As an update to our article Planning for IRC 951A: No Reprieve for the GILTI, the IRS has recently released regulations that provide a significant benefit to many US individual taxpayers grappling with the new GILTI regime. The regulations extend the “50% deduction” (Section 250 deduction), to individual taxpayers electing under Section 962 to be taxed as a US corporation. This concession was made on the basis that Congress intended that US individuals “will be (taxed) no heavier than they would have been had they invested in an American corporation doing business abroad”. To that end, provided that the controlled foreign corporation is paying at least 13.125% tax in Canada, the GILTI inclusion should, in theory, be fully offset by foreign tax credits. Of course, the devil is in the details. These rules are complex and taxpayers should consult with an experienced cross-border advisor regarding their specific circumstances.
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