Key Takeaways
- Proposes a 25% tax on outsourcing payments made by US persons to foreign persons for services benefiting US consumers
- No business tax deduction allowed for these outsourcing expenses
- Penalties of up to 50% of the tax amount for non-compliance
- If enacted, would apply to payments made after December 31, 2025
What is the HIRE Act?
The Halting International Relocation of Employment Act proposes to aggressively discourage outsourcing by US companies. It introduces a 25% tax on outsourcing payments — any premium, fee, royalty, service charge, or other payment made by US persons to foreign persons for labour or services where the benefit is directed to US consumers.
Impact
No business tax deduction would be allowed for these expenses, increasing total cost. For payments relating to services benefiting both US and non-US consumers, the tax would be apportioned to cover only the US consumer portion. This would make outsourcing significantly more expensive for US businesses.