AI agents for business finance: what they can and can't do
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The short answer
If your Nigerian company is a CFC, GILTI (global intangible low-taxed income) can require you, as a US shareholder, to include your share of its tested income in US income each year even if the profit stays in Nigeria. The IRS Form 8992 instructions (December 2024) compute it from each CFC's tested income less a 10% return on its tangible business assets, so service companies with little equipment are most exposed; Public Law 119-21 changed parts of this regime for later years.
The problem in one sentence
A US-resident owner of a profitable Lagos company can owe US tax on that company's profit for a year in which nothing was paid out and every naira stayed in a Nigerian account. That is what GILTI does, and it surprises many diaspora owners who assume US tax only bites when money arrives.
Who it applies to
The Form 8992 instructions say a person who was a US shareholder of a CFC during the tax year, and owned the stock on the last day the company was a CFC, must file. A US shareholder owns at least 10% of votes or value, directly, indirectly or constructively. Whether your company is a CFC is the first question; see is my Nigerian company a CFC. Individuals carry the result to Schedule 1 of Form 1040 (line 8o in the December 2024 instructions).
How the figure is built
In the instructions we read, the calculation runs like this:
- Each CFC's tested income or tested loss is taken from Schedule I-1 of its Form 5471, then multiplied by your pro rata share.
- Its qualified business asset investment (QBAI), a measure of the company's tangible business assets, is also taken from Schedule I-1 and pro-rated.
- A deemed tangible income return of 10% of QBAI is subtracted, adjusted for certain interest.
- What remains is the GILTI inclusion.
Because the deduction rests on tangible assets, a consulting, software, media or agency business with laptops and a rented office has almost no QBAI. Nearly all of its tested income becomes GILTI.
Why small Nigerian companies are hit hardest
- Little Nigerian tax to credit. PwC's Nigeria summary (reviewed 29 May 2026) gives small companies, with turnover up to ₦100 million and fixed assets up to ₦250 million, a 0% company income tax rate. No Nigerian tax means no foreign tax credit to set against the US inclusion.
- No treaty. The US and Nigeria have no income tax treaty (IRS, January 2026).
- Asset-light businesses. The 10% return on tangible assets shelters little.
- Individual owners. How the inclusion is taxed, and how much foreign tax can be credited, differs between individual and corporate shareholders, and some individuals use elections to change that. These choices are technical and worth paying an adviser for.
A worked example
Example only, simplified and ignoring expenses allocation, interest adjustments and any 2026 law changes. Chika, a US citizen in Georgia, owns 100% of a Lagos digital agency. In the year, its tested income is the naira equivalent of $60,000 (at an illustrative rate, not a current one). Its only tangible assets are computers with a tax basis of $10,000, so QBAI is $10,000 and the 10% return is $1,000.
| Step | Amount |
|---|---|
| Tested income (her 100% share) | $60,000 |
| Less 10% of QBAI ($10,000 × 10%) | −$1,000 |
| GILTI inclusion | $59,000 |
| Nigerian company income tax paid (small company, 0%) | $0 |
Chika reports $59,000 of income on her US return for that year, though the agency paid her nothing. If it had been a large company paying 30% Nigerian tax, the foreign tax credit picture would be very different.
The 2025 law and later years
Public Law 119-21, enacted in July 2025, revised the CFC rules for later tax years. The IRS's December 2025 Form 5471 instructions already reflect some of its changes, such as new tax-year rules for foreign corporations; the December 2024 Form 8992 instructions we read predate it and describe the calculation above. For tax years from 2026, check the current Form 8992 instructions and IRS guidance before relying on any part of this example.
Converting naira figures
Your Nigerian accountant reports in naira; the US return needs dollars. Agree with your preparer which exchange rates will be used for income and for asset basis, and use the same method every year. Never pick a rate after the fact to make the number smaller. The IRS says it has no official exchange rate and generally accepts any posted rate used consistently; its yearly average table has no naira row, so you and your preparer need to choose a published source and stick to it.
What owners do about it
- Model the inclusion before year end, using Nigerian management accounts converted at a sensible rate.
- Keep the Nigerian accounts and asset register clean; QBAI needs asset basis figures.
- Consider whether paying salary from the company to you, properly taxed, or other changes alter the result; your adviser can test options.
- Do not forget Form 5471 itself; see Form 5471 for US owners.
- Ownership through a US C corporation changes the arithmetic; see US parent with a Nigerian subsidiary.
None of this is a reason to hide a Nigerian company. The filings are manageable once they are planned, and the penalties for missing them are far larger than the cost of an adviser.
Questions people ask
What is GILTI in simple terms?
A rule that makes US shareholders of a controlled foreign corporation include part of its profit in US income each year, whether or not the profit is paid out.
Does GILTI apply to my small Nigerian company?
Only if the company is a CFC and you are a US shareholder owning 10% or more. If it is, small size does not exempt it.
Why do service businesses pay more GILTI?
The calculation subtracts a 10% return on tangible business assets. Service firms have few such assets, so most of their profit is included.
Did the 2025 tax law change GILTI?
Public Law 119-21 revised parts of the CFC regime for later tax years. Check the current IRS Form 8992 instructions for the year you are filing.
Sources
- IRS: Instructions for Form 8992 (Rev. December 2024; page reviewed 30 Apr 2026) · accessed Oct 2026
- IRS: Instructions for Form 5471 (Rev. December 2025) · accessed Oct 2026
- PwC Worldwide Tax Summaries: Nigeria, taxes on corporate income (reviewed 29 May 2026) · accessed Oct 2026
- IRS: United States income tax treaties A to Z (updated 3 Jan 2026) · accessed Oct 2026
- IRS: Yearly average currency exchange rates (reviewed 17 Sep 2026) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.