Foreign-Derived Intangible Income Deduction: Is your company eligible?

Enacted by the Tax Cuts and Jobs Act, the Foreign-Derived Intangible Income (FDII) deduction establishes preferential tax treatment for domestic C corporations serving foreign markets. The deduction is equal to 37.5% of the C corporation’s foreign-derived intangible income.

Companies with eligible income can take advantage of this incentive by claiming a permanent deduction against taxable income, thus lowering the cost to enter foreign markets. The deduction effectively reduces the tax rate on qualifying foreign derived income from 21% to as low as 13.125% through 2025. Companies, large and small, public and private, may take advantage of the deduction. In many cases, the tax savings are substantial.

Your C corporation may qualify if you have income from any of the following:

·        Sales of property to foreign persons that result in foreign use.

·        Sales include any lease, license, exchange, or other disposition.

·        Services provided to any person not located within the U.S. or any services provided with respect to property not located within the U.S.

Elliott Davis has prepared a downloadable PDF detailing information on the Foreign-Derived Intangible Income deduction and how we can assist with more information.