What Is the Base Erosion and Anti-Abuse Tax (BEAT)?
The Base Erosion and Anti-Abuse Tax (BEAT) is a United States federal minimum tax on large corporations making deductible payments to related foreign persons.
Also known as: BEAT, Base erosion minimum tax.
How Base Erosion and Anti-Abuse Tax (BEAT) works
The Base Erosion and Anti-Abuse Tax applies under Internal Revenue Code section 59A to corporations with average annual gross receipts of at least $500 million over the prior three years and a base erosion percentage generally of 3% or more, adding a minimum tax where deductible payments to foreign related parties reduce the regular tax base. Base erosion payments are generally amounts paid or accrued to a foreign related party for which a deduction is allowable, such as certain royalties, interest and service fees. The minimum tax equals the excess of a set percentage of modified taxable income, computed by adding those payments back, over regular tax liability as adjusted for certain credits. IRS instructions give a 10% rate for tax years beginning 2019 through 2025 and 10.5% for tax years beginning after 2025, with a one-point increase for banks and registered securities dealers, and corporations meeting the gross receipts test file Form 8991. Individuals and smaller companies fall outside the regime, so relevance to nomad-owned businesses is generally indirect, subject to future US legislative changes.
Base Erosion and Anti-Abuse Tax (BEAT) vs Base Erosion and Profit Shifting (BEPS)
Unlike Base Erosion and Profit Shifting (BEPS), which names the OECD/G20 project against multinational profit shifting, BEAT is a single United States domestic tax computed on a corporation's own federal return.
Example
Illustrative example: A US corporation within a multinational group exceeds the BEAT gross receipts threshold and pays substantial royalties to a related company in Country B. For BEAT purposes, the royalties are added back to taxable income to compute modified taxable income. If the applicable percentage of modified taxable income exceeds the corporation's adjusted regular tax liability, the difference is generally owed as BEAT. A US company founded by a remote entrepreneur with receipts far below the threshold would generally fall outside the computation, although transfer pricing and withholding rules may still apply to related-party payments.
Common misconception
Myth: A small US company paying service fees to the founder's own foreign company is caught by BEAT.
Reality: BEAT generally applies only to corporations meeting both the $500 million average gross receipts test and the base erosion percentage test, although transfer pricing and withholding rules may still govern smaller related-party payments.
Frequently asked questions
What is the BEAT tax?
The Base Erosion and Anti-Abuse Tax is a United States federal minimum tax under section 59A, payable where a large corporation's deductible payments to foreign related parties reduce regular tax below a set percentage of modified taxable income.
Who is subject to the base erosion and anti-abuse tax?
The Base Erosion and Anti-Abuse Tax generally reaches corporations, other than RICs, REITs and S corporations, with average annual gross receipts of at least $500 million and a base erosion percentage of 3% or more, or 2% for certain banking groups.
Related terms
- Base Erosion and Profit Shifting (BEPS) — Similar name, but an OECD project, not a tax
- Undertaxed Payment Rule (UTPR) — Pillar Two rule often compared with BEAT
- Global Minimum Tax
Related guides
- Global tax reform and US digital nomads — Context on US and global corporate tax reform
- US expat tax reform debate — US tax policy changes affecting international rules
Sources
Last verified: 2026-10-08. This entry is general information, not tax or legal advice; rules vary by country and change over time.
