Expert Insight: 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.


“Hi, I’m Alex Bayrak from Bloomberg Tax here to discuss three things to know about the global intangible low-taxed income tax, known as GILTI.

1. What is GILTI?

Introduced by the 2017 Tax Cuts and Jobs Act, GILTI is a deemed amount of income derived from controlled foreign corporations (“CFCs”) in which a U.S. person is a 10% direct or indirect shareholder. As a newly defined category of foreign income, the GILTI regime effectively imposes a worldwide minimum tax on foreign earnings.

2. How is GILTI computed?

GILTI = Net CFC Tested Income – (10% x Qualified Business Asset Investment, or QBAI – Interest Expense). Let’s break this equation down. Here, tested income is defined as:

  • Gross income minus
    • Subpart F income
    • U.S. effectively connected income
    • Income that qualifies for the high tax exception
    • Related party dividends
    • Certain deductions
    • And foreign oil and gas extraction

And QBAI is defined as:

  • The average of the adjusted bases in specified tangible property subject to depreciation used in a trade or business and for which a deduction is allowable under 167.

3. What is the importance of GILTI?

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

  • Foreign tax credits
  • The Section 250 deduction
  • Foreign-derived intangible income (FDII)
  • And the 2020 proposed Subpart F high-tax exception rules

As a result, navigating through the laws and regulations around GILTI is vital to any comprehensive tax planning strategy.”

[Bloomberg Tax subscribers have access to deeper insights on GILTI. Request a demo.]

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