GILTI tax for Americans with a foreign company

Do you live outside the United States and own a company in your country of residence? Then U.S. tax rules may apply to your company, even if the company is registered and pays tax outside the United States.

One of the rules you may come across is GILTI, short for Global Intangible Low-Taxed Income. Since 2026, the official name for these rules is Net CFC Tested Income (NCTI).

The rules are complex, but the basic idea is important: as an American abroad, you may have to report and sometimes pay U.S. tax on income earned by your foreign company, even if you have not paid that income to yourself.

On this page, we explain when the GILTI/NCTI rules may apply, what a Controlled Foreign Corporation (CFC) is and what you should consider if you own a foreign company.

What is GILTI?

GILTI stands for Global Intangible Low-Taxed Income. The GILTI rules were introduced in 2018 as part of the Tax Cuts and Jobs Act.

Despite the name, GILTI was not only about income from intangible assets such as patents or intellectual property. The rules could also affect Americans abroad who operate an ordinary business through a foreign company.

The rules apply to certain income earned through a Controlled Foreign Corporation (CFC).

For tax years beginning after December 31, 2025, the rules changed and GILTI was officially renamed Net CFC Tested Income (NCTI).

You may therefore still see the term GILTI used frequently, particularly in information relating to tax years before 2026.

Does GILTI apply to Americans living abroad?

Potentially, yes.

The United States generally taxes U.S. citizens and residents on their worldwide income, even when they live outside the United States. Moving abroad therefore does not automatically end your U.S. tax obligations. Americans living abroad generally still need to file a U.S. tax return.

If you own shares in a foreign corporation — for example, a Dutch BV, German GmbH, French SAS or another non-U.S. company — you should determine how that company is treated for U.S. tax purposes.

An important question is whether your company is considered a Controlled Foreign Corporation (CFC). If it is, the GILTI/NCTI rules may apply.

This is especially relevant if you started a company in your country of residence without considering the U.S. tax consequences at the time.

What is a Controlled Foreign Corporation (CFC)?

A Controlled Foreign Corporation is generally a foreign corporation in which more than 50% of the voting power or value is owned by U.S. shareholders.

For these rules, a U.S. shareholder is generally a U.S. person who owns at least 10% of the voting power or value of the foreign corporation.

Simply owning 10% of a foreign company does not automatically make the company a CFC. The total ownership by U.S. shareholders also needs to be considered.

The rules can become more complicated if shares are owned through other companies or if family members or related parties also own shares.

If you own 100% of your own company abroad, the situation is usually clearer: a foreign corporation wholly owned by a U.S. citizen will generally be considered a CFC.

What does GILTI mean if you own a company abroad?

A common assumption is that the profits of your company only become relevant for U.S. tax purposes when you pay yourself a dividend.

Under the CFC rules, this is not always the case.

GILTI/NCTI can result in income earned inside your foreign company being included in your U.S. taxable income, even when the company keeps the money.

For example, suppose you are an American living in Europe and operate a consulting business through a local company. Your company pays corporation tax locally and keeps part of its profit in the company for future investment.

From a local perspective, that profit belongs to the company.

For U.S. tax purposes, however, some of the company’s income may still need to be included on your U.S. tax return under the CFC and GILTI/NCTI rules.

This is why a company structure that is perfectly normal in your country of residence can have unexpected U.S. tax consequences.

The United States has tax treaties with many countries to address cross-border taxation. However, a tax treaty does not automatically remove all U.S. tax and reporting obligations.

What changed to GILTI in 2026?

An important change took effect for tax years beginning after December 31, 2025.

Global Intangible Low-Taxed Income (GILTI) is now officially called Net CFC Tested Income (NCTI).

The way the income is calculated has also changed.

Under the old GILTI rules, the calculation included a mechanism known as Qualified Business Asset Investment (QBAI). In simple terms, this allowed a deemed return based on certain tangible business assets to be taken into account.

This QBAI mechanism has been removed from the rules applying from 2026.

For Americans with foreign companies, the important point is that older information about how GILTI is calculated may no longer accurately describe the rules that apply from 2026.

If you are dealing with tax years before 2026, the previous GILTI rules may still be relevant.

How do you report GILTI or NCTI?

Owning a foreign company can result in additional U.S. reporting requirements.

One of the most important forms is Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations.

Depending on your situation, Form 5471 can require detailed information about your foreign company, including its ownership, income, expenses, assets, liabilities and transactions with shareholders or related parties.

