Tax
GILTI (Global Intangible Low-Taxed Income)
Quick definition
US tax on foreign subsidiary income above a 10% return on tangible assets.
GILTI imposes a US tax on a Controlled Foreign Corporation's (CFC) income, above a 10% return on tangible foreign assets. Effective US tax rate is 10.5% (post-TCJA's 50% deduction under §250). For most software companies with no foreign tangible assets, this means MOST foreign income is taxed in the US at 10.5%, plus local foreign tax. Combined effective rate often 15-25%. Triggers when US parent owns >50% of foreign sub. Requires Form 5471 filing annually.
Related tax terms
R&D Tax Credit
Federal credit for qualified research expenses, usable against payroll tax by startups.
Delaware Franchise Tax
Annual tax for Delaware corporations, often quoted wildly too high if calculated incorrectly.
Nexus (Sales Tax)
The connection with a state that triggers a tax-collection obligation.
QSBS (Qualified Small Business Stock)
Tax exemption for gains on qualifying startup stock held 5+ years.
Frequently asked questions
- What is GILTI (Global Intangible Low-Taxed Income)?
- GILTI imposes a US tax on a Controlled Foreign Corporation's (CFC) income, above a 10% return on tangible foreign assets. Effective US tax rate is 10.5% (post-TCJA's 50% deduction under §250). For most software companies with no foreign tangible assets, this means MOST foreign income is taxed in the US at 10.5%, plus local foreign tax. Combined effective rate often 15-25%. Triggers when US parent owns >50% of foreign sub. Requires Form 5471 filing annually.
- Why is GILTI (Global Intangible Low-Taxed Income) important for startups?
- GILTI (Global Intangible Low-Taxed Income) is a tax concept that matters for startup founders because it directly affects fundraising readiness, financial decision-making, or operational discipline at the stage where mistakes are expensive to undo. Founders who understand it have a meaningfully easier time in diligence, board meetings, and investor conversations.
- What category does GILTI (Global Intangible Low-Taxed Income) belong to?
- GILTI (Global Intangible Low-Taxed Income) is a Tax term in the StartupCFO finance glossary — alongside other tax concepts that founders, CFOs, and accountants use in daily startup operations and reporting.
- Where can I learn more about GILTI (Global Intangible Low-Taxed Income)?
- Beyond this definition, see the related tax terms below, or explore StartupCFO's insights and tools that put GILTI (Global Intangible Low-Taxed Income) in context. For specific situations, talk to a fractional CFO who can walk through your numbers.
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