Treasury Issues Final Rules On 'earnings Stripping'

By Robert Schroeder Markets MarketWatch Pulse

The U.S. Treasury Department issued final rules Thursday on so-called earnings stripping, in a move designed to reduce the benefit of corporate inversions. In an inversion, a U.S. company moves its legal address abroad in order to pay lower taxes. Under earnings stripping, a foreign parent company lends money to its U.S. operation, and the interest is then deducted. The rules were initially proposed in April. The final regulations contain some exceptions to the initial proposal, including for certain entities where the risk of earnings stripping is low.

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