IC-DISC Offers a Powerful Tool to U.S. Exporters to lower Taxes

With the extension of capital gains tax rates for qualified dividends included in the Tax Relief Act of 2010, permanent tax savings result from the current tax rate differential. An IC-DISC offers a permanent tax-saving opportunity to U.S. Exporters.

What is an IC-DISC?
An Interest Charge-Domestic International Sales Corporation is a powerful export incentive that can provide permanent federal tax savings to U.S. exporters. It’s available to exporters of products and certain services that are produced in the United States and sold for ultimate use outside of the United States.

To create an IC-DISC, a new entity is formed. This entity acts as a commission agent for all qualifying exports. When the new entity makes an election to be treated as an IC-DISC, it is not subject to federal tax on its earnings. As the related supplier, your company is allowed a deduction for the IC-DISC commission that is calculated on export profits. The IC-DISC makes dividend distributions of its earnings to shareholders. These distributions are treated as qualified dividend income.

Permanent tax savings result from the deduction of the commission at ordinary income rates (35 percent), and the qualified dividend income taxed at just 15 percent, for a savings of 20 percent on the calculated commission.

For a Free Consultation call or email:
Amare Berhie, International Tax Advisor
ABA Tax Accounting
Toll free 866-936-0430

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