Transitioning From GILTI to FDII? Foreign Branch Income Issues

8 Pages Posted: 1 Aug 2019

See all articles by Jeffery M. Kadet

Jeffery M. Kadet

University of Washington - School of Law

David Koontz


Date Written: July 1, 2019


In this article, Kadet and Koontz discuss certain issues that must be considered when a multinational analyzes whether it should transition certain operations conducted within a CFC (along with the associated income) into a domestic group member so as to achieve an FDII-qualifying structure. In doing so, there will likely be a need to move some key income-earning operations and functions to the United States to assure that the FDII foreign branch rule is not violated.

Where a group has previously implemented a profit shifting structure that obfuscates where income is generated, there may be few or no operations or functions that require relocation to the United States. In such a case, the transition may highlight a tax exposure to unreported effectively connected income in pretransition years. The article notes Qualcomm's disclosed transition as a possible example of this.

Keywords: international taxation, FDII, GILTI, Foreign-Derived Intangible Income, Global Low-Taxed Income, ECI, Effectively connected income

JEL Classification: H21, H25, K34, E62

Suggested Citation

Kadet, Jeffery M. and Koontz, David, Transitioning From GILTI to FDII? Foreign Branch Income Issues (July 1, 2019). Available at SSRN: or

Jeffery M. Kadet (Contact Author)

University of Washington - School of Law ( email )

William H. Gates Hall
Box 353020
Seattle, WA 98105-3020
United States

David Koontz

Independent ( email )

No Address Available

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