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Canadian Residents—Prepare for U.S. GILTI Tax Changes

Canadian Residents—Prepare for U.S. GILTI Tax Changes

U.S. individuals and corporations who own shares of a CFC may be affected by new changes.

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U.S. individuals and corporations who own shares of a Controlled Foreign Corporation (CFC), including a Canadian corporation, may be affected by new changes to the U.S. global intangible low tax income (GILTI) rules. The GILTI rules, which applied for the first time in 2018, may affect U.S. individuals or corporations who own (or are deemed to own) controlled foreign corporations (CFCs), such as a Canadian company. The United States has now issued final regulations on certain GILTI computations that were proposed in 2018, as well as some additional proposed regulations that broaden the current exception for certain foreign income taxed at a relative high rate and change the rules regarding the calculation and reporting of GILTI to income earned through partnerships.

While the final regulations are now considered law, the proposed regulations have not yet been enacted. Although the new proposed changes were made in response to stakeholder feedback, affected U.S. shareholders may want to carefully model potential outcomes of expected income and taxes for all CFCs for current and future years to determine whether the proposals are beneficial to their particular situation, and consider whether amended tax return filings could be necessary.

Download this edition of the TaxNewsFlash to learn more.

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