Moving to the U.S. With a Foreign Company: Form 5471, CFC & GILTI Tax Planning

This article is written for the foreign business owner specifically. For the broader picture — asset step-ups, timing of income and sales, foreign accounts, trusts, and the residency start date itself — see our guide to U.S. tax planning before moving to the United States.

What changes on the residency start date

U.S. tax residents are taxed on worldwide income. Beyond the income tax return, ownership of a foreign company brings a set of international information returns and, if the company is a controlled foreign corporation, potential current inclusions of company-level earnings on the owner's personal return.

Residency itself can begin part-way through a year, and the start date depends on the facts — the green card test, the substantial presence test, and available elections. Because the CFC and inclusion analysis is applied by reference to the tax year, a difference of a few weeks in an arrival date can matter.

Form 5471 arrives with you

A new U.S. resident who owns a significant interest in a foreign corporation will generally have a Form 5471 obligation for the first year, in the category that applies to their ownership. That means preparing the company's income statement and balance sheet under U.S. principles, in U.S. dollars, and tracking earnings and profits — figures that local accountants abroad typically do not maintain. Building that starting picture in the first year is far easier than reconstructing it in year four.

Controlled foreign corporation status and current inclusions

A wholly owned foreign operating company held by a new U.S. resident is generally a CFC. As a 10% U.S. shareholder, the owner can be taxed currently on Subpart F income and on GILTI — broadly, active earnings above a routine return on the company's tangible depreciable assets — whether or not any dividend is paid.

Service businesses, consultancies, software companies, and licensing companies feel this most sharply, because they earn well with few tangible assets, which is precisely the profile GILTI reaches. Attribution rules can also pull in family-held shares, so a minority stake on paper is not automatically outside the regime.

Retained earnings and distributions

Earnings accumulated before U.S. residency are a distinct question from earnings after it. Distributions of pre-residency profits after you become a resident are generally taxable to you as a U.S. person, and whether they qualify for favorable rates depends on the payer's country, treaty status, and other factors. Amounts already included under Subpart F or GILTI are tracked so they are not taxed twice on later distribution, but that tracking only works if it is maintained from the start.

A simplified example

A consultant moves from Spain to Florida in July and keeps her Spanish company, which holds retained earnings from prior years and continues to earn afterwards. Her post-arrival share of company earnings may generate a GILTI inclusion for that year. A distribution of the prior years' accumulated profits made after arrival is generally a dividend to her as a U.S. resident, while the same distribution made before residency began would have been outside the U.S. system. Whether either result is favorable depends on Spanish tax, treaty provisions, credits, and elections — but the timing difference is the part that cannot be recovered later.

Entity classification is a real lever

How a foreign entity is classified for U.S. purposes — corporation, partnership, or disregarded entity — determines almost everything that follows. Some foreign entity types have a default classification; others are eligible to elect. A check-the-box election generally applies prospectively and has its own timing rules, and an election can itself be a taxable event, so it is a decision to model rather than to make reflexively.

• Corporation treatment: CFC rules, Form 5471, potential Subpart F and GILTI inclusions, deferral of non-inclusion earnings.
• Disregarded or partnership treatment: income flows through to the owner currently, with different information returns and often more direct access to foreign tax credits.
• Neither is universally better; the right answer depends on the company's income mix, local tax rate, asset base, and distribution needs.

What can be considered before the residency date

• Whether to accelerate or defer distributions of accumulated profits.
• Whether to sell, gift, or restructure an interest while still outside the U.S. system, including the consequences under the home country's rules.
• Whether an entity classification election improves the ongoing result, and when it should take effect.
• Whether operations, intellectual property, or contracts should be repositioned before arrival rather than after.
• How the arrival date interacts with the substantial presence test, first-year elections, and any treaty tiebreaker.

Not every step is appropriate for every owner, and some carry home-country tax cost that outweighs the U.S. benefit. That trade-off is the reason planning should be done jointly with an advisor in the company's home country, and before the immigration timeline is locked.

Coordinating the immigration and tax calendars

Visa timing is often treated as fixed and tax as flexible. In practice the reverse is closer to true: many U.S. tax outcomes are determined by a date, while immigration timelines frequently have some room. A conversation before the move — even a short one — usually identifies whether the arrival date is doing real damage.

Sources and official references

• IRS — About Form 5471
• IRS — Substantial Presence Test