Global Intangible Low-Taxed Income (GILTI)

Last Updated March 8, 2023

The global intangible low-taxed income (GILTI) regime effectively imposes a worldwide minimum tax on foreign earnings. U.S. shareholders of controlled foreign corporations (CFCs) are subjected to current taxation on most income earned through a CFC in excess of a 10% return on certain of the CFC’s tangible assets – with a reduction for certain interest expense. GILTI inclusions are reduced by a special deduction and a partial foreign tax credit. Navigating through the laws and regulations around GILTI is vital to any international tax planning strategy.

What is GILTI?

GILTI, or global intangible low-taxed income, is a deemed amount of income derived from CFCs in which a U.S. person is a 10% direct or indirect shareholder. The GILTI regime is a newly defined category of foreign income introduced by the 2017 Tax Cuts and Jobs Act (TCJA), and effectively imposes a worldwide minimum tax on foreign earnings.

Along with creating a tax on foreign earnings, GILTI interacts with numerous provisions of the tax code affecting the calculation of:

Watch now: Three things to know about GILTI

Bloomberg Tax’s Alex Bayrak examines the fundamentals of the global intangible low-taxed income tax, including how to calculate GILTI tax on foreign earnings and how GILTI interacts with various provisions of the tax code.


Download: GILTI Roadmap

Our comprehensive GILTI Regulations Roadmap explores the four provisions within the preamble that were substantially revised between proposal and finalization.

How is GILTI calculated?

GILTI = Net CFC Tested Income – (10% x QBAI – Interest Expense)

Tested income: The gross income (or loss) of a CFC as if the CFC were a U.S. person, minus:

  • CFC’s income that is effectively connected with a U.S. trade or business.
  • Income that is otherwise subpart F income.
  • Income that is not subpart F income because it is subject to an exception for income that is highly taxed.
  • Related party dividends.
  • Oil and gas extraction income.

QBAI: Qualified business asset investment. The average of the adjusted bases in specific tangible property, subject to depreciations, used in the CFC’s business to earn the gross income used to calculate the CFC tested income and for which a deduction is allowable under 167.

Interest expense: Certain business expenses associated with those assets used to calculate QBAI.

Is there a limit on the amount of foreign income taxes that can be credits in a particular taxable year?

Yes. Foreign tax credits are limited annually to the amount of U.S. tax on foreign source taxable income as computed under U.S. tax principles. Thus, if the U.S. person pays more tax to the source country on the foreign source income than is due to the United States on the same foreign source income, the United States will limit the amount of taxes paid to the source country that can be used as credits against U.S. tax liability.

Mathematically, the foreign tax credit limitation is computed as a taxpayer’s pre-credit U.S. tax liability multiplied by a ratio (not to exceed one) wherein the numerator of which is the taxpayer’s foreign source taxable income and the denominator of which is the taxpayer’s worldwide taxable income for the year.

Foreign income taxes not credited because of the limitation can generally be carried back or forward to other taxable years, subject to the limitations for those years. However, foreign income taxes paid or accrued with respect to amounts includible in gross income under §951A (i.e., as global intangible low-taxed income, or GILTI) may not be carried back or carried forward.

The Treasury Department

Download: 2022 Proposed Foreign Tax Credit Regulations OnPoint

In Nov. 2022, the Treasury Department published foreign tax credit guidance aimed to clarify royalty withholding tax and cost recovery areas. This OnPoint explains the key proposals and what you need to know.

What income of a controlled foreign corporation (CFC) is currently taxed to a 10% U.S. shareholder?

A CFC’s “subpart F income” is the major component of a CFC’s income that is taxed to any U.S. shareholder who directly or indirectly owns at least 10% of the CFC. Subpart F income consists of the following:

  • Foreign personal holding company income, including income generally considered to be passive – such as interest, dividends, rent, royalties, capital gains, exchange gains, and so on – with some exceptions when these items are earned in active businesses.
  • Sales and services income from transactions with or on behalf of related persons when either the purchase or sale, or the services, take place outside the country of incorporation, subject to exceptions in each case.
  • Insurance income from policies outside a CFC’s country of incorporation.
  • Items imposed as a penalty, including the amount of bribes, kickbacks, etc.; a portion of income not otherwise treated as subpart F income if a CFC has business considered to be affected by an international boycott; and income from unrecognized countries, countries with which diplomatic relations are severed, and countries that support terrorism.

