What is section 899 and what could it mean for investors?

What is section 899?

Section 899, part of the “One Big Beautiful Bill Act” (OBBBA) that passed the U.S. House in May 2025, is now being reviewed by the Senate. If enacted, it would empower the US Treasury to impose additional, far-reaching taxes on foreign investors and companies – especially if they are from countries that the US see as unfairly taxing American businesses.

These measures include, but are not limited to, Digital Services Taxes (DSTs), the OECD’s Undertaxed Profits Rule (UTPR), and Diverted Profits Taxes (DPT). The current version of Section 899 would apply to a wide range of US-sourced income, such as dividends, interest from corporate bonds, rent from property, and profits made by US branches of foreign companies. The good news for investors is that capital gains are currently not included in this new tax plan.

What could be the impact for investors?

For investors, the implications are significant – but there are still a lot of uncertainties. The Senate may introduce some changes, and the current wording gives the treasury secretary a lot of freedom in determining which countries and tax regimes fall under the scope of the rule. This legal ambiguity leaves open questions about which assets, income streams, and investor types could ultimately be affected.

Investors are seeking greater clarity on two critical fronts.

First, how Section 899 would impact existing joint tax treaties. While terms in prior versions of the bill stated the current tax treaties would be ignored, the current version suggests the tax surcharge would be added on top of the treaty-reduced rate. As it stands, the provision proposes a phased increase in tax rates on affected foreign investors and multinational entities, rising by 5% annually up to a maximum of 20% above the statutory rate.

Therefore, if a treaty reduces the withholding rate to 0%, Section 899 would impose a tax of 5% in the first year and increase by 5% in each following year up to a maximum of 50%, providing the provision remains in place. Where no treaty applies, the surcharge would be added to the statutory rate, rising each year up to the 50% cap.

The second area of question is whether US treasuries bonds are excluded from the scope of impacted assets. The house report states that portfolio interest exemption - commonly used to shield US Treasuries from withholding tax - is excluded, but US treasuries are not mentioned specifically. As the wording isn’t clear, investors are waiting to see whether the exemption will remain intact under the new regime.

If passed in its current or slightly modified form, section 899 would mark a continuation of protectionist US policy, aligning with President Trump’s broader economic agenda. It would also provide the administration with an additional source of tax revenue and leverage in international trade negotiations. In response, many global company executives and US fund managers are actively lobbying lawmakers to reject the extra levies, warning of potential disruptions to cross-border capital flows and the wider US economy.

The bottom line

As the legislative process unfolds, investors should remain vigilant and as the situation develops and clarity improves, we will help to work through the implications for global portfolio allocations, tax planning, and risk management strategies. This is a moving picture given the US Senate deliberations on the whole bill currently, meaning that we will continue to monitor the process and provide updates where necessary.