American fund managers pressure Congress due to a tucked ruling within the tax bill for President Donald Trump. They can lead to foreign investors to remove investments from the United States.
The “Great Great Law Law”, which passed through the US House of Representatives in May, aims Punishment of companies owned by foreigners It works in the United States, which is one of the countries with “unfair foreign taxes” under a ruling known as Section 899. It is currently being considered by the Senate.
The Investment Institute (ICI), which represents the role of funds in the United States, is pressuring Congress to amend because it also warns the bill in its current form on most foreign investments in American stock markets, according to the documents that CNBC deems.
“In order to avoid the impact of section 899, it is possible that governor investors will decline from American stocks, which led to capital flows from the United States,” Ici said in a letter sent to Senator Mike Crabo.
What does Section 899?
Section 899 It aims to provide reprisal tax measures against entities from countries that have fees such as digital services taxes and global global tax rules for the European Union. If you fall into the law, it may affect investors from the European Union, the United Kingdom, Canada, Australia and Switzerland, among others.
The tax will start by 5 % and escalate by five percentage points annually with a maximum of 20 %, in addition to current taxes, which vary according to tax and tax treaties. Revenue can return to foreign investors in American stocks.
Unintended effect
In the letter, ICI also indicates that the American Fund Management Industry, which combined invested about $ 18 trillion in American stock markets, will be “guaranteed damage” due to the impact of the 899 section.
“We believe, however, that the current formulation of the proposed 899 article must clarify its scope and avoid inhibiting foreign investment in American stock markets through” investment funds “such as investment funds in the United States and their foreign unions (for example, Ucits).
The letter says to the Senate members.
A message from ICI sent to the Senate Finance Committee, which CNBC saw.
Money usually receives fees as a percentage of management assets, and withdrawal by foreign investors, on Section 899, can lead to a decrease in profits for the Investment Management Company.
The Senate Finance Committee refused to comment, and the Senator Mike’s office did not respond to the request for comment on CNBC.
Foreign investors have $ 19 trillion in US stock markets, 7 trillion dollars in US government bonds, and $ 5 trillion in US credit, according to data collected by Apollo Global.
ICI said it largely supports an attempt to “protect US commercial interests abroad and process discriminatory foreign taxes.” However, it warns that the current draft of the draft law does the opposite.
“Some foreign governments may actually chant this capitalist journey from the United States because they benefit from local stock markets, and it is not the behavioral motivation that Article 899 seeks to achieve,” she said.
Why do the shares of the United States hold?
Yuri Khodgamiri, chief investment in Tema ETFS, said that investors in Europe focus on distributing American profits will be “thinking very carefully” in their holdings at this stage.
“If you have to pay a tax on this income suddenly, then why do you take it?” Khodgamiri doubted. Tema Etfs runs American etf reformulation This is available to both American and foreign investors.
Tax experts suggest that paid profits for foreign investors are more likely to hit section 899 of capital gains and other shareholders ’distribution methods.
Tema ETFS investment head has warned that the influence on the American stock market will be relatively small as American companies, for example S & P 500It is usually known for their profits.
“In the United States, profit revenues are very low. There are not many companies that pay. Most of the capital is returned to sharing shares,” Khodgamerian told CNBC. “Will this actually be a big issue after that?”
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2025-06-10 08:19:00
