Tax Cuts and Jobs Act: IRC Section 965 "Repatriation Tax" and the new GILTI applies to Americans who reside in Canada and own Canadian Corporations

Tax Cuts and Jobs Act: IRC Section 965 "Repatriation Tax"

Newly enacted section 965 imposes a "Repatriation Tax" on certain previously untaxed earnings of specified foreign corporations (SFCs) of U.S. shareholders by deeming those earnings to be repatriated.
  • Foreign earnings held in the form of cash and cash equivalents: taxed at a 15.5% rate;
  • Remaining earnings: taxed at an 8% rate.
The repatriation tax generally may be paid in installments over an 8 year period.

Controlled Foreign Corporations (CFC's) subject to the "Repatriation Tax"

Under the "Repatriation tax" rules, a US shareholder of an SFC must include in its/his/her income the pro rata share of the accumulated post-1986 deferred foreign income of the corporation for the last taxable year beginning before Jan. 1, 2018.

Guidance provided by the IRS (Notice 2018-07) and the Tax and Jobs Cuts Act indicates that the repatriation tax on deferred foreign income is applicable to all US shareholders (including individuals, LLC's, partnerships and corporations) who own a 10% or more voting interest in SFC's. SFC's include controlled foreign corporations (CFCs) and 10/50 companies, but not passive foreign investment companies (PFIC's) that are not CFC's.


Controlled Foreign Corporations (CFC's) subject to the "GILTI"

The “global intangible low-taxed income” (GILTI) imposes a tax on the excess income of CFC's over a 10% rate of routine return on tangible business assets. This restricts the benefits of the tax deferral that could exist in CFC's.

Americans residing on Canada who own Canadian Corporations

The "Repatriation Tax" and GILTI apllies to Americans residing in Canada who own Canadian corporations. These individuals must carefully consider the implications of the "Repatriation Tax". Our Canada-US Tax Team has established a "Repatriation Tax Task Force', which has identified a number of methods of reducing the "Repatriation Tax" amounts payable.

For further details please contact Jonathan Levy CPA, CA at

This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

Tax Cuts and Jobs Act

Tax Cuts and Jobs Act: Section IRC 965 "Repatriation Tax" and GILTI applies to Americans who reside in Canada and own Canadian Corporations.

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