There seems to be a benefit to be derived from some straightforward planning to address the GILTI tax. Establishing a US C corp to own your foreign business creates no new US corporate income tax and lowers your personal income tax. How would it work?:

  1. A US C corp receives a 50% dividend received deduction and an 80% foreign tax credit and individual receives neither.
  1. The calculation means that at a 21% corporate income tax rate a foreign corporate tax rate greater than 13.125% results in no new US corporate income tax.21% x 50% dividend received deduction = 10.5% / 80% (allowed foreign tax credit) = 13.125%
  1. Thus a US C corp owning a UK company paying UK corporation tax of 19% pays no new US corporation tax (the deduction added to the foreign tax credit leaves a foreign tax credit carry forward and no US corporate income tax payable) and the amount in the US C corp can be regularly paid out to US shareholders as a dividend. Depending on the circumstances that may be taxed at the lower qualified dividend tax rate.

Of course, your personal circumstances may affect the result. This is not tax advice and no planning should be made based on this note.

Financial Planning for Americans in the UK book cover

Financial Planning for Americans in the United Kingdom

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