Treasury releases final and proposed high tax exception regulations

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July 2020

Overview

Today, Treasury released Final Regulations and Proposed Regulations under Section 954, and Section 951A as enacted by the 2017 tax reform legislation (the Act). These regulations relate to the treatment of income that is subject to a high rate of foreign tax under the global intangible low-taxed income (GILTI) and subpart F income regimes.

The final regulations contain 75 pages of preamble language and 37 pages of regulatory text, including 9 examples. The final regulations electively affect United States shareholders of foreign corporations and are effective as of September 21, 2020. Consistent with the applicability date in the 2019 proposed regulations, the final regulations provide that the GILTI high-tax exclusion applies to taxable years of foreign corporations beginning on or after July 23, 2020, and to taxable years of US shareholders in which or with which such taxable years of foreign corporations end.

The proposed regulations contain 45 pages of preamble language and 52 pages of regulatory text, including 10 examples. Public comments on the proposed regulations should be submitted by September 21, 2020.

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Doug McHoney

International Tax Services Leader, PwC US

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