One Big Beautiful Bill Act: International Tax Strategy
U.S. businesses operating globally have long wrestled with the complexities of cross-border taxation. The One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, brings clarity and permanence to several key international tax provisions originally introduced under the 2017 Tax Cuts and Jobs Act (TCJA). For CFOs, tax directors, and executive leaders, the changes represent both a stabilizing force in international tax planning and a new baseline for long-term compliance.
A Look Back: The TCJA’s Global Framework
The Tax Cuts and Jobs Act (TCJA) introduced a fundamentally new approach to international taxation in the U.S., shifting the focus toward discouraging the offshoring of intellectual property and profits. Central to that shift were three key provisions: Global Intangible Low-Taxed Income (GILTI), Foreign-Derived Intangible Income (FDII), and the Base Erosion and Anti-Abuse Tax (BEAT).
GILTI imposed a minimum tax on certain foreign earnings of U.S. shareholders in controlled foreign corporations, targeting income perceived to be shifted to low-tax jurisdictions. FDII, by contrast, rewarded companies that generated income from serving foreign markets using U.S.-based intangible assets, offering a preferential tax rate on such earnings. Meanwhile, the BEAT was designed to curb base erosion practices by levying an additional tax on large U.S. corporations that significantly reduced their U.S. tax liability through deductible payments to related foreign affiliates.
While these provisions achieved important policy goals, they also introduced complexity and uncertainty, especially because many of their components were set to expire or evolve without long-term guarantees.
What the OBBBA Changes
The OBBBA makes three major international tax provisions permanent, starting in tax year 2026:
Permanency for GILTI and FDII
The deductions for both GILTI and FDII are now permanent fixtures of the U.S. tax code.
The effective tax rates for both regimes are now aligned at 14%.
This adjustment offers greater predictability, but also ends any speculation about future rate reductions or repeal.
Permanent and Increased BEAT Rate
The BEAT regime is also made permanent.
The BEAT tax rate increases to 10.5%, up from the previous phased-in structure that was set to rise incrementally under TCJA.
This will have significant implications for large U.S.-based multinational groups with intercompany payments flowing to low- or no-tax jurisdictions.
Strategic Implications for U.S. Multinationals
For companies with global footprints, these updates warrant a comprehensive reassessment of tax positions and supply chains:
Effective tax rate planning: With a locked-in 14% rate for GILTI and FDII, businesses may consider shifting certain IP functions back to the U.S. to benefit from FDII.
Transfer pricing: BEAT’s permanency and higher rate elevate the stakes of intercompany transaction structures. Existing transfer pricing policies may need refinement to reduce exposure.
Cash repatriation strategies: With more predictable global tax rules, businesses may adjust how and when they repatriate earnings from foreign subsidiaries.
M&A modeling: These changes will impact how multinationals assess cross-border acquisitions and integrate foreign target companies, particularly those in low-tax jurisdictions.
Final Thoughts: Predictability, But Not Simplicity
While the OBBBA delivers welcome clarity by making GILTI, FDII, and BEAT permanent with a fixed 14% effective rate, the U.S. international tax framework remains intricate and highly specialized. These provisions coexist alongside evolving global standards like OECD Pillar Two, and GILTI’s compliance burdens and potential for double taxation continue to challenge finance leaders.
For multinational businesses, now is the moment to reassess international tax structures, model future-state scenarios, and align with this new baseline. That’s where CSH steps in. We help clients optimize operational and ownership structures to capitalize on favorable tax treatment under the new rules, while refining transfer pricing strategies to reduce BEAT exposure and enhance intercompany compliance. Our team also supports comprehensive international tax reporting, modeling, and planning, including M&A structuring and cash repatriation strategies—all aligned with your growth and compliance objectives.
In short, the OBBBA gives you a stable foundation on which to build, but activating that foundation requires proactive planning. With deep expertise, technical insight, and practical tools, CSH is your partner in turning these tax law updates into actionable advantage.