Additional taxable income

In addition, a CFC’s 10% U.S. shareholders are taxed on amounts considered to be “invested in United States property,” up to the amount of the CFC’s earnings and profits that have not been taxed by subpart F – even though they are not actually subpart F income, such as:

  • Property owned in the United States.
  • Stock or securities owned by U.S. persons (with some exceptions).
  • U.S. rights to certain intangible properties such as patents, copyrights, and business intangibles.

Also, 10% U.S. shareholders must also pay tax on the aggregate of the CFC’s GILTI deemed amount, which is also is not subpart F income.


Download: International Tax Discussion OnPoint

This concise OnPoint presentation highlights all you need to know about the international tax provisions of the Tax Cuts and Jobs Act (TCJA) to help you prepare for new revisions, including changes to the GILTI regime, the FDII calculation, and subpart F foreign tax credits.

How will GILTI be treated under Pillar Two?

Pillar Two is designed to ensure that multinational enterprises (MNEs) with substantial revenue pay a minimum rate of tax in the jurisdictions in which they operate, regardless of where they are headquartered. Under Pillar Two’s global minimum tax rules, these MNEs are subject to a minimum effective tax rate of 15% on profits earned in low-tax jurisdictions.

The OECD has released guidance clarifying that the Qualified Domestic Minimum Top-Up Tax (QDMTT) applies before any CFC taxes, and that the GILTI regime is a CFC tax under the Global Anti-Base Erosion (GloBE) Rules, not an Income Inclusion Rule (IIR). However, because GILTI applies on an aggregate basis, not on a jurisdiction-by-jurisdiction basis, it will be treated as a blended CFC tax, and the guidance addresses how to allocate taxes arising under such a blended CFC tax regime. The GILTI guidance is temporary because the GILTI rate increases in 2026.


Download: GILTI Roadmap

Our comprehensive GILTI Regulations Roadmap explores the four provisions within the preamble that were substantially revised between proposal and finalization.

Can a U.S. company still ‘invert’ after the 2017 Tax Cuts and Jobs Act?

The TCJA (Pub. L. No. 115-97) did not change the taxation of a corporate inversion, but many international provisions of the law were designed to make it less attractive from an income tax perspective to do so. The lowering of the corporate income tax rate, the creation of a favored category of income in the “foreign-derived intangible income” (FDII) deduction, and the GILTI inclusion – an anti-deferral device but at a favorable tax rate – all reduce the comparative tax attractiveness of an inversion.

At the same time, an inversion will still carry the same tax consequences as before the TCJA. An inversion puts a foreign parent corporation between a U.S. company and its shareholders. The tax consequences of such a transaction depend upon the level of control of the interposed foreign corporation, which is termed the “surrogate foreign corporation.” If the level of control is 80% or more, the foreign corporation is treated as a domestic corporation for all purposes of the code. If the level of control is less than 80%, but at least 60%, the effect is to impose a minimum amount of taxable income for the entity and its related parties, termed the “inversion gain,” for a 10-year period after the inversion is completed.

Key IRC Sections

Bloomberg Tax Research is pleased to offer the full text of the current Internal Revenue Code free of charge. This site is updated continuously and includes Editor’s Notes written by expert staff at Bloomberg Tax indicating when a section has been repealed or when there is a delayed effective date, allowing you to see the current and future law. Links to related code sections make it easy to navigate within the IRC.


Global Intangible Low-Taxed Income Included In Gross Income of United States Shareholders


Foreign-Derived Intangible Income and Global Intangible Low-Taxed Income


Deemed Paid Credit for Subpart F Inclusions (Post-2017)

Tax Research and Practice Tools

From in-depth research and analysis to timesaving practice aids, Bloomberg Tax has the resources you need to provide informed advice.

Access to this information requires a subscription to Bloomberg Tax Research. Don’t have access? Request a demo.



CFCs – General Overview (Foreign Tax Series)

Access practitioner-written analysis on controlled foreign corporation tax to help you implement effective federal tax strategies and provide authoritative guidance.

Increasing chart


Section 250 Deduction for FDII and GILTI Regulations

Download our OnPoint presentation and dive deep into the applicable deductions according to the final GILTI regulations so you can easily report to stakeholders.

Increasing chart


GILTI High-Tax Exclusion Regulations

Download our ready-to-use OnPoint presentation featuring key takeaways from the final GILTI high-tax exclusion regulations.

Expert resources for international tax planning and compliance from Bloomberg Tax

Bloomberg Tax has the detailed reports, expert insights, and practical guidance you need to stay informed on the latest international tax planning and compliance strategies – from the foreign tax credit and transfer pricing to the base erosion and anti-abuse tax and more.

Join our Tax Regulatory Alerts for breaking news

By clicking submit, I agree to the privacy policy.