Key Facts
• May 22, 2025: U.S. House passes the “One Big Beautiful Bill Act.”
• Section 899 proposes up to 20% additional tax on foreign entities’ U.S. income.
• Targets include interest, dividends, real estate gains, and branch profits.
• Tax rate increases by 5% annually, capped at 20% (House version).
• Japan’s tax treaty: current rates are 10% for dividends, 0% for interest.
• Section 899 could raise these to 30% for dividends, 20% for interest.
• U.S. Senate Finance Committee suggests delaying implementation to 2027.
• Japan’s UTPR law, effective April 1, 2026, may trigger Section 899.
• Japanese firms in the U.S. risk losing ¥0.7 trillion in profits annually.
• Broader impacts: reduced U.S. investments, weakened USD asset values.
• Section 899 also expands BEAT tax scope to foreign-owned U.S. firms.
• Final decision depends on U.S. Senate and House negotiations.
• Potential for U.S.-Japan tax negotiations to mitigate impacts.
Summary
The U.S. “One Big Beautiful Bill Act” includes Section 899, a controversial tax proposal targeting foreign entities deemed discriminatory by the U.S. government. If enacted, it could impose up to 20% additional tax on income from U.S. investments, affecting dividends, interest, and branch profits. Japan, with its UTPR law set for 2026, faces significant risks, including higher tax burdens for its firms operating in the U.S. and reduced investment appeal. The proposal also expands the BEAT tax scope, further impacting multinational corporations. While the Senate suggests delaying implementation to 2027 and capping the tax at 15%, the final outcome remains uncertain. Japan may need to renegotiate tax terms with the U.S. to mitigate potential economic repercussions.
