Navigating Tax Changes in 2025 Amid Uncertainty

 2025 was set up to be a significant year for global tax updates—most notably the continued implementation of Pillar Two, the global tax agreement designed by the OECD. And in December, the list of countries that have introduced Pillar Two rules, or that have committed to doing so, grew with the addition of Australia, Brazil, Kuwait, the UAE, Oman, Qatar, Hong Kong, Japan and Guernsey. 

 While the United States stayed on the sidelines during President Biden’s administration, the election of Donald Trump has introduced several unknowns to changes that will impact cross-border trade, corporations and high-net-worth individuals. 

Executive Actions Impacting Tax Policy

On January 20, 2025, President Trump issued an executive order declaring that Pillar Two—which aims to ensure multinational corporations pay at least a 15% income tax rate—has no force or effect in the United States. 

 While there was never any legislative action to support Pillar Two by the US Congress, there is the undertaxed profits rule (UTPR), a new enforcement mechanism introduced by Pillar Two. This rule allows countries to impose additional taxes on corporations, and can be triggered if a multinational’s income in a jurisdiction is taxed less than 15%, or if the appropriate jurisdiction does not enforce the Income Inclusion Rule to collect the required top-up tax that ensures the income is taxed at a global minimum rate of 15%.  In some cases, US companies that invest heavily in research and development could be subject to the UTPR, as certain tax credit incentives may lower their effective tax rate to below 15%. As a result, Congressional Republicans and the Trump administration have suggested that the US retaliate if the UTPR is imposed on US companies.

Adjustments to GILTI and BEAT

The Global Intangible Low-Taxed Income (GILTI) provision, introduced under the Tax Cuts and Jobs Act (TCJA) to curb profit shifting to low-tax jurisdictions, was previously expected to undergo significant modifications, including increased tax rates and stricter rules around foreign tax credit utilization. However, with the recent executive order rejecting the OECD’s global tax deal, the future of GILTI adjustments remains uncertain. 

 Similarly, the Base Erosion and Anti-Abuse Tax (BEAT), designed to prevent base erosion by taxing payments made to foreign affiliates, faces anticipated updates. The specifics are yet to be finalized, but corporations should prepare for potential increases in compliance complexity and tax liabilities, especially in light of the administration’s recent actions.

The Corporate Transparency Act: Legal and Compliance Implications

The Corporate Transparency Act (CTA), aimed at combating illicit financial activities by requiring disclosure of beneficial ownership information, continues to face legal challenges regarding its constitutionality. Under the act, companies would need to collect and submit ownership information to the Financial Crimes Enforcement Network (FinCEN) or risk significant penalties. However, the law continues to remain in flux. The Supreme Court recently revived the requirement by granting an emergency plea made by the Justice Department to crack down on the illicit use of anonymous shell companies. But registration remains voluntary due to a separate court case.

Broader Implications for Tax Planning

The TCJA was enacted during President Trump’s first term, and now both the administration and Republicans are hoping to extend—or make the changes permanent. This includes the 20 percent pass-through business deduction, a significant tax benefit for eligible partnerships, S-corporations, and sole proprietorships.

 There’s also hope for the expatriate community, as Trump has expressed support for reducing taxes on these citizens. While a significant portion of foreign income is excluded from U.S. tax, expats are still required to report all taxable income and pay taxes according to the Internal Revenue Code.  

 As these changes unfold, tax planning in 2025 will demand a more granular approach. The shifting tax landscape underscores the importance of agility and expertise in tax planning.  

IWTA Provides Guidance and Know-How

Jack Brister and his capable team know U.S. and international tax statutes inside and out. We’re here for a consultation, an evaluation and to serve as a trusted advisor and accounting partner. Whether you call Detroit, Dublin or Dubai your home, if you have investments, business or residences in the USA, we can help.

The upcoming months could see dramatic changes in the tax landscape. Watch this space for breaking U.S. and international tax news as it develops.