Tax reform readiness: GILTI mechanics impacting multinational entities

Overview

The 2017 tax reform reconciliation act (the Act) is having a substantial impact on multinational entities (MNEs), with the new concept of global intangible low-taxed income (GILTI) proving to be one of the Act’s most important provisions.

PwC on June 6 hosted a webcast featuring PwC specialists who discussed GILTI mechanics and selected issues. This Insight highlights some of those discussions. Watch the webcast replay and register for future webcasts in PwC’s Tax Reform Readiness series, which addresses other areas affected by tax reform.

The next webcast — Tax reform readiness: Thinking outside the tax box — macroeconomic and geopolitical impacts — will take place on June 13, from 2:00 PM - 3:00 PM (EDT).

The takeaway

The Act made broad, fundamental changes to the US international tax system. GILTI applies to virtually every business that maintains its foreign operations in corporate form and may cause the foreign income to be reported on the domestic entity’s US federal income tax return on a current basis.

Modeling is essential to understand the actual impact of GILTI. Numerous issues remain unresolved and taxpayers must make assumptions on how some of these provisions ultimately will be interpreted. Taxpayers should build ‘optionality’ into their models forecasting the possible impact other provisions may have on GILTI if they ultimately are determined to apply.