Export Incentive Planning

Export Incentive Planning

Are you aware of the benefits of forming an IC-DISC? An Interest Charge Domestic International Sales Corporation, or IC-DISC, is a U.S. corporation that delivers many notable tax benefits. An IC-DISC offers companies long-term deferral of the tax on export profits, increased liquidity for shareholders, and creates opportunities for management incentives. This type of structure also offers a permanent tax savings of nearly 16% for qualifying U.S. exporters.

Companies based in the United States that regularly export products or work on foreign construction projects to provide engineering or architectural support, should consider the tax benefits of forming an IC-DISC. This incentive can mean significant tax savings for small and medium-sized manufacturers, and tax professionals CPA Global Tax & Accounting PLLC can help you get started.

Our international tax CPA firm can assist qualifying companies in taking advantage of IC-DISCs and other U.S. export incentives. Our international tax advisors and wil work hard to ensure your organization is taking full advantage of the tax savings realized by forming an IC-DISC.

IC-DISC tax services include:

FDII (Foreign Derived Intangible Income)

What is FDII?

We now have the new export tax incentive that every exporting C Corporation should consider in addition to IC-DISC benefits. Enacted as part of the Tax Cuts and Job Act, the Foreign-Derived Intangible Income (FDII) deduction is a permanent deduction for domestic C-corporations that generate certain types of foreign income. It is effective for years beginning after December 31, 2017.

What is the mechanism?

The incentive is not necessarily tied to a specific revenue stream derived from a taxpayer’s ownership of intangible property – the name is misleading. Rather, the deduction generally applies to U.S. taxpayers that generate income from export sales or services. For taxable years beginning after December 31, 2017, but before January 1, 2026, the deduction generally reduces a taxpayer’s effective tax rate on FDII to 13.125 percent; for taxable years beginning after December 31, 2025, the effective tax rate on FDII is generally 16.406 percent.

What qualifies for the deduction?

At a high level, U.S. taxpayers that generate gross receipts from the following activities may qualify for the deduction:

  • Sale, lease, license, exchange or other disposition of property sold by a taxpayer to a non-U.S. party for foreign use.
  • Services provided by taxpayer to any person, or with respect to property, not located in the U.S.

Special rules apply if the property or services are provided to foreign related parties.

How should the Corporation take advantage:

All exporting Corporations should assess the tax advantage and claim the deduction.

How Can CPAG help:

Our team can assist in assessing and calculating potential tax benefits with the relevant financial data. For many taxpayers, the benefit can also be obtained for 2018 tax year since the extended due date is October 15, 2019.

Contact CPA Global Tax & Accounting PLLC now at 480-889-8949 to discuss the tax benefits of forming and IC-DISC for your international business.