How Section 899’s “Revenge Tax” Could Rock European Software Stocks & U.S. Assets

A sweeping Republican budget bill's Section 899 would impose up to 20% tax on passive income—like dividends and royalties—earned by foreign investors in the U.S. Dubbed a “revenge tax,” it aims to counter digital services levies abroad but risks sparking a capital war, denting demand for U.S. equities, bonds, and the dollar. Here's a comprehensive look:

1. What Section 899 Means for Foreign Investors

• Scope: Applies to sovereign wealth funds, non-U.S. corporates, and individuals from countries with digital-service taxes.

• Tax rate: Progressive up to 20% on passive U.S.-source income (dividends, royalties).

• Revenue impact: CBO estimates $116 billion over 10 years.

• Target: Countries with “unfair” DSTs, notably France, Spain, and the U.K.

By broadening withholding, Section 899 effectively penalizes any foreign entity with U.S. holdings, threatening to reroute global capital flows.

2. European Software Firms in the Crosshairs

Leading names—SAP (ETR:SAP), Amadeus IT (BME:AMS) and Dassault Systèmes (EPA:DSY)—collect substantial royalties and licensing income from U.S. customers:

Affected firms could see a compressed net margin and lower share prices as investors recalibrate U.S. market exposure.

3. Capital Flows & U.S. Asset Demand

U.S. Treasuries: Higher withholding reduces foreign appetite, potentially pushing yields up by 10-20 bp across the curve.

• Dollar: Lower demand for U.S. assets could weaken the USD against peers.

• Global equities: Reduced inflows may pressure the S&P 500 by 1-2% over 6-12 months.

Embed FX & Yield Data:
Use the Forex Daily API to track real-time USD performance versus EUR/GBP/JPY, and the Market Most Active API for real-time high volume stocks, so you see how Section 899 chatter moves currencies and stock prices.
Forex Daily API
Market Most Active API

4. Wall Street's Warning: “Capital War” Risk

Deutsche Bank's George Saravelos cautioned this measure could escalate from a trade war into a capital war, provoking retaliatory financial measures from impacted nations—including increased taxes on U.S. multinationals and caps on U.S. sovereign-debt purchases.

5. Timeline & Legislative Odds

• House passage: Section 899 included in the “One Big Beautiful Bill Act.”

• Senate deadline: GOP aiming to clear their version by July 4.

• Final vote: Conference committee must reconcile House and Senate texts before Trump's signature.

Track Key Dates:
Embed the Economics Calendar & Data API to spotlight Senate vote schedules and expected budget committee releases, ensuring you never miss a legislative milestone.
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6. Tactical Takeaways & Risk Controls

Section 899's journey from proposal to law will shape cross-border capital, software valuations, and the Fed's policy calculus. Arm yourself with real-time data and rigorous strategies to navigate the coming “revenge tax” storm.