As global economics have prospered due to increasing cross-border trade and international business transactions, the US government has introduced new tax regulations governing how these transactions are accounted for.
Here is a description of two of the many forms now required to be filed by taxpayers with foreign business transactions or foreign related parties. These forms were introduced under the Tax Cuts and Jobs Act of 2017.
Form 8992 is used to report US shareholder calculation of global intangible low-taxed income (GILTI) under newly enacted section 951A. This new section requires US shareholders of controlled foreign corporations (CFCs) to include in gross income on a current basis shareholders’ GILTI for years in which they are US shareholders of CFCs with tax years beginning after 2017.
The Act also provides certain deductions for export of specified sales and services and certain deductions related to the GILTI under section 250.
Form 8993 is used by US persons to calculate deductions allowed under section 250, for the eligible percentage of foreign-derived intangible income (FDII) and GILTI. The deduction for the eligible percentage of FDII is available only to US corporations, but the deduction to reduce GILTI income may be available to US individuals through the use of other elections.
Other relevant forms
Other forms that may be required are 5471, 5472, 8865, 8858, 8804, 8805, 1042, 8938, and 114. Some of the foreign tax reports and forms are required only for reporting purposes and may not involve any additional tax burden, but heavy penalties and interest may be incurred if they are not filed in time, explain the experts at Marcum LLP.
To optimize cross-border taxation, now more than ever, it is important to understand all of the reporting and tax payment requirements of the US government and to evaluate your business structure in the light of such requirements. The restructuring of an organization and understanding of the tax results from check-the-box rules may provide a more efficient and cost-effective approach to tax compliance and, ultimately, to the effective global income tax rate.
Abhishek Gupta, CPA, Tax & Business Services manager, Marcum LLP, Fort Lauderdale, Florida, USA
Marcum LLP (www.marcumllp.com) is a national accounting and advisory firm headquartered in New York City, with offices throughout the US as well as Grand Cayman, China, and Ireland. It is an associated partner of ECOVIS International.
Ecovis is a leading global consulting firm with its origins in Continental Europe. It has over 7,500 people operating in over 75 countries. Its consulting focus and core competencies lie in the areas of tax consultation, accounting, auditing and legal advice. The particular strength of Ecovis is the combination of personal advice at a local level with the general expertise of an international and interdisciplinary network of professionals. Every Ecovis office can rely on qualified specialists in the back offices as well as on the specific industrial or national know-how of all the Ecovis experts worldwide. This diversified expertise provides clients with effective support, especially in the fields of international transactions and investments – from preparation in the client‘s home country to support in the target country. In its consulting work Ecovis concentrates mainly on mid-sized firms. Both nationally and internationally, its one-stop-shop concept ensures all-round support in legal, fiscal, managerial and administrative issues.
The name Ecovis, a combination of the terms economy and vision, expresses both its international character and its focus on the future and growth.