IFRS issuers with operations in the US: have you revised your estimates?

in Regulatory/Compliance, Tax, 24.01.2018

Tax changes in the US are felt in many places around the world, and the recent tax update across the pond, passed in late 2017, is no exception. In Luxembourg, companies with operations in the US (e.g. a US subsidiary) may be significantly affected. Because IFRS requires issuers to prepare their financial information based on substantively enacted tax laws and rates, companies already need to analyse the effect of the new US tax law while preparing their December 2017 financial statements.

What are the main changes?

  • A decrease in corporate tax rate, from 35% to 21%, as of 1 January 2018

    This means that companies must re-evaluate a number of existing deferred tax assets and liabilities using this new rate. The new rate will imply a corresponding change in deferred tax expense due to a write-down of deferred tax assets or a reduction of deferred tax liabilities, as has already been announced by several multi-national banks and companies.

  • Repatriation deemed mandatory in certain cases, tax thereon not deferrable

    Under US tax law, a company’s foreign earnings accumulated under legacy tax laws are deemed to be repatriated. The tax on such earnings cannot be deferred indefinitely anymore, but they may be paid over 8 years. The resulting liability from the additional tax due should be recognised in the accounts.

  • Other changes

    Other changes in international provisions include the introduction of global intangible low-taxed income (GILTI) and a base erosion anti-abuse tax (BEAT). Additional provisions can affect a company’s assessment of how realisable deferred tax assets are. The alternative minimum tax (AMT) has also been repealed.

Conclusion

For companies operating in the US, the changes mentioned above certainly have an impact on the calculation of current and/or deferred tax. It is thus highly recommended to get to know the details of the new tax law. Find out more in our brochure, Tax reform in the United States, or check out KPMG’s latest Q&A.


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