Base Erosion and Anti-Abuse Tax (BEAT)

The Base Erosion and Anti-Abuse Tax (BEAT) was implemented in 2017 under the Tax Cuts and Jobs Act (TCJA). 

The BEAT applies to large US corporations that make deductible payments to foreign-related parties. The BEAT is a minimum tax that applies to applicable corporations to prevent them from reducing their US taxable income through transfer pricing strategies. 

A corporation’s base erosion payments generally include the following payments made to foreign related parties:

• Royalty Payments;
• Interest Payments;
• Payments for Services;
• Payments to a foreign related party in connection with the acquisition of property; and
• Reinsurance premiums.

Applicable corporations calculate their BEAT amounts on IRS Form 8991 (Tax on Base Erosion Payments of Taxpayers with Substantial Gross Receipts).