The international tax landscape is about to shift—again. With the signing of the One Big Beautiful Bill (OBBB) Act on July 4, 2025, several key provisions affecting cross-border taxation are set to change starting in 2026. These updates go beyond the domestic focus of the Tax Cuts and Jobs Act (TCJA) and introduce new terminology, increased tax rates, and additional compliance considerations for multinational businesses and U.S. taxpayers with foreign ties.
In this article, we break down the most important international tax reforms under the OBBB Act and what they could mean for your global tax strategy.
GILTI and FDII: New Names and Higher Rates
U.S. shareholders of Controlled Foreign Corporations (CFCs) will see the effective tax rate on Global Intangible Low-Taxed Income (GILTI) increase from 10.5% to approximately 14%, aligning more closely with the global minimum tax. This change is driven by:
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A reduction in the Section 250 deduction from 50% to 40%
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A decrease in the foreign tax credit haircut from 20% to 10%
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Elimination of the Net Deemed Tangible Income Return (NDTRI)
Similarly, U.S. corporations earning Foreign-Derived Intangible Income (FDII) will face an increase in their effective rate from 13.125% to roughly 14%, due to:
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A reduction in the Section 250 deduction from 37.5% to 33.34%
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The exclusion of gains from sales of intangibles and depreciable property from deduction-eligible income
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Elimination of NDTRI
Additionally, the terms GILTI and FDII will be replaced with new labels:
GILTI → Net CFC Tested Income
FDII → Foreign-Derived Deduction Eligible Income
Base Erosion and Anti-Abuse Tax (BEAT) Rate Increase
The BEAT rate will rise modestly from 10% to 10.5%. The $500 million gross receipts threshold remains unchanged, limiting the impact of this provision to larger multinational taxpayers.
New 1% Excise Tax on Outbound Remittances
A new 1% excise tax will apply to cash transfers from the U.S. to foreign recipients. This primarily affects nonresidents—individuals who reside in the U.S. but are not citizens or green card holders—who send funds abroad. U.S. citizens and nationals can avoid this tax by providing proper identification or claiming a refundable credit.
Section 899 Excluded from Final Legislation
The proposed Section 899, which would have imposed retaliatory taxes on foreign taxpayers from jurisdictions deemed “discriminatory” by the U.S., was ultimately excluded from the final legislation—offering relief from further international tax complexity.
What This Means for You
The OBBB Act’s international tax reforms mark a significant shift for U.S. taxpayers with global operations or investments. From higher effective rates to new terminology and compliance requirements, these changes will require careful planning.
Have questions about how these updates may affect your business or personal tax strategy? Our international tax advisors are here to help you navigate what’s ahead and identify planning opportunities.
Contact us today to start the conversation.