International tax provisions

Area 2: Entity Tax Compliance (30-40%)

Your Progress

0 of 103 questions attempted

Topics

Subpart F and GILTI
Foreign tax credit mechanics

Lessons

International Tax

Study Frameworks

International Tax Provisions

US International Tax Framework

Subpart F Income

Certain passive and mobile income of CFCs included currently

Prevents deferral of easily shifted income

Insurance income, FPHCI, foreign base company sales/services

GILTI (Global Intangible Low-Taxed Income)

CFC tested income minus 10% of QBAI (tangible asset return)

Included in US shareholder's income currently

50% deduction for C corps (effective 10.5% rate)

FDII (Foreign-Derived Intangible Income)

Incentive for domestic corporations serving foreign markets

37.5% deduction (effective 13.125% rate)

Only available to C corporations

Foreign Tax Credit (FTC)

Credit for taxes paid to foreign governments

Limitation: US tax x (foreign source income / worldwide income)

Separate baskets: general, passive, GILTI

BEAT (Base Erosion and Anti-Abuse Tax)

Minimum tax on large corporations (>$500M gross receipts)

Targets deductible payments to related foreign persons

10% of modified taxable income (after adding back base erosion payments)

GILTI Computation

GILTI = Tested Income - (10% x QBAI) - Specified Interest Expense

Global Intangible Low-Taxed Income. QBAI = qualified business asset investment (average adjusted bases of tangible depreciable property). C corps get a 50% deduction, resulting in an effective 10.5% rate.

Foreign Tax Credit Limitation

FTC Limit = US Tax x (Foreign Source Taxable Income / Worldwide Taxable Income)

Maximum foreign tax credit claimable. Computed separately for each basket (general, passive, GILTI). Excess credits carry back 1 year, forward 10 years.

International Tax Provision Comparison

Provision	Applies To	Rate / Mechanism	Purpose
Subpart F	US shareholders of CFCs	Current inclusion of passive/mobile income	Prevent deferral of easily shifted income
GILTI	US shareholders of CFCs	Tested income - 10% QBAI; 50% deduction for C corps	Minimum tax on CFC earnings above routine return on assets
FDII	Domestic C corporations	37.5% deduction (effective 13.125% rate)	Incentive to earn and keep IP income in the US
FTC	US taxpayers with foreign income	Credit limited by (foreign income / worldwide income) x US tax	Prevent double taxation of foreign-source income
BEAT	Corps with $500M+ gross receipts	10% of modified taxable income	Minimum tax targeting base erosion through related-party payments

GILTI-QGILTI = Tested Income minus 10% of QBAI

Quick GILTI formula: subtract 10% of qualified business asset investment (deemed tangible return) from CFC tested income. The excess is GILTI, included currently in US shareholder income. C corps get a 50% deduction.

Practice These Topics(103 questions)