The “One Big Beautiful Bill Act” has introduced sweeping changes to the tax treatment of foreign capital in the US, with Section 899 targeting entities from “discriminatory foreign countries” that impose levies disproportionately affecting US companies.
Under this provision, investors from such countries will face increased taxes on US income by 5 percentage points each year, potentially taking the rate up to 20%. The move is seen as a significant step in transforming the US tax system into a “capital war,” according to Deutsche Bank’s global head of FX research, George Saravelos.
The provision aims to address tax disparities between the US and foreign countries. France, for instance, has a 3% digital services tax that primarily targets big tech firms like Google, Amazon, Facebook, and Apple. Germany is reportedly considering a similar tax. The new law would increase taxes on US income by 5 percentage points each year, making dollar assets less valuable for foreign investors.
Analysts warn that the bill could significantly impact companies generating US revenues and domiciled in countries with enacted digital services taxes or implementing the OECD’s Under Taxed Payment Rule. Companies like Compass Group and InterContinental Hotels are likely to be affected by the proposed law.
The bill’s impact won’t be limited to European companies or individuals from those states, as it could ensnare governments and central banks, which hold significant investments in US Treasuries. France and Germany, for instance, held over $475 billion worth of US government bonds as of March. The proposed tax would lower returns on US Treasuries by nearly 100bps, according to Deutsche Bank’s Saravelos.
Legal experts suggest that “significant changes” could be made to the bill as it passes through the US Senate before being enshrined into law by President Trump.
Source: https://www.cnbc.com/2025/05/30/us-set-to-weaponize-taxes-on-foreign-investors-via-section-899.html