corporations (“CFCs”) and foreign corporations for which the US company holds at least 10% of the stock during its taxable year. The US parent company will likely require repatriation of funds from local subsidiaries depending on the cash flows to pay repatriation toll tax. Companies will need to consider additional tax costs that may be incurred in the process of repatriation.

PwC solution

  • Revenue and cost recognition planning to enjoy the real benefits of lower tax rates.
  • Measure the historical earnings and profits of foreign companies to calculate the amount of one-time repatriation toll tax and consider making tax accounting method elections to reduce the tax cost.
  • Classify the offshore earnings based on the US tax principles, understand cash needs, and analyse potential withholding tax costs for repatriation.

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Investment structure restructuring and financing structure design and optimisation

Key points of tax reform

  • The new law expands the definition of CFCs and US shareholders and tightens the anti-deferral and anti-base-erosion regimes with Global Intangible Low-Tax Income (“GILTI”) and Base-Erosion Anti-Abuse Tax (“BEAT”). The new law introduces Foreign Derived Intangible Income (“FDII”) to encourage export sales by US companies.
  • The new tax law imposes a more stringent interest deduction limitations. Foreign companies that are looking to acquire US targets and which have existing debt financing arrangements with existing US subsidiaries will need to consider this new limitation. 

PwC solution

  • Model out future tax costs considering GILTI, FDII and BEAT. Optimise the structure for holding investments in the US and, where necessary, design a restructuring plan to get to the optimal structure.
  • Perform debt vs. equity and debt capacity analysis for existing and new debts.

 

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Operation and value chain analysis and remodeling

Key points of tax reform

  • Where profits are earned by group entities in low-tax jurisdictions and deductible payments are made to related entities, review allocation of business functions and risks among group entities who are part of the value chain with special attention to allocation of profits to entities incorporated in low-tax jurisdictions. 
  • The new law provides full expensing for certain purchases of equipment. Where there is a plan to set up a manufacturing plant in the US, arrange the overall capital investment plan more efficiently by making full use of the provisions on the expensing of specific assets under the new tax law.

PwC solution

  • Design group value chain restructuring, optimise the intangible assets strategy, and ensure compliance with transfer pricing regulations.
  • Review capital investment plan. Perform a detailed cost segregation analysis to appropriately classify fixed assets based on their class lives and their tax bases. 

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Individual income tax analysis and planning

Key points of tax reform

  • For US founders or shareholders of foreign companies, the tax reform has retained a variety of delinquent filing methods for foreign assets (including bank accounts, other financial assets, etc.) that were not disclosed in the previous year.
  • US pass-through entities will enjoy a 20% deduction for qualified business income.
  • The new tax law doubles exemption amounts of gift tax and the exemption will be reduced after 2025.

PwC solution

  • Analyse and recommend filing methods to waive possible penalties, and reduce the applicable tax rate on income disposal from disposal of shareholdings through special elections and filings.
  • Consider choice of entity for existing or future US investments to optimise the tax efficiency and reduce the potential tax burden in the future.
  • Effective use of tax credits, trusts, foundations and other tools to reduce gift tax or estate tax.

 

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Contact us

Peter Ng

China and Hong Kong Tax Leader, PwC Hong Kong

Tel: +[852] 2289 1828

Spencer Chong

Partner, PwC China

Tel: +[86] (21) 2323 2580

Sulay Sinha

Partner, PwC Hong Kong

Tel: +[852] 2289 3937

Jenny Chong

Partner, PwC Hong Kong

Tel: +[86] (21) 2323 3219

Kevin Wang

Partner, PwC Hong Kong

Tel: +[86] (10) 6533 3331

Wendy Ng

Partner, PwC Hong Kong

Tel: +[852] 2289 3933

Albert Chou

Partner , PwC Hong Kong

Tel: +[86] (21) 2323 2868

Dervis Pajo

Partner, PwC Hong Kong

Tel: +[86] (21) 2323 1577

Anthony Tong

Senior Advisor, PwC Hong Kong

Tel: +[852] 2289 3939

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