Do you have shares in a Controlled Foreign Corporation? Is one of the Shareholders in your CFC a U.S. Corporation? If so, did you pay your repatriation tax? It was due on your 2017 tax return!
In order to have a reportable interest in a CFC, you must own 10% or more of the vote or value of the corporation’s stock. With the Tax Cuts and Jobs act, the government put in place a one-time repatriation tax on all offshore assets of foreign subsidiaries of U.S. companies. You probably heard about the repatriation in relation to Apple and Goldman Sachs, where they were discussing the huge tax payments they were going to have to pay on the repatriated cash and illiquid assets. It’s because of these big business stories that many people who owned shares in CFC’s were unaware that they may be liable for taxes under the same repatriation rules.
The tax, which is 15.5% for cash and a flat 8% for illiquid assets, is aimed at post-1986 earnings of deferred foreign income corporations and controlled foreign corporations with at least one shareholder that is a U.S. corporation. What many didn’t know was that any U.S. shareholder who has 10% or more of the DFIC or CFC is liable for their portion of the deferred income earned after 1986.
The worst part is, these taxes were due April 15. If you have already filed your 2017 taxes and are worried that you may have been subject to the repatriation tax, all is not lost. Reach out to your local tax expert, figure out your liability, file an amended return if necessary and move on.
NOTE: If you already report income under IRC §965, there may be other issues concerning your liability, contact a professional soon to see how this will affect you.