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The US is considering "taxing" global sovereign wealth funds, which may trigger a new round of capital outflows

By: theblockbeats.news|2026/01/16 18:30:17
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BlockBeats News, January 16: The U.S. authorities have proposed a major reform that may require sovereign wealth funds to pay taxes on their investments in the United States, impacting some of the largest investors in the U.S. private equity industry.

The IRS proposed a amendment to the Internal Revenue Code in December last year, intending to revise the relevant provisions for sovereign wealth funds and some public pension funds applying for U.S. tax exemptions. This is the latest move in a series of policy changes under the Trump administration, which have already led sovereign wealth funds to diversify their investment exposure in the United States.

In this proposal, the IRS will expand the definition of "business activities" to include some activities that were previously considered as investments. These changes will affect situations where sovereign wealth funds provide loans to companies and make direct equity investments in private companies. Under the new proposal, activities that may result in tax obligations for sovereign wealth funds include making direct loans to companies and playing a role in bond default restructurings. These changes may also impact the so-called "blockers," special purpose vehicles (SPVs) that sovereign wealth funds and pension funds commonly use in joint investment structures to directly invest in portfolio companies alongside private equity firms. (Jinse Finance)

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