The One, Big, Beautiful Bill has a tax sting in the tail. While I hope this measure is removed before it can become law, if it does pass as-is, this potentially would have a big impact on the market.
A potential new US tax rule called Section 899, which is part of a bill they’re calling the “One Big Beautiful Bill Act” – yeah, really is looming! It could potentially cause some issues for international investors, including those of us in Switzerland, if it actually gets passed.
Basically, the idea is that if the US deems a country as having “unfair foreign taxes” – things like Digital Services Taxes, Undertaxed Payments Rules (UTPRs), or Directed Payment Taxes (DPTs) – then they’ll increase US income and withholding taxes for investors from that country. We’re talking a potential extra 5% on US dividends each year, and it could even go up to 20% on top of what we already pay. For example, our current 15% US dividend withholding tax could jump to 35%! And the really concerning part is that it might even override existing tax treaties.
Now, it’s important to remember this isn’t law yet. It’s already passed the House, but it still needs to get through the Senate, possibly with some changes, and then get signed by the President. So it’s far from a done deal.
The good news for us in Switzerland is that we haven’t actually implemented those specific taxes (DSTs, DPTs) that would immediately put us in the crosshairs. Plus, while we are working on some things related to BEPS Pillar Two, the Federal Council has thankfully paused the UTPR indefinitely – which is a key trigger for this Section 899. So, for now, we should be okay. However, a lot of other countries – most of the EU, the UK, Japan, and South Korea – are moving forward with UTPRs, so they’re definitely in line for potential issues.
I’m curious to hear what everyone else is thinking about this. With all this uncertainty, how are you looking at your US investments? Are you thinking about selling now just to be safe, even though Switzerland seems relatively protected at the moment? Or is it better to wait and see how things play out in the US and what our government decides to do with the UTPR before making any moves? Some people are even suggesting it could be a buying opportunity if the market gets spooked and US assets become cheaper – the “Trump Always Chickens Out” theory, basically, that big threats often get watered down.