Can a US company bring foreign profits home tax-free now?

Often, if the US owner is a C corporation. Section 245A gives a 100% dividends-received deduction for the foreign-source portion of dividends from a 10%-owned foreign corporation, so qualifying dividends can come home with no additional US income tax. Individuals and pass-throughs generally don't get 245A, which is the key planning distinction.

What is previously taxed income (PTEP)?

PTEP is earnings that were already taxed to the US shareholder under GILTI or Subpart F, even though they weren't distributed at the time. When those earnings are later distributed, they generally come out tax-free because you already paid US tax on them — you just have to track the PTEP balance to prove it.

Do I have to hold the foreign stock for a minimum period to get the 245A deduction?

Yes. The Section 245A dividends-received deduction requires the US corporate shareholder to satisfy a holding-period test — more than 365 days within a specified window around the dividend. Distributions on stock that flunks the holding period don't qualify, so timing a dividend near an acquisition or disposition needs care.

Why can foreign currency gain create tax even when the dividend itself is exempt?

PTEP distributions can throw off foreign-currency gain or loss under Section 986(c) because the dollar value of the earnings can move between when they were taxed and when they're distributed. That currency movement is recognized separately, so even a distribution that's otherwise tax-free can produce a small taxable gain or a loss.

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Outbound Tax

Repatriating Foreign Earnings: Bringing Profit Home Tax-Efficiently

Since 2018, US corporations can often bring foreign profits home nearly tax-free — but only if you understand the §245A participation exemption and previously taxed income. Plan the distribution and it's clean; skip the planning and you can pay twice.

SMAART Tax Team

March 9, 2026

6 min read

|Reviewed by Ray Dominguez, EA, USTCP