Common Mistakes CFC Shareholders or Their Advisors Make When Computing Tested Income and Tested Loss for the GILTI Taxing Regime
By Anthony Diosdi The Tax Cuts and Jobs Act, created a new global minimum tax on certain foreign income of U.S. shareholders or global intangible low-taxed income (“GILTI”). The Congressional intent of GILTI is to discourage U.S. multinational corporations from shifting the income of foreign subsidiaries into foreign countries with low tax rates. Although GILTI’s intent was to discourage U.S. multinationals from shifting income of foreign subsidiaries into foreign jurisdictions with low tax rates, the mechanical nature of the GILTI’s calculations means it impacts most foreign corporations (“CFCs”) and CFC shareholders. GILTI also triggers unexpected results that may catch unsuspecting practitioners by surprise. GILTI is calculated by including in the income of a CFC shareholder of a CFC the excess of a “deemed tangible return” on its tangible fixed assets.…