Key Takeaways:
- GILTI and FDII are rebranded as NCTI and FDDEI, with new rates, rules, and allocation limits starting in 2026.
- BEAT increases to 10.5% and interacts with domestic provisions, altering outcomes for many international structures.
- Strategic modeling and cross-border tax alignment are essential to mitigate risk.
—
Multinational companies face a new international tax landscape beginning in 2026, driven by significant reforms under the One Big Beautiful Bill Act (OBBBA). These changes affect global intangible income, foreign-derived deductions, and base erosion rules — requiring fresh planning strategies for tax professionals, CFOs, and international leadership teams.
NCTI: Replacing GILTI
The global intangible low-taxed income (GILTI) regime has been renamed net CFC tested income (NCTI), with an increased effective tax rate of 12.6% (up from 10.5%). Foreign tax credits now face a reduced 10% haircut, and the QBAI reduction is eliminated, making more income taxable. Additionally, deduction allocation is now limited to directly allocable expenses (excluding interest and research costs). These changes may lead to increased U.S. inclusions and narrower planning flexibility.
FDDEI: Evolving from FDII
Meanwhile, foreign-derived intangible income (FDII) becomes foreign-derived deduction-eligible income (FDDEI), taxed at 14%, and excludes gain from certain depreciable assets post-June 2025. Like NCTI, it no longer permits qualified business asset investment (QBAI) adjustments and tightens expense allocation rules. These updates could unlock new tax planning advantages for capital-intensive companies — but are only available to C corporations.
BEAT: Increased Rate and Interactions
The base erosion and anti-abuse tax (BEAT) rate rises slightly to 10.5%, but its real impact may be felt through interaction with updated domestic rules, including 100% bonus depreciation and renewed R&E expensing.
Why Timing Matters
These international and domestic changes work together to reshape cross-border tax strategy. Timing matters: many provisions start in 2026, and decisions made early will determine how taxpayers fare under the new rules. Modeling income acceleration, deferral, or restructuring now is key to managing risk and maximizing opportunity.
Strategic International Tax Planning Starts Now
MGO supports multinational businesses in navigating cross-border tax shifts with confidence. Our international tax professionals guide clients through the implications of the NCTI, FDDEI, and BEAT reforms, helping model different outcomes and adjust structures for maximum efficiency.
We bring practical, forward-looking advice to entity restructuring, foreign tax credit planning, and transfer pricing alignment — helping your organization position itself for 2026 rules and beyond. Reach out to our team today to explore how these changes affect your company and take proactive steps before year-end.