GILTI vs FAPI
Two regimes that tax a foreign company's profits to its shareholder before distribution — one American and broad, one Canadian and aimed at passive income.
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Two regimes that tax a foreign company's profits to its shareholder before distribution — one American and broad, one Canadian and aimed at passive income.
Side by side
| GILTI | FAPI | |
|---|---|---|
| Country | United States | Canada |
| Income caught | Active earnings above a routine return on tangible assets | Passive income of a controlled foreign affiliate |
| Corporate relief | Deductions and credits soften it for corporations | Deduction for underlying foreign tax |
| Individual shareholder | The corporate reliefs are not automatically available | Attribution applies with its own relief mechanics |
| Overlap | A shareholder inside both systems can face both | The interaction has to be computed, not assumed |
Which one applies to you
Identify which system claims the shareholder. Where both do — a US citizen resident in Canada owning a third-country company — the two regimes and their credits have to be computed together, and that is the whole engagement.
How to get this moving
The quote comes before the work, in writing.
Reviewed against current guidance for the 2025 and 2026 filing seasons by Udit Gupta, Cross-Border Tax Expert, Legal Quotient Consultants. General guidance only. Your own facts decide the answer, so bring them to a call before relying on this.
International tax accountant — what this page covers
Read this page for international tax accountant. It works through GILTI vs FAPI from the beginning — whether it applies to you at all, what has to be filed if it does, and what the engagement costs, priced up front.
Why choose Legal Quotient for GILTI vs fapi
18,000+ clients served
Individuals, expats and corporations across India, the USA, Canada and the UAE have filed with us — 15+ years of cross-border work.
Residence is tested, not assumed
Where you are resident for treaty purposes is a question with a method. We work through it and write down the answer, with the facts it rests on.
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Every page on this site and every file we deliver says which practitioner reviewed it — a person, not a team inbox.
The quote comes from your documents
Nothing is priced from a phone call. We read what you have first, then the fee is set — so the scope and the number are agreed on the same evidence.
What these engagements turn on
US citizen in Canada holding a third country company
The shareholder was a US citizen who had been resident in Canada for some years, holding all the shares of an operating company incorporated elsewhere. Two returns had been prepared by different advisers in different countries, each ignoring the other. We rebuilt the company's results once, from its own accounts, and ran both attribution regimes off that single set of figures. The engagement produced a reconciled pair of returns, a credit position the two computations agreed on, and a written note recording how each item of income had been characterised under each system, so the following year could be prepared on the same basis.
Active trading profits characterised separately under each regime
The company sold goods and also held surplus cash and a portfolio. The previous filing had applied one label to the whole year's profit. We separated the income by stream and tested each against the Canadian passive income definition and the American measure that looks past a routine return on tangible assets. Most of the trading profit fell outside the Canadian attribution rule while a portion still produced an American inclusion. The engagement produced a characterisation schedule tied to the company's own ledger, which is now the working paper both returns are built from.
Individual shareholder position compared with holding through a corporation
The client held the foreign shares personally and had been told the American reliefs would reduce the inclusion. They do not arrive automatically in individual hands. We modelled the position as it stood and again as it would look with the shares held through a corporation, carrying the Canadian attribution consequences through both versions rather than examining one country at a time. The engagement produced a written comparison of the two structures, the cost of moving between them, and a recommendation the client could take to their own lawyer before anything was reorganised.
Prior years reopened after an attribution regime was missed entirely
A new client's foreign company had never been reported on the Canadian side at all, and the American side had been filed as though no inclusion arose. We established when the company first came within each regime, rebuilt the intervening years, and prepared the corrective filings in the order each authority expects. The engagement produced a complete set of amended and late filings with a covering explanation of how the omission arose, and a schedule of the positions carried forward that the next year's return could be built on.
Distribution planned around an inclusion already taxed
The profit had already been attributed to the shareholder in both countries, and the client wanted the cash. Taking it out without reference to what had been taxed risks a second charge on the same earnings and a withholding cost on top. We mapped which pools of the company's retained profit had already been taxed, in which country, in which year and in whose hands, then set out an order of distributions that kept the two systems aligned. The engagement produced a distribution schedule and the supporting computation each country's return needs to reference.
Second opinion on whether either regime applied at all
The client had been advised to restructure urgently. Before any of that, the question was whether the ownership and control tests were met in the first place, on either side. We examined the share register, the voting arrangements and the residence position of each holder against both countries' definitions. On the facts as they stood, one regime did not reach the company and the other did so only on part of its income. The engagement produced a written opinion on that question and a short list of the facts which, if they changed, would alter the answer.
A Foreign Subsidiary That Nobody Had Been Reporting
Owning a company abroad triggers an information return separate from the corporate return, with its own penalty. The work is the surplus and income computations behind it, which also determine how a future dividend is taxed on the way home.
Read how this one runsA US Citizen Settled in India, Filing on Both Sides
Residence in India and citizenship in the United States produce two annual returns for one income. The order decides the credit, and the Indian financial year and the US calendar year have to be reconciled before either is prepared.
Read how this one runsAll case studies — every published engagement in one place.
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