The calculation under Section 951A is generally made using Form 8992. The IRS has updated this form to reflect Net CFC Tested Income.

Form 5471 is a complex information return and penalties can apply when a required form is not filed correctly or on time. You can read more about possible penalties for Americans who have missed U.S. filing obligations.

If you discover that you should have filed Form 5471 in previous years, it is therefore important to determine the correct way to resolve the situation before simply filing a missing form.

What is a Section 962 election?

If you own a foreign company as an individual, another term you may encounter is a Section 962 election.

U.S. corporations and individual U.S. shareholders are not always treated in the same way under the CFC rules. A Section 962 election allows an individual shareholder, in certain circumstances, to receive treatment that is closer to that of a U.S. corporation for specific CFC income.

This can affect how the U.S. tax on GILTI/NCTI is calculated and how certain foreign corporate taxes are treated.

A Section 962 election can be beneficial in some situations, particularly if your company already pays corporation tax in the country where it is established.

However, it is not automatically the best option. There may also be U.S. tax consequences when the company later distributes its profits.

Whether a Section 962 election makes sense therefore depends on your individual circumstances and should be considered as part of your overall U.S. and local tax position.

What about the Foreign Tax Credit?

Paying corporation tax in your country of residence does not automatically mean that there can be no U.S. tax consequences.

The United States has mechanisms designed to reduce double taxation. One of these is the Foreign Tax Credit.

In a more typical individual tax situation, qualifying foreign income taxes may be used to reduce U.S. income tax. You can read more about Form 1116 and the Foreign Tax Credit.

The situation is more complicated when foreign corporation tax and GILTI/NCTI are involved.

Changes were also made to the foreign tax credit rules connected to NCTI from 2026. How these rules affect you depends, among other things, on how your company and your shareholding are treated for U.S. tax purposes.

For individual shareholders, a Section 962 election can sometimes be relevant when looking at how foreign corporation tax interacts with U.S. taxation.

Does GILTI apply to every foreign business?

No.

The legal structure of your business matters.

The CFC and GILTI/NCTI rules concern foreign entities that are treated as corporations for U.S. tax purposes. Not every business outside the United States is treated in the same way.

Importantly, the U.S. classification of a business does not always match its classification in the country where it was established.

This is why it is important for Americans abroad to consider the U.S. tax consequences when setting up or restructuring a foreign business.

GILTI, CFCs and your other U.S. tax obligations

GILTI/NCTI is only one part of the U.S. international tax system.

Depending on your circumstances, owning a company or investments abroad can also involve Form 5471, Subpart F income and the Foreign Tax Credit.

Your foreign financial accounts can create separate reporting obligations. If the total value of your foreign accounts exceeds the applicable threshold, you may need to make an FBAR filing.

Americans who invest outside the United States should also be careful with non-U.S. mutual funds, ETFs and certain other foreign investments. These can fall under the PFIC rules and create additional U.S. tax and reporting obligations.

It is therefore better to look at your complete U.S. tax situation rather than considering GILTI in isolation.

What if you have never reported your foreign company?

Some Americans living abroad only discover their CFC and Form 5471 obligations years after starting their company.

If this applies to you, it is important not to panic. First determine which U.S. tax returns and information forms should have been filed and whether previous returns need to be corrected.

Depending on your circumstances, there may be a procedure available to bring your U.S. tax affairs into compliance.

For Americans abroad who did not file because they were unaware of their U.S. tax obligations, the Streamlined Procedure may be relevant. This procedure is intended for qualifying taxpayers whose previous failure to comply was non-willful.

However, a missed Form 5471 or GILTI filing does not automatically mean that the Streamlined Procedure is the appropriate solution. Your filing history and individual circumstances need to be considered.

Own a foreign company as an American abroad?

If you are a U.S. citizen or Green Card holder and own a company outside the United States, it is important to understand how your company is treated for U.S. tax purposes.

Americans Overseas can help you clarify your situation and determine which U.S. tax issues may require attention. Where necessary, we can connect you with a U.S. tax advisor, CPA or other specialist from our network.

This may include questions about:

• whether your foreign company is a CFC;
• Form 5471;
• GILTI and Net CFC Tested Income;
• a possible Section 962 election;
• the Foreign Tax Credit; and
• previous U.S. tax filings that may need to be brought into compliance.

Not sure what the U.S. rules mean for your foreign company? Contact Americans Overseas for a free, no-obligation consultation.