The IRS Clarifies the Regulations for the High-Tax Exception to GILTI

The IRS Clarifies the Regulations for the High-Tax Exception to GILTI

Tax Law
By Anthony Diosdi Global intangible low-taxed income (“GILTI”) is the excess of a U.S. shareholder’s net controlled foreign corporation (“CFC”) tested income for such taxable year over its net deemed tangible income return. Net CFC tested income is any excess of the U.S. shareholder’s pro rata share of the tested income of each CFC for which it is a U.S. shareholder over its pro rata share of each CFC’s tested loss. A U.S. shareholder’s net deemed tangible income return is 10 percent of the shareholder’s pro rata share of the CFC’s tax basis in tangible personal property used by its CFCs in the production of tested income (reduced by certain interest expense). Congress presumably intended that GILTI apply only to income that is subject to a low tax rate of…
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