Despite being higher than the originally proposed 15%, the reduction will save companies a notable amount in tax payments. The Act abolished taxes on dividend/income from a company’s foreign subsidiaries, previously taxed at 35%, and gives full credit for local tax charges. A lower tax rate could also lead to an increase in M&A activity in the sector, which were at low levels in 2017.
The Act levies capital expenditure, excluding the costs of structures such as warehouses and plants, in the ongoing year, instead of delaying it by between five to 15 years as previously. Large biotech and pharmaceutical corporations are expected to take advantage of this opportunity, as they will have enough cash available following the potential tax reform. Setting up or acquiring a manufacturing facility will help companies further lower their tax bills.