US GILTI, BEAT, and FDII - Tax Cuts and Jobs Act 2017 International Tax Provisions

What US GILTI, BEAT, and FDII - Tax Cuts and Jobs Act 2017 International Tax Provisions requires

The Tax Cuts and Jobs Act (TCJA), signed into law by President Trump on 22 December 2017 (Public Law 115-97), enacted the most comprehensive reform of US international corporate taxation since 1986 and introduced three interconnected regimes that remain the primary US framework for taxing cross-border profits of US multinational enterprises (MNEs) as of April 2026. (1) Global Intangible Low-Taxed Income (GILTI) - IRC Sec. 951A: US shareholders of controlled foreign corporations (CFCs) must include in gross income their GILTI for each taxable year. GILTI equals: net CFC tested income minus the Net Deemed Tangible Income Return (NDTIR), where NDTIR = 10% of QBAI (Qualified Business Asset Investment - the average quarterly adjusted basis of depreciable tangible property used in the CFC's business). Net CFC tested income is the aggregate of each CFC's tested income (gross income less properly allocable deductions, excluding certain categories: effectively connected income, subpart F income, high-tax exception income, foreign oil and gas extraction income, and related-party dividends) reduced by tested losses of other CFCs. Domestic corporations may deduct 50% of their GILTI inclusion under IRC Sec. 250(a)(1)(B) (reducing from 50% to 37.5% after 2025 under TCJA sunset provisions), resulting in an effective GILTI rate of 10.5% at the 21% corporate rate (rising to 13.125% after 2025). A foreign tax credit is available for 80% of the pro-rata share of foreign income taxes paid or accrued by CFCs with respect to tested income - subject to a separate GILTI FTC basket and no carryover. A high-tax exclusion (HTE) election under Treasury Regulations allows exclusion of GILTI tested income from CFCs with an effective tax rate exceeding 90% of the US corporate rate (>18.9% at 21%). (2) Base Erosion and Anti-Abuse Tax (BEAT) - IRC Sec. 59A: an alternative minimum-type tax on large US corporations that make deductible payments to foreign related parties (base erosion payments). BEAT applies to corporations with average annual gross receipts of at least USD 500 million over the 3-year test period and a base erosion percentage of at least 3% (2% for banks and registered securities dealers). BEAT rate: 10% (taxable years beginning 1 January 2019 through 31 December 2025), rising to 12.5% (2026 onwards). BEAT = the excess of (BEAT rate × Modified Taxable Income) over regular tax liability. Modified Taxable Income adds back deductions for base erosion payments - broadly any payment to a foreign related party that is deductible, other than payments for cost of goods sold, certain services at cost or cost-plus margins, and qualified derivative payments. (3) Foreign-Derived Intangible Income (FDII) - IRC Sec. 250: US domestic corporations may deduct 37.5% of FDII (reducing to 21.875% after 2025), achieving an effective rate of approximately 13.125% pre-2026 on income attributable to foreign markets from exploitation of intangibles. FDII equals the portion of deemed intangible income (deduction-eligible income minus 10% of the corporation's QBAI) attributable to foreign-derived sales and services. The FDII deduction provides a tax incentive to locate intellectual property and production in the United States. Pillar Two interaction: the OECD GloBE rules do not treat GILTI as a qualified IIR - US MNEs whose effective GILTI rate falls below 15% may face UTPR charges in EU, UK, and other implementing jurisdictions that have enacted the Undertaxed Profits Rule as of April 2026. US has not enacted domestic Pillar Two legislation as of April 2026.

Pillar: Tax & Transfer Pricing · Authority: US Internal Revenue Service; US Congress (congress.gov) · Version: 1.0.0 · Last updated: 2026-04-27

Primary source: https://www.congress.gov/bill/115th-congress/house-bill/1

SHA-256 integrity: d048c8dc561771478405578c7d194e3d41e9999cf8a572bd99f57c16725cb7b4

Primary Citations — 7 traced to source

• Tax Cuts and Jobs Act (TCJA), Public Law 115-97, signed 22 December 2017 - IRC Sec. 951A (GILTI): US shareholders of CFCs include net CFC tested income minus Net Deemed Tangible Income Return (10% of QBAI) in gross income; IRC Sec. 250(a)(1)(B): domestic corporations deduct 50% of GILTI inclusion (37.5% after 2025 TCJA sunset), effective rate 10.5% pre-2026; GILTI FTC: 80% of pro-rata CFC foreign income taxes attributable to tested income, subject to separate GILTI FTC basket
• IRC Sec. 59A (BEAT) - Base Erosion and Anti-Abuse Tax enacted by TCJA: applies to corporations with average annual gross receipts ≥ USD 500 million (3-year test period) and base erosion percentage ≥ 3% (2% for banks); BEAT rate 10% (2019-2025), 12.5% (2026+); Modified Taxable Income adds back deductions for base erosion payments to foreign related parties; exclusions for COGS, services at cost or cost-plus, and qualified derivative payments

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