Explaining GILTI – Wrap-up

My last four posts were an attempt at a broad overview of the Global Intangible Low-Taxed Income (GILTI) provisions that were part of the US Tax Reform enacted in December 2017. I started with a discussion of a comment made on behalf of the Israeli Ministry of Finance. This comment is quite unusual because most countries refrain from commenting on domestic regulations in another country. Following on from that post, I explained the underlying rationale behind GILTI, the mechanics of GILTI for corporate US shareholders and how the rules differ for individual US shareholders. This post provides a high level summary to tie the series together. 

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Explaining GILTI – Individual Impact

In this series of blog posts I try to explain GILTI (Global Intangible Low Taxed Income) in simple terms. In the first post I discussed a public comment made on behalf of the Israeli Ministry of Finance on the recent proposed GILTI regulations. My second post explained the rationale behind GILTI. The third post talked about how GILTI was measured focusing on US domestic corporations, the target of these provisions in the first place. This post will look at how these rules, that were written for Apple and Google, play out for individuals owning small businesses in the “foreign” country where they live. For those who want to get into the detail, there’s a technical appendix on our wiki. Continue reading “Explaining GILTI – Individual Impact”

Explaining GILTI – Measurement

In this series of blog posts I try to explain GILTI (Global Intangible Low Taxed Income) in simple terms. In the first post I discussed a public comment made on behalf of the Israeli Ministry of Finance on the recent proposed GILTI regulations. My second post explained the rationale behind GILTI. In this post I’ll discuss how GILTI is measured in non-technical terms. For those of you who want to get into the detail, there’s a technical appendix on our wiki. This post will focus on the general rules applicable to Apple and Google and other US domestic corporations that are US Shareholders in Controlled Foreign Corporations (CFCs). In my next post I’ll discuss the differences that apply when the US Shareholder is not a domestic corporation. Continue reading “Explaining GILTI – Measurement”

Explaining GILTI – Rationale

In my last post I discussed a public comment made on behalf of the Israeli Ministry of Finance on the recent proposed GILTI regulations. GILTI is quite complex, and that post may have thrown some readers into the deep end. In this post I go back to the beginning and try to explain why the US Congress felt that the GILTI provision was an essential part of the 2017 Tax Cuts and Jobs Act (TCJA). Subsequent posts will cover more detail about what GILTI actually measures and how the GILTI computations are supposed to work.

When Congress passed TCJA, it was hailed as major international tax reform that would make US multinationals more competitive with their international counterparts. The US corporate tax rate was reduced from 35% to 21% and with much fanfare, the US moved from taxing the worldwide income of corporations to a (not quite) territorial taxation system. Now that the bill has been signed and taxpayers, the IRS, and the tax compliance industry have had some time to study it, the reality doesn’t quite live up to the hype. For non-resident individual US taxpayers, the problem could be even worse! The transition/repatriation tax (§965) and GILTI (Global Intangible Low Taxed Income – §951A) have been drafted to apply to all US shareholders of Controlled Foreign Corporations (CFCs), not just the US domestic corporations that benefit from the modified territorial tax system. Once again, Congress has failed to consider the implications of their actions on non-resident US taxpayers. Continue reading “Explaining GILTI – Rationale”

Explaining GILTI

GILTI (Global Intangible Low Tax Income) is the gift that keeps on giving – claiming US tax jurisdiction over the income of corporations owned by US “persons” on an ongoing basis. While the transition tax was painful, it was a one-off. For calendar year taxpayers, GILTI will apply starting with the 2018 US tax return – so it’s actually been in place for almost 11 months now. But the IRS has only just issued some of the relevant regulations and there are many questions that remain unanswered. Comments on the first set of proposed regulations are due on 26 November, so I’m going to start by considering a comment submitted by Arnold&Porter on behalf of the Israeli Ministry of Finance. In subsequent posts I’ll go back and discuss the purpose of GILTI and whether the actual legislation does what it says.

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