The United States has replaced the Global Intangible Low‑Taxed Income (GILTI) regime with a new Net CFC Tested Income (NCTI) framework for tax years beginning after 31 December 2025, bringing material changes to how US citizens and Green Card holders who own or control companies overseas will calculate and credit foreign income for US tax purposes, according to advisory firm Expat Tax Online.
Immediate changes and timing
The new rules come into effect for the 2026 US tax year. For calendar‑year taxpayers this creates an important timing distinction: tax returns for the 2025 year, which are typically filed in 2026, generally remain subject to the old GILTI rules, while the NCTI regime generally applies to income earned in 2026 and later.
Expat Tax Online said the shift from GILTI to NCTI is not merely a renaming. Darryl Albuquerque, Senior Tax Manager at the firm, urged affected owners to review their structures ahead of the first NCTI filing season, warning that the new calculation could materially alter liability.
“The shift from GILTI to NCTI is more than a name change. US owners of foreign companies should carefully review how the new calculation affects their structure before the first NCTI filing season,”
Key technical changes
Expat Tax Online highlighted several specific adjustments under the NCTI regime that will influence outcomes for controlled foreign companies (CFCs):
- Elimination of QBAI: The qualified business asset investment (QBAI) tangible asset return is removed, so a tangible asset‑based reduction that previously lowered the amount subject to Section 951A will no longer apply.
- Reduced Section 250 deduction: The Section 250 deduction—used to lower taxable income attributable to certain foreign earnings—generally falls from 50% under the prior regime to 40% under NCTI.
- Improved deemed‑paid foreign tax credit: The percentage used for deemed‑paid foreign tax credits generally increases from 80% to 90%, which may improve credit relief for some taxpayers.
Who may pay more — and who may not?
The advisory firm cautioned that these changes will not uniformly increase US tax bills for all affected taxpayers. The net effect for any owner or shareholder will depend on multiple factors:
- the foreign jurisdiction’s tax rate;
- the amount and character of the foreign company’s income;
- the ownership and entity structure of the foreign business;
- whether a Section 962 election is made, which can alter the tax treatment for individual US shareholders.
Practical implications and next steps
For Americans living in South Africa and elsewhere, the practical effect is that tax planning and compliance need to be revisited. Firms such as Expat Tax Online, which the announcement describes as serving clients in more than 150 countries and holding over 10,000 positive reviews, emphasised the importance of a careful review before the first NCTI filing season.
Taxpayers with interests in foreign companies should consider:
- running comparative calculations under the old and new regimes to identify potential increases or decreases in overall liability;
- assessing whether a Section 962 election is appropriate for individual US shareholders;
- consulting with a cross‑border tax adviser familiar with CFC rules and foreign tax credit mechanics.
| Element | GILTI | NCTI |
|---|---|---|
| Tangible asset (QBAI) | Reduced taxable base | Eliminated |
| Section 250 deduction | 50% | 40% |
| Deemed‑paid foreign tax credit | 80% | 90% |
While the announcement and commentary come from a private advisory firm, the changes reflect a significant rewrite of the international minimum tax architecture as it applies to US persons with foreign businesses. For affected taxpayers in South Africa—where a number of US citizens and Green Card holders run businesses, hold investments, or work for multinational groups—this will require updated modelling and, potentially, structural changes to reduce unintended tax exposure.
Advisers and taxpayers should also bear in mind administrative timing: because the rules apply by tax year rather than by filing date, individuals reconciling 2025 activity will likely continue under GILTI, while 2026 activity will fall under NCTI, complicating transitional planning for those with calendar‑year companies or mixed‑year reporting.
Contact details and further commercial information were provided in the original announcement by Expat Tax Online.
