Treasury Toughens Rules for Firms to Move to Low-Tax Nations

Source: Wall Street Journal

The Treasury Department issued new rules making it harder for U.S. companies to move to low-tax countries, amid a rising debate over U.S. business-tax policy.

The move Thursday comes just days after Cleveland-based Eaton Corp. announced plans to relocate to Ireland, through a deal to acquire Ireland-based Cooper Industries PLC. The Eaton-Cooper deal represents the latest in a series of similar relocations that some tax experts expect to see increase in number.

The new rules make it tougher for many U.S. companies to relocate to low-tax countries through merger by requiring the combined firms to have 25% of employees, property and gross income in the new home country. If firms don't meet these requirements, they face substantial tax penalties. The previous rules required substantial business activity in the new home country, a fuzzier standard.

The Treasury move to toughen the rules had been anticipated, because the old rules were scheduled to expire Friday. Several tax experts said it doesn't appear the Eaton move would be adversely affected by the new regulations, however, in part because the rules contain a grandfather clause allowing deals that already have been announced to proceed under existing rules.

Read more: http://online.wsj.com/article/SB10001424052702303753904577453120752153042.html

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