New U.S. International Tax Rules: What Multinational Businesses Need to Know for 2026

On July 4, 2025, sweeping international tax reforms were signed into law under the One Big Beautiful Bill Act. These changes—some effective immediately, most beginning in 2026—reshape how foreign businesses and U.S.-based multinationals calculate taxes, claim credits, and structure cross-border operations.

For companies with global footprints, the time to act is now. At The RAD Firm, we are already guiding clients through this transition, and we’re uniquely positioned to help both inbound and outbound businesses navigate these complex new rules.

1. GILTI Becomes NCTI — Higher Rates, Broader Scope

The Global Intangible Low-Taxed Income (GILTI) rules are being overhauled:

• Renamed: Starting in 2026, GILTI is now Net CFC Tested Income (NCTI).

• No More Carve-Out: The 10% tangible asset return deduction (NDTIR) is gone.

• Wider Net: New rules capture “foreign controlled U.S. shareholders” and “foreign controlled foreign corporations.”

• Rate Changes: Effective rate set permanently at 12.6% (up from 10.5% today, slightly below the previously scheduled 13.125%).

• Credit Benefits: More favorable foreign tax credit (FTC) rules—90% creditable vs. 80% today—mean no residual U.S. tax if foreign effective rates are 14% or higher.

What this means: Foreign-owned U.S. businesses and U.S. multinationals will see higher tax liabilities on foreign income, but also more usable credits—requiring strategic restructuring to optimize results.

2. FDII Becomes FDDEI — Simplified but Less Generous

The Foreign-Derived Intangible Income (FDII) incentive—benefiting exporters of goods, services, and IP—is being streamlined:

• Renamed: Now Foreign-Derived Deduction Eligible Income (FDDEI).

• Rate Changes: Effective rate permanently set at 14% (vs. 13.125% today, 16.4% previously scheduled).

• Simplified Formula: Eliminates complex asset-based and ratio tests, but expands categories of excluded income.

What this means: Export-focused companies will still benefit, but eligibility is narrower. Detailed review of revenue streams is critical.

3. BEAT Changes — Stable but Lower Than Expected

The Base Erosion and Anti-Abuse Tax (BEAT), which targets large corporations making significant payments to foreign affiliates, sees two major changes:

• Rate: Permanently set at 10.5% from 2026 onward (avoiding a planned jump to 12.5%).

• Credits: Retains current rules for “BEAT-favored” credits—good news for taxpayers relying on renewable energy or R&D incentives.

4. Other International Provisions

• Permanent “Look-Through” Rule (§954(c)(6)): Preserves the ability to move active business income between foreign subsidiaries without triggering immediate U.S. tax.

• Mid-Year CFC Ownership Rule: Shareholders must report Subpart F/NCTI income for any period of CFC status during the year.

• Restored §958(b)(4): Prevents certain “downward attribution” that could unexpectedly classify companies as CFCs.

• Inventory FTC Sourcing Rule: New foreign-source treatment for certain inventory sales tied to overseas offices (50% limit).

5. Why This Matters Now

Most provisions start January 1, 2026, but some apply to transactions and distributions occurring in 2025. Businesses that wait until 2026 risk losing tax planning opportunities and falling behind on compliance requirements.

6. How The RAD Firm Can Help

The RAD Firm, LLC works with foreign-owned U.S. businesses, U.S. multinationals, and tax advisors worldwide to translate complex tax laws into practical strategies. Through our strategic alliances and our own industry leading expertise, we are able to:

• Coordinate cross-border tax planning.

• Structure business operations to optimize tax efficiency under the new rules.

• Guide compliance to avoid penalties and preserve incentives.

Whether you’re in São Paulo, Atlanta, or anywhere in between, our cross-border legal and tax team can help you navigate the new landscape with confidence.

Contact Us Today – If your business has international operations, the 2025 reforms demand your attention now. Schedule a consultation with The RAD Firm to prepare for 2026 and beyond.