🌍 Taking Your Business Global? Don’t Let GILTI Catch You Off Guard 💼
As exciting as international expansion sounds, terms like GILTI (Global Intangible Low-Taxed Income) can quickly turn enthusiasm into confusion. Even seasoned entrepreneurs can find themselves puzzled—because this isn’t just tax law, it’s tax strategy on expert mode.
At EXP Consulting, we help you cut through the complexity. We’re here to simplify what GILTI means and, more importantly, how it can impact your bottom line.
🔍 What is GILTI and Why Does it Matter? Introduced under the U.S. Tax Cuts and Jobs Act of 2017, GILTI is designed to prevent profit shifting to low- or no-tax countries. It targets income—particularly from intangible assets—earned by Controlled Foreign Corporations (CFCs) beyond a certain threshold. If U.S. shareholders (10%+ ownership) collectively own over 50% of a foreign company, it becomes a CFC—and GILTI kicks in.
📊 How It’s Calculated: U.S. shareholders must report and pay U.S. tax on this income—even if it’s not repatriated.
👥 Who’s Impacted? Both individuals and corporations holding 10%+ of a CFC may be taxed on GILTI. However, corporate entities may benefit from:
- A 50% deduction under IRC Section 250.
- A potential 80% foreign tax credit for taxes paid in the CFC’s jurisdiction.
GILTI is taxed at an effective rate of 10.5%,this rate increases to 13.125% after 2025 due to a scheduled reduction in the Section 250 deduction to 37.5%.
❗ For Individuals, the Picture’s Tougher:
- Taxed at personal income tax rates (up to 37%)
- No Section 250 deduction
- Relief only through a Section 962 election to be taxed like a corporation
📌 Non-compliance = Hefty Penalties Miss a filing like Form 8992? You could face fines of up to $10,000 per form, not to mention interest on unpaid tax.
🛠 Planning Ahead: GILTI Mitigation Strategies We work with clients to implement proactive strategies:
✔ Increase QBAI
✔ Restructure foreign entities
✔ Leverage foreign tax credits
✔ Utilize the Section 962 election (when appropriate)
🌐 GILTI: Global Scrutiny, Local Impact While some view it as a challenge to global tax sovereignty, GILTI aligns with the OECD’s BEPS (Base Erosion and Profit Shifting) agenda—aiming to ensure corporations pay their fair share.
📣 Need Clarity? Let’s Talk. GILTI doesn’t have to be intimidating. At EXP Consulting, we make it understandable—and actionable. Whether you’re already operating abroad or considering your next market, we’ll help you navigate U.S. tax law confidently.
📬 Connect with us today and future-proof your global strategy.
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