New CFC rules in the USA
Local tax news
USA - New CFC rules
The USA implemented major changes to the taxation of CFCs which are effective from 1 January 2018 and include:
(i) broadening the scope of conditions under which a foreign corporation may be treated as a CFC;
(ii) changing the participation exemption regime;
(iii) introducing a repatriation tax on offshore deferred earnings of CFCs; and
(iv) implementing a new category of CFC income, referred to as “global intangible low-taxed income" (GILTI).
GILTI is defined as the income of the CFC that exceeds a deemed 10% rate of return on the CFC’s tangible property. The tangible property is deemed to generate the CFC’s active foreign income, with a 10% return. 10% is presumed to be a normal return on the corporation’s tangible foreign assets. The reminder of the CFC income is deemed to be generated by intangible property. The US shareholder is taxed on 50% of GILTI and may credit 80% of taxes paid in other country against US corporate tax.
New GILTI module on its way
In the light of the US tax reform and the implication it will have for many of our customers we are happy to announce that we are currently developing a new GILTI module with the input from our US partner Saville CPAs & Advisors. Our new module will reflect the new rules and allow you to run calculations with the complete transparency that you are used to have.
Since, however, that the module will be launched in a few weeks and that you already need to start preparing for how GILTI will affect your organization we have added a new section in the Commentary database. You may find this section through Database / choose United States from the list of countries / Anti-avoidance / CFC legislation.
If you require some further information at this time on how GILTI will impact your organization please contact email@example.com.