From the 1040 Abroad, there is a discussion on managing a Controlled Foreign Corporation (CFC) as a US Citizen,
One-time Mandatory Repatriation of Funds. Current undistributed retained earnings are taxed at 15.5% if held in liquid assets, and 8% for those held in illiquid assets. Any money you have retained in a foreign company will be subject to this one-time tax. But the good news is you can pay it over an 8 year period.
You can also look at the Treasury Announcement,
The United States Department of the Treasury today announced the release of proposed regulations relating to the section 965 transition tax, on U.S. multinational companies’ overseas income, which is being repatriated under section 965 of the Tax Cuts and Jobs Act.
That Section 965 Communication from the IRS states,
What is section 965?
Section 965 requires United States shareholders (as defined under section 951(b)) to pay a transition tax on the untaxed foreign earnings of certain specified foreign corporations as if those earnings had been repatriated to the United States.
Tax Code
The full tax code 26 U.S. Code § 965. Treatment of deferred foreign income upon transition to participation exemption system of taxation gets pretty complicated.
IRS Publication 5292 (2017), How to Calculate Section 965 Amounts and Elections Available to Taxpayers has a walkthrough for filling out Section 965 Forms.
Payment Option
The 8 year payment option for the tax is per Instructions for Form 965-A,
The general installment payment schedule for a net 965 tax liability subject to an election to pay in installments is:
- 8% of the net 965 tax liability payable in year 1 (the year of the section 965(a) inclusion or triggering event with respect to a deferred S corporation-related net 965 tax liability)
- 8% of the net 965 tax liability payable in year 2
- 8% of the net 965 tax liability payable in year 3
- 8% of the net 965 tax liability payable in year 4
- 8% of the net 965 tax liability payable in year 5
- 15% of the net 965 tax liability payable in year 6
- 20% of the net 965 tax liability payable in year 7
- 25% of the net 965 tax liability payable in year 8