International Expansion Tax: GILTI, Subpart F, and Transfer Pricing for Your First Foreign Subsidiary
Written by Aparna Devalla, CPA
Curated by Rubric Financial
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When This Becomes Relevant
- Most US-incorporated startups expand internationally for sales reasons (UK + EU customers want a UK entity), engineering reasons (hiring teams in Ottawa, Bangalore, Singapore), or tax/regulatory reasons.
- Setting up a foreign subsidiary creates a Controlled Foreign Corporation (CFC) from the IRS perspective if the US parent owns >50% of the foreign entity (which it always does).
- CFC status triggers: GILTI tax, Subpart F income inclusions, transfer pricing rules, FBAR + Form 5471 reporting, foreign tax credit complexity.
- Realistic threshold: this becomes a 'thing' for startups at Series B+ with >$20M revenue, OR earlier if the foreign sub generates meaningful income.
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