One Big Beautiful Bill

On 22 May 2025, the US House of Representatives approved (by one vote) the new tax bill (also known as the “One Big Beautiful” bill). 

The bill includes a number of provisions that are intended as retaliatory countermeasures to certain foreign tax regimes which the US government considers to be unfair, including the Under Taxed Payments Rules (UTPR) in the OECD Pillar II regime and digital service taxes (DSTs).

Among the countermeasures are provisions which could have serious detrimental impact on the asset management industry in respect of investment in US assets. Under these measures, the rate of US withholding tax on payments such as interest, royalties, dividends as well as under the US branch profits tax would be increased 5% per year for four years (resulting in an aggregate increase of 20% at the end of those four years).

The increase will apply to payments to any individual or corporation resident in a jurisdiction which applies the UTPR or a DST to US owned businesses (unless, in the case of a corporation, it is more than 50% owned by US persons).

Impacts for Ireland (and UK and EU)

As Ireland (along with all other EU Member States, the UK, and many other countries) has legislated for UTPR, these countermeasures, if enacted, would apply to all Irish resident individuals and, unless owned more than 50% by US persons, to all Irish resident companies (including funds).

For example, the standard rate of US dividend withholding tax (DWT) is 30%. Should the proposals be enacted, this would increase by 5% a year until the rate reached 50% in four years’ time.

Earlier proposals also included provisions which would turn off any reduction provided for under a double taxation agreement. While the dis-application of treaty provisions has not been included in the bill, the 5% increase per year would apply on top of the reduced treaty rate.

This means that, for example, while the reduced rate of DWT of 15% (and 5% for non-portfolio shareholdings) provided for under the terms of the Ireland-US double taxation agreement would be respected, the rate would nevertheless increase initially to 20% (or 10% for non-portfolio shareholdings), eventually reaching 35% at the end of the four-year period (or 25% for non-portfolio shareholdings).

While the bill would also need to be passed by the Senate (which may not be a straightforward matter), nevertheless there is significant cause for concern for the asset management industry in Ireland and other European jurisdictions.

Ongoing negotiations

Negotiations between the OECD and the United States are ongoing as both parties seek a compromise regarding the UTPR. However, if that compromise is not reached prior to the enactment of the bill such that the proposed countermeasures might be removed, this could present significant difficulties because the countermeasures, as drafted, will apply so long as the other jurisdiction applies the UTPR to US owned businesses.

Therefore, if enacted in their current form, the countermeasures could apply even if a compromise is reached depending on how that compromise is framed and operates. Subsequently seeking to pass an amendment to take account of any compromise might not be a straightforward matter given the narrowness of the vote in the House passing the bill.

More information on the bill and the proprosed changes can be found in this TaxNewsFlash from KPMG US.