GILTI or maybe not……..

By: GIFA , Friday, November 30, 2018

The United States has recently imposed the Global Intangible Low-Taxed Income tax (‘GILTI Tax”) on Controlled Foreign Corporations (‘CFCs’), i.e. non-US companies where a US company, partnership or person owns more than 50 percent of that non-US company. The GILTI Tax is primarily aimed at the likes of Google, Apple, Amazon etc. to try and prevent them from avoiding US tax.

Delaware Limited Partnerships are popular, hitherto tax-neutral, vehicles that enable US investors to invest in Private Equity (‘PE’) either directly or as feeder funds or as parallel investment vehicles alongside other funds. Julian Carey, Head of Client Services at Vistra Guernsey and member of the GIFA Marketing Committee recently pointed out that an unintended consequence of the GILTI Tax is that a dry tax (i.e. on undistributed income) could be levied on potentially all PE investments held by such Delaware entities into companies that are classified as CFCs.

Guernsey is able to offer a potential solution to this predicament as, if US investors were to invest in a Guernsey vehicle, which then held foreign PE investments, the effect of the GILTI Tax might be eliminated or mitigated as the foreign company would not be held by the US company and therefore not be classified as a CFC in the US.

Paul Smith, Chairman of GIFA said that, “This is yet another example of how Guernsey, as a long established, well regulated and tax neutral jurisdiction, is able to provide solutions that facilitate global investment.”



Of course, this article does not constitute tax advice and appropriate advice should be sought from a professional tax adviser in relation to the above.

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