Proposed Regulations on Global Intangible Low-Taxed Income (GILTI) Inclusions

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What is GILTI?

U.S. shareholders of Controlled Foreign Corporations (CFC’s) are required to include in income their Global Intangible Low-Taxed Income (GILTI), as a result of the addition of IRC §951A by the Tax Cuts and Jobs Act. The rules apply to tax years of foreign corporations beginning after December 31, 2017, and to tax years of the U.S. shareholders in which or with which such tax years of foreign corporations end.

How is it calculated?:

Intangible income is determined according to a formulaic approach that assigns a 10-percent return to tangible assets (Qualified Business Asset Investment (QBAI)) and each dollar above the return is treated as an intangible asset.

What are the Proposed GILTI Regulations?:

Proposed regulations have been issued that provide the best guidance on the computation of the GILTI inclusion. The proposed regulations provide some new rules, including rules for consolidated groups, domestic partnerships, and partners, and required basis adjustments. The proposed regulations also contain a number of anti-abuse rules to be aware of and impose new reporting requirements.

How do I handle GILTI compliance?:

The rules for GILTI are complex and the guidance issued to provide additional rules for computing the correct GILTI inclusion. To ensure that the inclusion is correctly computed, it is recommended to work with international tax experts like the team at Azran Financial. Contact us to find out more information and if GILTI or FDII implications affect you and your business.