New reporting rules requiring the filing of Form 8992, U.S. Shareholder Calculation of Global Intangible Low-Taxed Income, are also described in the proposed regulations.
In IR-2018-186 the Internal Revenue Service announced that it issued proposed regulations on September 13, 2018 concerning global intangible low-taxed income under section 951A and related sections of the Internal Revenue Code.
The new law applies to the first tax year of a CFC beginning after Dec. 31, 2017, and the U.S. shareholder’s year with or within which that year ends, and all subsequent tax years.
These Proposed Regulations Do Not Include Foreign Tax Credit Computational Rules Relating to Global Intangible Low Taxed Income, Which Will Be Addressed Separately in the Future.
The Tax Cuts and Jobs Act's tax on GILTI was a key plank in the law's international framework, which legislators said would work as a backstop to ensure companies did not take advantage of a new exemption on most foreign profits to migrate its U.S. income offshore.
GILTI includes income earned through offshore subsidiaries beyond 10 percent of their tangible depreciable assets. That income is immediately pulled in for U.S. taxation, although it receives a deduction that ultimately sets its tax rate at 10.5 percent.
The “low-taxed” part of the equation comes only after the income is identified. Because foreign tax credits apply to this income at an 80 percent rate, GILTI will result in additional U.S. tax only if it is held in a jurisdiction with a tax rate of less than 13.125 percent.
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