GILTI Fundamentals and Calculations

There is increasing attention on the U.S.’s Global Intangible Low-Taxed Income (GILTI) tax and its interaction with new minimum tax rates taking effect around the world under the international Pillar Two initiative. GILTI is currently being reviewed in detail by tax authorities who are looking at how the U.S. might align it with the international Pillar Two initiative.

This attention highlights the importance of understanding GILTI calculations, which apply to U.S.-based companies with foreign corporations. While the Pillar Two minimum income taxes are targeted at reaching a minimum 15% net income effective rate, and apply country-by-country, the GILTI rules have a different effective rate, and the core calculations work differently.

This OnPoint discusses:

• A comparison of the U.S. GILTI rules, and the international Pillar Two minimum taxes;
• The fundamentals that apply to GILTI calculations; and,
• Options that are available to help address overlapping taxes.

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