What the new 2026 US tax rule (NCTI) means if you own a company abroad.

If you own a company abroad and your reaction to this year’s tax headlines was some version of “GILTI is gone, what is NCTI, does it hit me, and how do I plan?”, this guide is for you. Plenty has been written for multinationals; almost nothing explains what the change means for a founder who owns one operating company overseas. This is that explainer, including why the viral claim that NCTI is just a rate increase tied to the OECD global tax deal gets the law wrong.

What is NCTI, in plain English?

NCTI stands for net CFC tested income. It is the new name, and the rebuilt mechanics, of the regime formerly called GILTI (global intangible low-taxed income). The change was enacted in Public Law 119-21 of July 2025 (the budget law known as the One Big Beautiful Bill Act) and applies to tax years beginning after December 31, 2025. For a calendar-year company, NCTI governs 2026, the return you will file in 2027. Your 2025 return still follows the old GILTI rules.

The core mechanic carries over from GILTI. If you are a “US shareholder” of a “controlled foreign corporation” (a CFC, both terms defined below), section 951A requires you to include your share of the company’s net earnings, its “tested income”, in your own US taxable income every year, even if the company never distributes a cent.

What changed is how much gets included. Under GILTI, you first subtracted a deemed 10% return on the company’s tangible business assets (machinery, buildings, equipment, “QBAI”). NCTI repeals that subtraction entirely. The inclusion is now, in essence, the company’s full net tested income. Congress dropped the word “intangible” from the name because, with the tangible-asset carve-out gone, the tax no longer even pretends to target intangible income: it is an annual US tax on a CFC’s active earnings.

Who NCTI actually hits: CFC owners, not “everyone offshore”

Two questions decide whether NCTI applies to you, and both must be yes.

First, is your company a controlled foreign corporation? A CFC is a foreign corporation in which US shareholders together own more than 50% of the stock, by vote or value.

Second, are you a US shareholder of it? A US shareholder is a US person, citizen, green-card holder or US tax resident, who owns 10% or more of the vote or value. Crucially, ownership counts shares held indirectly through entities and shares attributed to you from related persons. “I personally hold under 50%” is not the test and not a safe harbor, the attribution traps are covered in our CFC explainer.

So NCTI does not hit “everyone offshore.” A non-US founder with no US owners is untouched. A US person holding a 4% stake in a foreign startup is untouched. A foreign company majority-owned by non-US persons is generally outside the regime. But the classic profile, a US citizen or green-card holder who, alone or with other US persons, owns most of a foreign operating company, whether a Panama corporation, a Dubai free-zone entity or a Hong Kong Ltd, is squarely inside it, exactly as under GILTI.

The GILTI replacement in 2026: what actually changed in practice

The most viral explanation on Reddit, a 300-plus-upvote comment, described the change as the US raising its GILTI rate to line up with the OECD global minimum tax deal. That framing is wrong, and planning from it will produce wrong numbers. Three things changed, and they pull in different directions.

• The base got broader. The deemed 10% return on tangible assets (QBAI) is repealed. A company with real equipment, premises or inventory abroad now sees a larger inclusion than it did under GILTI.
• The deduction got smaller. The section 250 deduction against this income fell from 50% to 40%. For C corporations, and individuals who make the section 962 election, below, the effective federal rate on NCTI is 21% × (1 − 40%) = 12.6%, up from 10.5% under GILTI.
• The foreign tax credit got better. Corporations and 962 electors may now credit 90% of the foreign taxes the CFC paid on that income, up from 80%. As a rule of thumb, a foreign corporate tax rate of roughly 14% or more now generally eliminates the residual US tax (12.6% ÷ 90% ≈ 14%).

Notice what that combination does. If your company already pays meaningful foreign corporate tax, the better credit can mean you owe less than under GILTI. If your company pays little or no foreign tax, say, a Panama corporation earning foreign-source income that Panama does not tax, the broader base and smaller deduction mean you will generally owe more. That is nearly the opposite of “a rate bump for everyone offshore.”

