Shareholders in a Foreign Corporation; Did You Pay Your Transition Tax?
As a U.S. shareholder in a foreign corporation you are potentially liable for the transition tax that was added by Tax Reform. The transition tax can apply based on your direct or indirect ownership of stock in a foreign corporation.
This tax applies to all shareholders including individuals.
Mandatory One-Time Tax on Accumulated Offshore Earnings
The transition tax is a mandatory one-time tax on the untaxed post-1986 foreign earnings of certain foreign corporations of U.S. shareholders. The tax is determined by reference to the foreign corporation’s post-1986 foreign earnings for its last tax year, beginning before January 1, 2018.
Due Dates. Accordingly, for calendar year foreign corporations with tax years ending on December 31, 2017, the tax was due and payable with the taxpayer’s 2017 return. For fiscal year foreign corporations, the last tax year beginning before January 1, 2018 (e.g., December 1, 2017) will end during or with a taxpayer’s 2018 tax year and the return is due with the shareholder’s 2018 return.
There is an election to pay the tax in eight annual installments.