International taxpayers will have to spend additional time on tax compliance with new forms for GILTI and FDII in 2018.
The IRS recently issued Form 8992, U.S. Shareholder Calculation of Global Intangible Low-Taxed Income (GILTI) for U.S. shareholders to compute their GILTI inclusion. IRC Sec. 951A requires U.S. shareholders of CFCs (controlled foreign corporations) to include in gross income GILTI (Global Intangible Low-Taxed Income) for the tax years of the CFCs. This reporting begins after December 31, 2017.
In addition, the IRS issued Form 8993 Section 250 Deduction for Foreign-Derived Intangible Income (FDII) and Global Intangible Low-Taxed Income (GILTI) which taxpayers will use to determine their allowable deduction. New IRC Sec. 250 allows certain taxpayers to deduct an eligible percentage of FDII (Foreign-Derived Intangible Income) and GILTI.
New GILTI Form Is Final - New FDII Form Not Yet Final
The IRS has issued a new form, Form 8992, for doing the calculations with respect to Code Sec. 951A, which was enacted by the Tax Cuts and Jobs Act. Code Sec. 951A requires U.S. shareholders of controlled foreign corporations to include in gross income the shareholder's global intangible low-taxed income.
Only draft versions of the new FDII form and instructions are available for viewing at the IRS website. The IRS cautions taxpayers that the forms remain subject to change and require approval by the OMB (Office of Management and Budget) before final versions will be officially released.
Determining Who Must File Under IRC Sec. 951A & IRC Sec. 250
Form 8992 U.S. Shareholder Calculation of Global Intangible Low-Taxed Income (GILTI) must be filed by any U.S. shareholder of one or more CFCs that must take into account its pro rata share of the CFCs tested income or tested loss in determining the U.S. shareholder’s GILTI inclusion under IRC Sec. 951A. This amount is taken from a CFC’s Form 5471, Schedule I-1.
For purposes of Form 8992:
- A U.S. shareholder is a U.S. person that directly, indirectly, or constructively owns (within the meaning of IRC Sec. 958) at least 10% of the total value of shares of all classes of a CFC’s stock, or at least 10% of the total combined voting power of a CFC’s voting class stock; and,
- a CFC is a foreign corporation with U.S. shareholders that directly, indirectly, or constructively own (within the meaning of IRC Sec. 958) on any day of the foreign corporation’s tax year more than 50% of the total value of the corporation’s stock, or the total combined voting power of all of its voting stock classes.
Form 8993 Section 250 Deduction for Foreign-Derived Intangible Income (FDII) and Global Intangible Low-Taxed Income (GILTI) must be filed by all domestic corporations in order to determine the eligible deduction for FDII and GILTI allowed under IRC Sec. 250. The deduction is only available to domestic corporations (not including REITs (Real Estate Investment Trusts) or RICs (Regulated Invested Companies) and S corporations. The GILTI and FDII deductions from Form 8993 will also be entered on Form 1120, Schedule C.
Where and When to File
Both Forms 8992 and 8993 must be attached to the taxpayer’s income tax return and filed by the due date of the income tax return (including extensions). Any corrections to these forms may be included with an amended return.
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