GILTI Tax For US Expatriates: What You Need to Know

In this blog post, we will provide a comprehensive overview of the GILTI tax, who is subject to it, and how it affects multinational corporations. We will also discuss the tax rates for GILTI income, and how to comply with GILTI tax regulations. We understand that GILTI tax can be a complex topic, which is why we encourage readers to consult with a tax professional to ensure compliance with the law and to determine their specific tax liability.

GILTI tax is a provision of the U.S. tax code that applies to U.S. taxpayers who own at least 10% of the shares of a controlled foreign corporation (CFC). The purpose of GILTI tax is to discourage profit shifting to low-tax countries by taxing the U.S. shareholder’s share of the CFC’s global intangible low-taxed income (GILTI). GILTI income is the CFC’s income from intangible assets, such as patents, trademarks, and copyrights, that is subject to a low rate of foreign tax.

The GILTI tax is calculated by taking the taxpayer’s net CFC tested income (which is the CFC’s gross income minus certain deductions) and reducing it by a deemed return on the CFC’s tangible assets. This deemed return is calculated as 10% of the CFC’s qualified business asset investment (QBAI), which is the CFC’s average aggregate adjusted bases in its tangible property used in its trade or business. The resulting amount is then multiplied by the GILTI tax rate, which is currently 10.5%.

It is important to note that the GILTI tax is a separate tax from the regular income tax and is calculated and reported on a taxpayer’s Form 8992 (Part of the IRS form 5471).

If the taxpayer takes the money out of the corporation as wages or dividends or if their corporate income tax rate is more than 18.9%, they may not have to pay GILTI tax.
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John Richardson - To punish 100 GILTI Corporations is to punish millions more individuals

Introduction: As Goes Tax Reform For US Multinationals, So Escalates The Harm To Individual Americans Abroad

The Problem: The proposed changes in International Tax (mostly in relation to corporations) will affect numerically more individuals than corporations. The effects on Americans abroad, who run small businesses outside the United States, will be absolutely devastating.

Two Solutions: Suggestions for how to protect individuals (including Americans abroad) would be to make changes to the Subpart F regime – GILTI, etc. There are at least two ways this change can be achieved:

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Gilti Tax - John Richardson

In December 2017 the U.S. Tax Cuts and Jobs Act imposed confiscatory taxation on the U.S. citizen shareholders of many small business corporations located outside the United States. Canadian residents have been severely impacted by this. Monte Silver is a U.S. citizen tax lawyer based in Israel who has been very active in both tax advocacy on behalf of Americans abroad and litigation.

On December 24, 2019 his lawsuit against U.S. treasury achieved a major victory in the ongoing quest for “tax justice” for individuals living outside the United States who are also U.S. citizens. This is the fourth time that John Richardson has interviewed Monte Silver on these issues. This story is far from over!

Watch This You Tube Video

You Should Also Read This Blog By John Richardson.