The planning levers: the section 962 election, foreign tax credits and structure

Individuals default to the worst version of this regime. An individual US shareholder picks up the NCTI inclusion at ordinary income rates, up to 37%, and, without an election, gets neither the 40% section 250 deduction nor the corporate deemed-paid foreign tax credit. A persistent online myth says individuals can simply offset the inclusion with the company’s foreign taxes; without a section 962 election, they generally cannot.

The section 962 election is the main lever. It lets an individual elect to be taxed on the inclusion as if it were received by a US corporation: the 21% corporate rate, the 40% deduction and the 90% deemed-paid credit all become available.

A worked example, clearly hypothetical. Suppose a US founder wholly owns a CFC that earns $400,000 of tested income in 2026 and pays no foreign corporate tax. Without an election, the founder includes $400,000 at ordinary rates, at the top bracket, roughly $148,000 of federal tax on that income. With a section 962 election, the tax is 21% of $240,000 ($400,000 less the 40% deduction): $50,400. The trade-off is a second layer of tax when the company actually distributes those earnings, to the extent the distribution exceeds the tax already paid. Whether 962 wins turns on your bracket, the foreign tax rate and your distribution plans, the full decision framework is in our section 962 guide.

Beyond 962, the levers worth modeling rather than guessing at: paying yourself compensation (deductible to the CFC, taxable to you as wages, it moves income out of the NCTI base but not out of tax); entity-classification elections that change whether the regime applies at all; and, for some profiles, a US corporate holding layer. Each has costs as well as benefits, and each works far better before year-end than after it.

What to do before your 2026 return

• Confirm what you own, with attribution. Establish whether each foreign company is a CFC for 2026 and whether you are a 10% US shareholder, counting indirect and attributed ownership.
• Re-run the numbers under NCTI, do not reuse 2025 GILTI workpapers. The QBAI return is gone, the deduction is 40% and the credit is 90%; each change moves your result.
• Model the section 962 election both ways before filing, not after.
• Expect the same paperwork. The inclusion is still computed on Form 8992, alongside the Form 5471 information return for the CFC itself. (If instead you are a non-US owner of a US LLC, your filing question is Form 5472, a different regime entirely.)
• Distrust pre-2026 content. Any article describing a 10.5% rate, a QBAI return or an 80% credit is describing law that no longer exists for 2026.
• If your company sits in a zero-tax or territorial jurisdiction, assume your US bill went up until a calculation shows otherwise.

If you own a company abroad, a cross-border review will model your 2026 NCTI position, with and without a 962 election, while there is still time to act on the answer.

FAQ

What is NCTI?

NCTI (net CFC tested income) is the US tax regime that replaced GILTI for tax years beginning after December 31, 2025. It requires US shareholders of controlled foreign corporations to include the company’s net tested income in their US taxable income each year, even with no distributions.

Is NCTI just GILTI with a higher rate?

No. The tangible-asset (QBAI) carve-out was repealed, the section 250 deduction fell from 50% to 40%, and the deemed-paid foreign tax credit rose from 80% to 90%. Owners paying little foreign tax generally owe more; owners paying substantial foreign tax may owe less.

Do I still file Form 8992?

Yes. The NCTI inclusion is computed on Form 8992, and Form 5471 is still required for the CFC itself.

I’m not a US person, does NCTI affect my offshore company?

Not directly. NCTI applies only to US shareholders of CFCs. But adding a US co-founder or US investors can tip a company into CFC status, so cap-table changes deserve a check.

Does NCTI apply even if I leave all profits in the company?

Yes. Like GILTI before it, NCTI is an anti-deferral regime: it taxes the US shareholder when the CFC earns the income, not when the money is paid out.

This article is general information, not tax or legal advice. Your facts decide your outcome, that’s what a review is for.