Key Points:
-
Purpose: GILTI is intended to ensure that U.S. shareholders pay a minimum level of tax on foreign earnings, thereby preventing profit shifting to low-tax jurisdictions.
-
Taxable Income: U.S. shareholders are subject to current taxation on most income earned through a CFC. This taxable income is the excess of a 10% return on certain CFC tangible assets, reduced by certain interest expenses.
-
Special Deduction and Foreign Tax Credit: The income calculated under GILTI is reduced by a special deduction and a partial foreign tax credit, which helps mitigate the overall tax burden.
-
Subpart F Income: A CFC’s “subpart F income” is a significant component of the income taxed currently under GILTI.
Tax Reporting Obligations for U.S. Taxpayers:
-
Schedule I-1 (Form 5471):
-
Purpose: This form is an Information Return of U.S. Persons with respect to Certain Foreign Corporations and includes reporting of ownership.
-
Filing Requirement: Must be filed along with the tax return.
-
Penalties: There is a penalty of $10,000 for not filing, and an additional penalty of up to $50,000 for continued failure to file after receiving a notice of non-filing (total penalty of $60,000).
-
-
Form 8992:
-
Purpose: This form is used for the U.S. Shareholder’s calculation of Global Intangible Low-Taxed Income (GILTI), along with Schedule A, which provides information about the CFC.
-
Filing Requirement: Must be filed along with the tax return.
-
GILTI tax falls within the scope of Internal Revenue Code (IRC) section 951A. The introduction of GILTI aims to curb tax avoidance strategies and ensure that U.S. corporations pay a fair share of taxes on their global income.
For more detailed information and guidance on compliance, you can refer to the .
Great article