Glossary
Global Intangible Low-Taxed Income (GILTI)
Definition
GILTI is a category of income earned by a controlled foreign corporation that a U.S. shareholder must include in income each year, whether or not it is distributed. The inclusion depends on statutory calculations, exceptions and the applicable tax year.
Who it affects
GILTI applies to U.S. shareholders of controlled foreign corporations, which includes many U.S. citizens and residents who own their own foreign company. It is not limited to technology or intangible assets, despite the name.
How it is taxed
The CFC’s income is generally computed at the corporate level, then included in the shareholder’s income. Corporate shareholders have had access to special deductions and credits, while individuals often face higher cost unless they make certain elections. The details depend on facts such as foreign tax paid.
Check the applicable year
Section 951A calculations and available relief depend on the tax year. Do not assume that an earlier year’s calculation applies unchanged to a later return. Reporting generally involves Form 5471, Form 8992 and related schedules; individual shareholders should also evaluate whether a Section 962 election is appropriate.
Practical example
For example, suppose Rosa, a U.S. resident, owns a consulting company in Mexico taxed at a low rate. Even if she leaves the profits in the company, part of that income may have to be included on her U.S. return under the GILTI rules.
General information, not tax advice
This page provides general educational information about U.S. federal tax rules. It is not individualized tax, legal or accounting advice, and it does not create a client relationship. Results depend on each taxpayer's specific facts.
Written by Roger I. Chirino, founder of Chirino USA Accountants & Advisors P.A.
Supported by licensed CPAs, IRS Enrolled Agents (EAs), and experienced U.S. tax professionals focused on cross-border compliance and planning.
Related questions
Do foreign companies owned by U.S. taxpayers need to be reported?
I moved to the U.S. and still own my foreign company. What changes?
Is my foreign company a corporation, partnership or disregarded entity for U.S. tax purposes?
Can unused foreign tax credits be carried back or forward?
Does a green card holder living abroad still have to file U.S. taxes?
How does the foreign tax credit work?
Related IRS forms
Related penalties
Related articles
Owning a Foreign Corporation as a U.S. Taxpayer: Form 5471, CFCs & GILTI
Moving to the U.S. With a Foreign Company: Form 5471, CFC & GILTI Tax Planning
Should You Claim the Foreign Tax Credit or the Foreign Earned Income Exclusion?
I Missed Forms 5471, 5472, 3520 or 8938. What Penalties Apply and Is Relief Available?