What Is GILTI (Global Intangible Low-Taxed Income)?
Global Intangible Low-Taxed Income (GILTI) is a US anti-deferral regime under which US shareholders of controlled foreign corporations include certain foreign earnings in current income.
Also known as: GILTI, Net CFC Tested Income (NCTI).
How Global Intangible Low-Taxed Income (GILTI) works
Global Intangible Low-Taxed Income (GILTI) applies to a United States shareholder, generally a US person owning 10 percent or more of the vote or value of a controlled foreign corporation, and requires annual inclusion of the shareholder's share of the corporation's net tested income even when no dividend is paid. Under the version of section 951A computed on Form 8992, with instructions revised in December 2024, the inclusion equals net tested income reduced by a deemed tangible income return calculated at 10 percent of qualified business asset investment, so asset-light service companies typically see most of their profit included. Public Law 119-21 renamed the regime net CFC tested income (NCTI) and removed the net deemed tangible income return for taxable years beginning after 31 December 2025, so the GILTI label now mainly describes earlier years, subject to later amendments and IRS guidance. Corporate shareholders who qualify may claim a section 250 deduction reported on Form 8993, while individual shareholders face different rules and foreign tax credit limits, which makes the shareholder's own status as decisive as the foreign company's local tax rate.
Global Intangible Low-Taxed Income (GILTI) vs CFC Subpart F Income
Unlike Subpart F income, which targets defined categories such as passive and certain related-party income, Global Intangible Low-Taxed Income (GILTI) reaches most remaining active earnings of a controlled foreign corporation. Both regimes require current inclusion by United States shareholders without an actual distribution.
| Global Intangible Low-Taxed Income (GILTI) | CFC Subpart F Income | |
|---|---|---|
| Income targeted | Broad residual tested income, including active business profits | Defined categories such as passive and certain related-party income |
| Current status | Renamed net CFC tested income for taxable years beginning after 2025 | Older anti-deferral regime in Subpart F of the Internal Revenue Code |
| Main computation | Form 8992 at shareholder level, aggregating all CFCs | Computed per controlled foreign corporation, reported through Form 5471 |
Example
Illustrative example: A United States citizen living in Country A owns all the shares of a consulting company incorporated in Country A, which pays a low corporate rate and distributes no dividends. Because the citizen holds more than 10 percent of the vote and value of a controlled foreign corporation, the company's net tested income is generally included in the citizen's US gross income each year, computed on Form 8992 for taxable years beginning before 2026 and under the net CFC tested income rules afterwards. With few tangible assets, the deemed return reduction available in earlier years would have been small. Country A separately taxes the company's profits and, later, any dividend paid to the citizen, so the timing mismatch between the US inclusion and local taxation becomes the central compliance question, subject to foreign tax credit limits and any elections available to individual shareholders.
Common misconception
Myth: Income kept inside a foreign company is not taxed in the United States until a dividend is paid.
Reality: Global Intangible Low-Taxed Income (GILTI) rules, and from 2026 the net CFC tested income rules, generally require United States shareholders to include certain controlled foreign corporation earnings currently, whether or not distributed.
Frequently asked questions
What is GILTI?
Global Intangible Low-Taxed Income (GILTI) is a US rule requiring United States shareholders of controlled foreign corporations to include certain foreign earnings in gross income annually, computed on Form 8992, even without a dividend.
Does GILTI apply to US citizens living abroad?
Global Intangible Low-Taxed Income (GILTI) rules apply to United States shareholders, including US citizens living abroad who own 10 percent or more of a controlled foreign corporation, although individual and corporate shareholders are treated differently.
Was GILTI replaced by NCTI in 2026?
Global Intangible Low-Taxed Income (GILTI) was renamed net CFC tested income by Public Law 119-21 for taxable years beginning after 31 December 2025, which also removed the net deemed tangible income return, subject to later amendments and guidance.
What is the difference between GILTI and Subpart F?
Global Intangible Low-Taxed Income (GILTI) covers broad residual earnings of a controlled foreign corporation, whereas Subpart F income targets defined categories such as passive income; both require current inclusion by United States shareholders.
Related terms
- CFC Subpart F Income — Parallel US inclusion regime for defined income categories
- Controlled Foreign Corporation — Entity whose earnings GILTI reaches
- Form 5471 — Information return for US owners of CFCs
- Foreign Tax Credit (FTC) — Relief mechanism interacting with GILTI inclusions
- Global Minimum Tax — OECD-based minimum tax often compared with GILTI
- Base Erosion and Anti-Abuse Tax (BEAT) — Parallel US minimum tax from the same 2017 reform
Related guides
- Global tax reform and US digital nomads — US nomads and global tax reform
- Incorporation options for location-independent entrepreneurs — Foreign company choices with US ownership effects
Sources
- IRS, About Form 8992
- IRS, Instructions for Form 8992 (Rev. 12/2024)
- Cornell LII, 26 U.S. Code 951A (as amended by Pub. L. 119-21)
Last verified: 2026-10-08. This entry is general information, not tax or legal advice; rules vary by country and change over time.
