INSIGHT

How the OBBBA will reshape your international tax strategy 

July 15, 2025

Services: International Tax

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The recently enacted “One Big Beautiful Bill Act” (OBBBA) has introduced sweeping changes to the U.S. international tax landscape, and if your company operates globally, these modifications will likely impact your bottom line.  

Significant changes to the international tax landscape

While the specifics of this legislation can feel overwhelming, understanding the key provisions and their implications is crucial for effective tax planning moving forward. Let’s walk through some of the most significant changes and what they mean for your business. 

GILTI and FDII face reduced benefits 

Two of the most impactful changes under the OBBBA involve the Global Intangible Low-Taxed Income (GILTI) and Foreign-Derived Intangible Income (FDII) provisions, both of which will result in higher effective tax rates for many multinational companies. 

GILTI tax rate increases to 14% 

The OBBBA reduces the Section 250 deduction for GILTI from 50% to 40%, effectively raising the tax rate from approximately 10.5% to 12.6%. This represents a significant increase that will directly impact your company’s tax liability on foreign earnings. 

Additionally, the legislation increases the deemed paid tax credit for GILTI income from 80% to 90%, which provides some relief but doesn’t fully offset the higher base rate. 

FDII incentives diminish 

Similarly, the FDII tax incentive has been scaled back from 37.5% to 33.34%, resulting in an effective tax rate of approximately 14% for export-related income. This change reduces the competitive advantage that U.S. companies previously enjoyed when operating in international markets. 

Manufacturing companies face the biggest shock 

Perhaps the most unexpected and impactful change is the complete elimination of the Qualified Business Asset Investment (QBAI) provision under GILTI. This development will particularly affect traditional manufacturing companies with significant foreign operations. 

Previously, QBAI allowed companies with substantial tangible assets overseas to reduce their GILTI inclusion, effectively keeping more foreign earnings offshore without additional U.S. tax. With this provision eliminated, U.S. multinationals with foreign manufacturing operations will face higher tax burdens on their international income. 

This change was largely unanticipated and will require immediate attention from companies that have structured their international operations around the QBAI benefit. 

Additional provisions create compound effects 

The OBBA includes several other modifications that, while individually smaller, contribute to the overall tax increase: 

• BEAT rate adjustment: The Base Erosion and Anti-Abuse Tax (BEAT) rate increases marginally from 10% to 10.5% 
• Imposes a book-income minimum tax of 15% of adjusted financial-statement income (AFSI) for “applicable corporations” with over $1 billion of average AFSI. 
• Section 163J modification: Business interest limitation calculations will now occur before applying interest capitalization provisions and Subpart F inclusions, net CFC Tested Income and Section 78 gross-ups are added back to EBIT in computing adjusted taxable income.  
• CFC look-through rule: This provision has been made permanent, providing some planning certainty 

Tariff uncertainty adds complexity 

Beyond the specific tax provisions, ongoing tariff discussions create additional uncertainty for international businesses. The fluid nature of trade policy means companies must remain flexible and prepared to adapt their strategies as conditions change. 

What you should do now 

With the OBBA now enacted, the time for speculation has passed. Here’s how you can begin preparing for these changes: 

Start planning immediately 

• Review your current international tax structure and identify areas most affected by the changes 
• Model the financial impact of the new GILTI and FDII rates on your projected earnings 
• Assess whether your foreign manufacturing operations need restructuring or transfer pricing adjustments in light of the QBAI elimination 

Evaluate your options 

Depending on your specific situation, various strategies may help mitigate the tax effects: 

• Consider timing of income recognition and expense deductions 
• Explore opportunities to optimize your international structure before the provisions take full effect 
• Review transfer pricing policies to align with the new landscape 

The bottom line 

The OBBA represents a clear shift toward higher taxation of international income for U.S. multinationals. While these changes create challenges, proactive planning can help minimize their impact on your business. The key is to act now, while you still have time to implement strategic adjustments. 

The elimination of QBAI, combined with higher GILTI and reduced FDII benefits, means that many companies will face increased tax costs over the coming years. However, with careful planning and the right advisory support, you can navigate these changes and position your business for continued success in the global marketplace. 

Ready to develop your international tax strategy? The experienced professionals at BPM can help you understand how the OBBA affects your specific situation and develop actionable strategies to manage these changes. Contact us today to discuss your international tax planning needs and explore opportunities to optimize your global operations under the new rules.