What Is GILTI Tax And How Do You File It?


Taxation can take a toll on your activities, and if some new concepts sweep in, it can be overwhelming and even affect your financial performance. You don’t want to be subjected to penalties, so you always file your tax on time. However, at times, with the ever-evolving taxation dynamics, you may be blindsided by new concepts that you can hardly grasp. One such instance is the introduction of the GILTI tax, but you can read more about it here for a better understanding.

What is GILTI tax?

As of tax year beginning in 2018, GILTI takes effect. GILTI (Global Intangible Low Taxed Income) created by the Tax Cuts and Jobs Act of 2017 aims at revolutionizing how multinational’s foreign profits are taxed. It is good news for shareholders, since, unlike the previous approach, they can now enjoy a reduced tax burden.

A good example of how GILTI reduces a shareholders tax burden is where a person owns shares in 3 Controlled Foreign Corporations, and the tax amount is calculated on all, not as per a company. In such a scenario, if you are pocketing profits from 2 companies amounting to $ 400,000, but the other makes loses of $ 420,000, your GILTI tax amount would be zero.

How GILTI is filed?

CFC shareholders use form 8992 and schedule A to establish their low-taxed income inclusion under section 951A and considering its related regulations. You then attach the form and schedule A to your income tax return including, if applicable, the exempt organization returns or partnership and ensure you file them by the due date or before the extension expire for that return.

Unlike what you could presume from its name, GILTI does not target intangible but rather the income generated from the CFCs. Before filing for GILTI, you need to understand the deductions, exemptions, and other dynamics that regulate how it is computed; otherwise, you may pay more or attract penalties for incomplete reports or late filing as you try to wrap your head around GILTI mechanisms.

Instead of dwelling on GILTI and its concepts that could take your valuable time to comprehend, it is recommendable that you seek professional assistance. A qualified CPA can guide you through GILTI’s concepts and ensure that you file your taxes accordingly. Moreover, with the emerging taxation concepts, your CPA consultant will keep you updated, allowing you to take advantage of the features that reduce your tax burden.

As you consider a CPA go for thought leaders to ensure that you can concentrate on your core functions while staying informed on the most recent accounting trends. Moreover, with such a valuable service, you can get better connections that go beyond your tax needs to enhance your economic productivity.

Tax evasion has always been a concern as it affects revenue generation. However, with the complexities surrounding tax matters, it takes innovation to simplify and make the taxation process transparent. That’s why, to better taxation process and reduces the tax burden for U.S shareholders in Controlled Foreign Corporations, GILTI was formulated.