KPMG report: Foreign tax credits for multinationals
"Foreign Tax Credits for Multinationals Involve a Winding Path"
"Foreign Tax Credits for Multinationals Involve a Winding Path"
Long-awaited guidance from the IRS and Treasury Department provides some comfort that U.S. businesses will be eligible for a foreign tax credit for qualified domestic minimum top-up taxes (QDMTTs) imposed under the new 15% global minimum tax deal known as Pillar Two. Read TaxNewsFlash
The guidance, which outlines how the foreign tax credit and the global minimum tax will work together, also provides that a tax imposed on majority-owned income of a U.S. multinational under the income inclusion rule (IIR) generally will not be creditable. To the extent that QDMTTs predominate over the IIR, its noncreditability will have limited significance for U.S. multinationals depending on whether they have capacity to claim foreign tax credits for imposed QDMTTs.
U.S. multinationals may not have sufficient limitation to credit QDMTTs that are imposed on global intangible low-taxed income (GILTI), or on branch basket income, so they may need to focus on assessing capacity in both baskets as part of the next wave of preparation for Pillar Two.
Read a December 2023 report* [PDF 221 KB] prepared by KPMG LLP tax professionals: Foreign Tax Credits for Multinationals Involve a Winding Path
* This article originally appeared as a Bloomberg Tax Insight and is provided with permission. Published December 21, 2023. Copyright 2023 Bloomberg Industry Group 800-372-1033.
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