Question: What Is Subpart F Recapture?

Is Gilti Subpart F?

The reason Subpart F income is excluded from GILTI is that it is already taxed under the CFC regime, which was introduced as an anti-deferral mechanism to prevent US shareholders from rolling up certain types of movable passive income (Subpart F income), such as rents, royalties, interest and dividends, in non-US ….

Is subpart F income passive?

A U.S. shareholder is generally subject to U.S. tax on its pro rata share of each of its CFC’s subpart F income. Subpart F income consists of passive income and other income from transactions with related parties.

Are dividends subpart F income?

In general, it consists of movable income. For example, a major category of Subpart F income is Foreign Base Company Income (FBCI), as defined under I.R.C. § 954(a), which includes foreign personal holding company income, or FPHCI, which consists of investment income such as dividends, interest, rents and royalties.

How do you avoid Gilti?

How to avoid or lower GILTI – Global Intangible Low Tax IncomeCharacterize GILTI as Subpart F. First, you can elect to covert GILTI to subpart F income. … Increase QBAI. … Combine Controlled Foreign Corporations into one. … Avoid CFC or US shareholder status.Create a US holding company to own all CFC shares. … What about putting CFC shares into a Private Placement Life Insurance Policy.

How do I report Gilti income?

Reporting GILTI Inclusion For an individual taxpayer, the GILTI inclusion will be reported on the “other income” line of the Form 1040 and taxed at the ordinary income tax rate. Further calculations are needed if the U.S. person is a corporation.

Is interest income subpart F income?

In general, it consists of movable income. For example, a major category of Subpart F income is Foreign Base Company Income (FBCI), as defined under I.R.C. § 954(a), which includes foreign personal holding company income, or FPHCI, which consists of investment income such as dividends, interest, rents and royalties.

Who does Gilti apply to?

The GILTI rules (contained in the new section 951A) require a 10 percent U.S. shareholder of a controlled foreign corporation (CFC) to include in current income the shareholder’s pro rata share of the GILTI income of the CFC. The GILTI rules apply to C corporations, S corporations, partnerships and individuals.

What is included in Subpart F income?

Subpart F income includes: insurance income, foreign base company income, international boycott factor income, illegal bribes, and income derived from a §901(j) foreign country, which are countries that sponsor terrorism or are otherwise not recognized by the US, such as Iran and North Korea.

Is subpart F income taxable?

For purposes of subsection (a), the subpart F income of any controlled foreign corporation for any taxable year shall not exceed the earnings and profits of such corporation for such taxable year.

What income is subject to Gilti?

More specifically, a US business must include GILTI in its gross income annually. GILTI is calculated as the total active income earned by a US firm’s foreign affiliates that exceeds 10 percent of the firm’s depreciable tangible property.

What is movable income?

Income from movable property means any income such as interest, dividend, rent and the like derived from capital in cash or capital in kind. (Income from business activities, agricultural activities and independent personal services is not considered as income from movable property.)

Is rental income subpart F income?

FPHCI is a category of foreign base company income under subpart F income. FPHCI generally includes passive types of income such as interest, dividends, rents, royalties and sales of property held for investment. There are many exceptions to this general rule.