Compliance overhaul looms under proposed tax reform

June 9, 2025

A significant U.S. tax reform proposal—nicknamed the “One Big Beautiful Bill”—has cleared the House of Representatives and is now under review by the Senate. While the bill is not yet law, it introduces a series of changes that could have a substantial impact on how international businesses manage information reporting, tax withholding, and jurisdictional compliance.

Comply Exchange, an innovative tax compliance software, recently delved into what the proposed tax bill could mean for information reporting and withholding.

One of the headline changes involves raising reporting thresholds, a move intended to reduce the administrative load for smaller payments. For Form 1099-NEC and MISC, used to report contractor payments, the threshold would increase from $600 to $2,000. Meanwhile, third-party settlement organisations such as Venmo and PayPal would see the Form 1099-K threshold return to $20,000 and 200 transactions—reversing the $600 limit introduced in 2022.

Another pivotal component of the bill focuses on foreign jurisdictions. It proposes elevated withholding rates on U.S.-source income paid to entities based in countries considered to impose “unfair or discriminatory” tax policies on U.S. firms. Withholding could begin at 5% in the first year and rise to 20%, in addition to existing statutory rates. If implemented, this could complicate the documentation and application of correct withholding rates for impacted payees, Comply Exchange said.

These suggested changes highlight the increasing complexity of global tax compliance and the urgency for financial institutions to prepare. Automation and responsiveness will be critical as companies work to manage updated thresholds and evolving international regulations.

Comply Exchange is already preparing for these shifts. The company is reviewing its withholding logic and documentation rules to support any new rate changes triggered by jurisdictional updates. It is also exploring monitoring enhancements to identify and respond to countries flagged under the new legislation, ensuring clients remain informed and compliant.

To streamline operations further, Comply Exchange is evaluating features that can automatically identify payees in affected countries. This aims to reduce manual processes and ensure compliance decisions are based on the most current data.

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