QuestionAugust 6, 2025

Although US shareholders in a CFC need to pick up the GILTI what foreign effective tax rate means there will be no additional US federal income tax? 0% 21% 10.5%

Although US shareholders in a CFC need to pick up the GILTI what foreign effective tax rate means there will be no additional US federal income tax? 0% 21% 10.5%
Although US shareholders in a CFC need to pick up the GILTI what foreign effective tax rate means there will be no additional US federal income tax? 0% 21% 10.5%

Solution
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Answer

13.125\% Explanation 1. Understand GILTI Taxation GILTI (Global Intangible Low-Taxed Income) is subject to a 10.5% minimum tax rate for US shareholders in a CFC. 2. Determine Foreign Effective Tax Rate If the foreign effective tax rate is at least 13.125%, then after applying the 80% foreign tax credit, the US tax liability will be zero. 3. Calculate Threshold The threshold foreign tax rate is calculated as \frac{10.5\%}{0.8} = 13.125\% .

Explanation

1. Understand GILTI Taxation<br /> GILTI (Global Intangible Low-Taxed Income) is subject to a 10.5% minimum tax rate for US shareholders in a CFC.<br /><br />2. Determine Foreign Effective Tax Rate<br /> If the foreign effective tax rate is at least 13.125%, then after applying the 80% foreign tax credit, the US tax liability will be zero.<br /><br />3. Calculate Threshold<br /> The threshold foreign tax rate is calculated as $ \frac{10.5\%}{0.8} = 13.125\% $.
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