Can Holding or Blocker Company be Used to Reduce GILTI Tax Liability?
By Anthony Diosdi The GILTI or “global intangible low-taxed income regime under Internal Revenue Code Section 951(a) captures a significant amount earned by a controlled foreign corporation (“CFC”). The U.S. federal income tax liability associated with GILTI is dramatically different to an individual CFC shareholder compared to domestic subchapter C corporation. Individual CFC shareholders are subject to GILTI tax at federal rates of up to 37 percent (plus 3.8 percent medicare tax, applicable state and local taxes). Absent planning, individual CFC shareholders cannot claim indirect foreign tax credit to reduce U.S. federal income tax liability. On the other hand, domestic C corporations are typically only subject to tax on GILTI inclusions at a Federal rate of 10.5 percent. In addition, a domestic C corporation may utilize an indirect foreign tax…