Proposed Internal Revenue Service regulations for multiparty, cross-border financing may constitute "a unilateral attempt by the United States to impose a tax" says Barclays de Zoete Wedd, the investment banking unit of Britain's Barclays Bank PLC.

Under the proposed regulations, the IRS will tax interest on loans from a foreign company to its U.S. subsidiary even if the loans were extended through a bank in another country which is exempt from such taxes.

For example, interest on loans from a Japanese company to its U.S. subsidiary would be taxed even if the loans are made through a French bank which is exempt from taxes under bilateral treaties between France and the United States.

"That definitely could affect financial institutions," said Charles W. Cope, director of structured products at BZW North America.

"Foreign banks will definitely have to look at these regulations and at who is lending into the United States," he added.

Mr. Cope noted that no other country in the world taxes such back-to-back transactions. "The United States is unique in this," he added.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.