Goldman to take one-time $5 billion hit to profit from new tax law

(Reuters) - Goldman Sachs Group Inc said on Friday it expects fourth-quarter earnings to decrease by about $5 billion, as the bank looks to take advantage of a new tax law that makes it cheaper for U.S. companies to repatriate profits.

Around two-thirds of the $5 billion decrease is due to repatriation tax, the cost of moving money from foreign countries to the U.S., Goldman said in a statement with the Securities and Exchange Commission. (http://bit.ly/2C8j4br)

However, the impact of the tax legislation may differ from the estimate, according to the bank.

Congress' U.S. tax overhaul bill, which President Donald Trump signed into law last week, significantly cuts the corporate tax rate to 21 percent from 35 percent.

According to the new law, profits brought back to the United States would not be taxed at the full 35-percent corporate tax rate that would normally be due. Instead, those profits would be taxed at only 15.5 percent for cash assets and 8 percent for illiquid assets.

Apple Inc is likely to be a big beneficiary of the overhaul since it allows the company bring back its $252.3 billion foreign cash pile without a major tax hit.

Drugmaker Amgen Inc last week said it expects to incur tax expenses of $6 billion to $6.5 billion over time as it repatriates cash.

Several other companies have also warned of a one-time loss due to the tax overhaul, Delta Airlines said it may take a hit of around $200 million to tax expense.

Big European banks such as Barclays, UBS Group and Credit Suisse Group said the new tax rules will cost each between $1.3 billion to $3 billion.

JPMorgan Chase & Co, Wells Fargo and Morgan Stanley did not immediately respond to requests for comments.

Bank of America said in a public filing last week it expects net income for the quarter ended Dec. 31, 2017 to reduce by about $3 billion, mainly due to lower valuation of some deferred tax assets. (http://bit.ly/2C9kqCu)

Goldman Sachs shares were down marginally down in early trading.

(Reporting By Aparajita Saxena in Bengaluru; Editing by Shounak Dasgupta)