Taxpayers may be able to reduce BEAT liability by increasing cost of goods sold

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June 2018

Overview

The base erosion and anti-abuse tax (BEAT) imposes a tax on base erosion payments, which include amounts a taxpayer pays or accrues to a related foreign person that the taxpayer may deduct.  Taxpayers may be able to reduce BEAT liability by recovering costs  as cost of goods sold, which are subtracted from gross receipts and are not deductions, particularly by using the uniform capitalization (UNICAP) rules under Section 263A.

The takeaway

Taxpayers may want to review their costs to identify amounts paid or accrued to related foreign persons that may be capitalizable to inventory and recovered through COGS, which may reduce their BEAT exposure.

Contact us

Christine Turgeon

Partner, Federal Tax Services Leader, PwC US

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