Tax
Subpart F Income
Quick definition
Foreign subsidiary income types automatically taxed to US parent regardless of repatriation.
Subpart F is a different inclusion rule from GILTI — it applies to specific types of foreign subsidiary income that are 'tainted' for US tax purposes. Includes: passive income (interest, dividends, royalties), related-party transactions, certain insurance income, foreign personal holding company income. Even if income isn't repatriated to the US, Subpart F categories get taxed to the US parent currently. Operating subs with real foreign employees + economic substance can usually avoid Subpart F triggers. Heavily documented in IRS audit when foreign subs do business with US parent.
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 Subpart F Income?
- Subpart F is a different inclusion rule from GILTI — it applies to specific types of foreign subsidiary income that are 'tainted' for US tax purposes. Includes: passive income (interest, dividends, royalties), related-party transactions, certain insurance income, foreign personal holding company income. Even if income isn't repatriated to the US, Subpart F categories get taxed to the US parent currently. Operating subs with real foreign employees + economic substance can usually avoid Subpart F triggers. Heavily documented in IRS audit when foreign subs do business with US parent.
- Why is Subpart F Income important for startups?
- Subpart F 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 Subpart F Income belong to?
- Subpart F 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 Subpart F Income?
- Beyond this definition, see the related tax terms below, or explore StartupCFO's insights and tools that put Subpart F Income in context. For specific situations, talk to a fractional CFO who can walk through your numbers.
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