HIDE

Other Publications

Insights

Publications

Proposed F.D.I.I. Regulations: Deductions, Sales, and Services

Proposed F.D.I.I. Regulations: Deductions, Sales, and Services

The foreign derived intangible income (“F.D.I.I.”) regime allows for a reduced rate of corporate tax rate on hypothetical intangible income used in a U.S. business to exploit foreign markets.  Many implementation issues that were left open when the provision was enacted have been addressed in proposed I.R.S. proposed regulations issued early March.  In their article, Fanny Karaman and Beate Erwin explain (i) which taxpayers benefit from the regime, (ii) the way deductions are taken into account, (iii) whether the deduction is always available when a U.S. corporation sells on a foreign market, (iv) the way in which foreign use of sales or services is established, and (v) the way in which related-party transactions can qualify as F.D.D.E.I. sales or services.

Read More

Tax Considerations of I.P. When Expanding a Business Offshore

Tax Considerations of I.P. When Expanding a Business Offshore

If a client asks a U.S. tax adviser about the U.S. tax cost of contributing intangible property (“I.P.”) to a foreign corporation for use in an active business, the response can be a dizzying array of bad tax consequences beginning with a deemed sale in a transaction that results in an ongoing income stream. While that is a correct answer, it need not be the only answer. Elizabeth V. Zanet and Stanley C. Ruchelman explore alternatives to a capital contribution of I.P. to a foreign corporation, including (i) the use of a foreign hybrid entity and (ii) licensing the I.P. to a foreign entity in order to benefit from the F.D.I.I. tax deduction. Each alternative may provide interesting tax results, but attention to detail will be required.

Read More

A New Tax Regime for C.F.C.’s: Who Is G.I.L.T.I.?

A New Tax Regime for C.F.C.’s: Who Is G.I.L.T.I.?

The T.C.J.A. introduces a new minimum tax regime applicable to controlled foreign corporations (“C.F.C.’s”).  It also provides tax benefits for incomefrom “intangibles” used to exploit foreign markets.  The former is known as G.I.L.T.I. and the latter is known as F.D.I.I.  Together, G.I.L.T.I. and F.D.I.I. change the dynamics of cross-border taxation and can be seen as an incentive to supply foreign markets with goods and services produced in the U.S.  Both provisions reflect a view that only two value drivers exist in business: (i) hard assets (such as property, plant, and equipment) and (ii) intangible property.  In a detailed set of Q&A’s, Elizabeth V. Zanet and Stanley C. Ruchelman look at the ins and outs of the new provisions.

Read More