WASHINGTON, Oct 14 (APP/AFP): The US Treasury Department on Thursday unveiled new rules to limit corporate tax avoidance based on lending to affiliated companies, a practice known as “earnings stripping.” The new regulations join a rule the Treasury adopted in April to dissuade companies from engaging in so-called “corporate inversions,” when companies move abroad to reduce or eliminate their tax burdens. Earnings stripping is commonly used to lower taxes after such inversions and involves deducting interest payments on loans to affiliated corporate entities, according to the Treasury Department. The rules will in some circumstances treat debt as equity and require companies claiming deductions on related-party loans to provide documentation, as they would for third-party loans. Treasury Secretary Jacob Lew said Thursday that his department was taking action because lawmakers had not. “In the absence of congressional action… it is Treasury’s responsibility to use our authority to protect the tax base from continued erosion,” Lew told reporters during a conference call.
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US Treasury issues new rules on corporate tax avoidance
