Form 8992 (GILTI) Tax Planning for Controlled Foreign Corporations (CFCs)

 

Four-panel comic titled 'Form 8992 (GILTI) Tax Planning for CFCs'. Panel 1: A woman asks, 'What is GILTI tax?' to a man. Panel 2: The man responds, 'It applies to CFC income,' pointing to a chart labeled 'CFC'. Panel 3: He says, 'A strategy is a deduction election,' showing a document labeled 'Section 962 Election'. Panel 4: The woman says, 'That will lower the tax owed!' with a dollar symbol and downward arrow shown."

Form 8992 (GILTI) Tax Planning for Controlled Foreign Corporations (CFCs)

U.S. shareholders of Controlled Foreign Corporations (CFCs) face unique challenges when it comes to GILTI—Global Intangible Low-Taxed Income.

Introduced under the Tax Cuts and Jobs Act (TCJA), GILTI imposes U.S. tax on certain foreign earnings even if they are not repatriated.

Form 8992 is used to calculate and report these earnings, but without proper planning, it can significantly increase your global tax burden.

This post explores smart tax strategies to legally reduce GILTI exposure, optimize Form 8992 reporting, and maintain compliance with the IRS.

๐Ÿ”— Table of Contents

๐Ÿ“„ Understanding GILTI and Form 8992

GILTI is a category of income earned by CFCs that U.S. shareholders must include in their taxable income annually.

Form 8992 is required for any U.S. person who is a 10% or greater shareholder in one or more CFCs during the tax year.

The goal of GILTI is to prevent U.S. corporations from shifting profits to low-tax jurisdictions, but it also applies to individuals and pass-throughs unless specific elections are made.

๐Ÿงพ Key Terms: CFC, QBAI, and Tested Income

CFC: A foreign corporation where U.S. shareholders hold more than 50% control.

Tested Income: Foreign income that is subject to GILTI after certain exclusions.

QBAI (Qualified Business Asset Investment): Tangible depreciable assets that offset GILTI inclusion by providing a deemed return exclusion.

๐Ÿ“‰ GILTI Tax Reduction Strategies

  • Make a Section 962 Election to be taxed as a corporation and claim the 50% GILTI deduction + foreign tax credit (FTC).

  • Structure your foreign subsidiary to retain more tangible assets and increase QBAI.

  • Use hybrid entities or foreign branches strategically to lower tested income.

  • Review tested losses and ensure proper allocation across subsidiaries.

๐Ÿ“ Form 8992 Filing Tips

  • Coordinate with Form 5471 filings and ensure accurate ownership reporting.

  • Use professional software or a cross-border tax specialist to avoid penalties.

  • Attach all required schedules, including tested income detail and QBAI calculations.

๐Ÿ’ก Final Thoughts

Form 8992 compliance is more than just filling out a form—it’s a critical piece of international tax strategy.

Without a proactive plan, U.S. shareholders in CFCs may be hit with higher tax bills and missed deduction opportunities.

Whether you're an individual shareholder or managing a multinational entity, a well-informed GILTI strategy ensures compliance while protecting your bottom line.

๐Ÿ”— Related Resources

๐ŸŒ Cross-Border Smart Reporting Strategies
๐Ÿ“Š Tax-Efficient Structures for Global Investment
๐Ÿง  Predictive Models for Reputation & Tax Risk
๐Ÿ“„ SaaS Solutions for Tax Grant Optimization
๐Ÿ” Managing Personal Data Across Jurisdictions

Keywords: GILTI tax planning, Form 8992 strategy, controlled foreign corporation, QBAI deduction, Section 962 election