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T24: International Taxation – GILTI

Global Intangible Low-Taxed Income (GILTI) is a way for the US government to effectively imposes a worldwide minimum tax on foreign earnings. U.S. shareholders of Controlled Foreign Corporations (CFCs) are subjected to current taxation on most income earned through a CFC. This taxable income is the excess of 10% return on certain of the CFC’s tangible assets after a reduction for certain interest expense.

The income calculated per GILTI are reduced by a special deduction and a partial foreign tax credit. A CFC’s “subpart F income” is the major component of a CFC’s income that is taxed currently under GILTI.

Tax reporting obligations for US tax payer are in two areas:

Schedule I-1(Form 5471) which is an Information Return of US Person with respect to Certain Foreign Corporations and reporting of ownership. Need to file along with Tax Return. Penalty of 10000 USD for not filing and penalty of 60000 USD for delay beyond 3 months after getting notice of not filing.

Form 8992 which is US Shareholder calculation  of Global Intangible Low Tax Income (GILTI) along with schedule A which is Information of CFC.

Above GILTI tax comes within the ambit of Internal Revenue Code ( IRC ) section 951A.

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